Back to GetFilings.com
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, 1998
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 March 15,
1999 was approximately $426,957,923. As of March 15, 1999, there were
18,108,175 shares of common stock, $.01 par value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement to be issued in connection with the Company's 1999 Annual
Meeting of Stockholders is incorporated by reference into Items 11, 12 and 13
of Part III of this Report.
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 7A. Quantitative and Qualitative Disclosures About Market Risk
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
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 64% partnership interest as of December 31, 1998
(56.1% at December 31, 1997) 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, as of December
31, 1998, operated 259 communities with 34,229 apartment units. Of these,
23,936 units in 97 communities are owned outright (the "Owned
Properties"), 7,482 units in 123 communities are managed and partially
owned by the Company as general partner, and 2,811 units in 39 communities
are managed for other owners (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:
APARTMENTS OWNED AND MANAGED AT 12/31/98
APTS. APTS. MANAGED AS APTS. APT.
MARKET AREA OWNED GENERAL PARTNER FEE MANAGED TOTALS
Detroit, MI 4,294 0 1,020 5,314
Eastern PA 3,169 0 0 3,169
Rochester, NY 2,975 1,359 668 5,002
Northern NJ 2,913 0 0 2,913
Buffalo, NY 2,519 156 0 2,675
Baltimore, MD 1,733 0 56 1,789
Downstate NY 1,605 235 0 1,840
Syracuse, NY 1,564 1,274 260 3,098
Chicago, IL 672 0 0 672
Portland, ME 596 0 0 596
Northern VA 548 0 0 548
Hamden, CT 498 0 0 498
South Bend, IN 310 168 0 478
Western PA 298 2,036 225 2,559
Northern/Central OH 242 1,124 0 1,366
Other NYS Areas 0 1,130 582 1,712
Total 23,936 7,482 2,811 34,229
Subsequent to December 31, 1998 and as of March 17, 1999, the Company has
acquired 264 additional units consisting of 198 units in Leesburg,
Virginia and 66 units in Yeadon, Pennsylvania and transferred 256 units in
Plainfield, New Jersey to an affiliated partnership in anticipation of
completing a Low Income Housing Tax Credit transaction.
The Company's mission is to provide investors with dependable financial
returns that exceed those of comparable investments. While pursuing this
mission, the Company remains committed to improving the quality of life
for its residents, enhancing the broader communities in which the Company
operates, providing employees with opportunities for growth and
accomplishment.
The Company's business strategy includes: (i) aggressively managing and
improving its communities to achieve increased net operating income; (ii)
acquiring additional apartment communities with attractive returns at
prices significantly below replacement costs; (iii) selectively developing
and rehabilitating government-assisted apartment communities to maximize
development fee income while increasing the number of communities under
management; and (iv) maintaining a conservative capital structure with
efficient access to the capital markets.
STRUCTURE
The Company was formed in November, 1993 as a Maryland corporation and is
the general partner of the Operating Partnership. On December 31, 1998,
it owned a 64% 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, 1998 this represented a 6% 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. As of December 31, 1998, the Operating Partnership held
95% of the economic interest in both Management Companies, with Nelson and
Norman Leenhouts (the "Leenhoutses") holding the remaining five percent
interest in HP Management and the Leenhoutses and Richard J. Crossed,
holding the remaining five 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 transferred all but
one percent of its interest in the Operating Partnership to the QRS.
The Company currently has approximately 1,600 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) acquiring apartment communities at prices below
new construction costs and repositioning those properties for long-term
growth; (ii) reinforcing its decentralized company orientation by
encouraging employees' personal improvement and by providing extensive
training; (iii) 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; (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)
continuing to utilize its written "Pledge" of customer satisfaction that
is the foundation on which the Company is building its name-brand
recognition; 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 markets
also possess other characteristics similar to the Company's existing
markets, including a limited amount of new construction, acquisition
opportunities below replacement costs, a mature housing stock and a stable
or growing job market. The Company expects that its growth will be
focused in select metropolitan areas within the Northeast, Mid-Atlantic
and Midwest United States, with a gradual entrance into new geographic
regions that possess the above characteristics. It expects to pursue
acquisition of individual properties as well as larger portfolios. It may
also consider strategic investments in other apartment companies.
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 market factors warrant.
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, 1998, the Company's debt was approximately $419 million
and the debt-to-total market capitalization ratio was 37% based on the
year-end closing price of the Company's stock at $25.75. The weighted
average interest rate on the Company's mortgage debt as of December 31,
1998 was 7.2% and the weighted average maturity was approximately 10
years. Debt maturities are staggered. As of December 31, 1998, the
Company had an unsecured line of credit facility from Chase Manhattan Bank
of $50 million and a $50 million supplemental unsecured facility with M&T
Bank. These facilities are available for acquisition and other corporate
purposes and bear an interest rate 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, at the Company's option. As of December 31, 1998, there
were no outstandings on the line of credit and the Company had
approximately $33 million of cash on hand.
The Company also intends to continue to structure creative equity
transactions to raise capital with limited transaction costs. During
1998, the Company issued approximately $122 million of common shares under
its shelf registration statement, including approximately $49 million (net
of underwriter's discount) in its first public offering since going
public.
Approximately $72 million was also raised in 1998 under the Company's
Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and
Employee Stock Purchase Plan (the "Stock Purchase Plan"). The Stock
Purchase Plan currently provides a 3% discount from the current market
price for purchases up to $5,000 by existing shareholders. In its
discretion, the Company can permit investments in excess of $5,000 under
the Stock Purchase Plan at discounts between 0% and 3%. The Stock
Purchase Plan has provided a steady source of capital to fund the
Company's continued growth.
Officers and Directors of the Company also purchased approximately $10
million of newly issued shares pursuant to the Company's Director, Officer
and Employee Stock Purchase and Loan Plan approved by the Company's
shareholders at the 1998 Annual Meeting and through the exercise of stock
options.
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 $71 million worth of Units as partial consideration in
acquisition transactions during 1998.
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 1998 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.
MARKET ENVIRONMENT
The markets in which Home Properties operates can be characterized as
stable, with modest levels of job growth. Occupancies are relatively
high, and new apartment construction activity is low relative to the
existing multifamily rental housing stock. After considering the
obsolescence of older communities and the conversion of rental housing to
condominiums or co-ops, the Company views the net increase in the
multifamily rental housing stock in the Company's markets as representing
only a fraction of the estimated number of new units needed to satisfy
increased demand.
New construction in the Company's markets for the past two decades has
been limited, with most of the existing housing stock built before 1980.
In 1998, Home Properties' markets represented 15.7% of the total U.S.
households, but only 7.7% of the country's estimated net new supply of
multifamily housing units.
An analysis of future multifamily supply compared to projected multifamily
demand can indicate whether a particular market is tightening, softening
or in equilibrium. The second to last column in the following table
reflects current estimated net new multifamily supply as a percentage of
new multifamily demand for the Company's markets and the United States.
Net new multifamily supply as a percent of new multifamily demand for 1998
in the Home Properties' markets was approximately 45%, compared to a
national average of 72%.
The last column in this table shows the net new multifamily supply as
percent of existing multifamily housing stock. In the Company's markets,
net new supply only represents 0.5% of the existing multifamily housing
stock. This compares to the national average net new multifamily supply
estimates at 1.2% of the multifamily housing stock.
The information on the following table was compiled by the Company from
the sources indicated on the table. The methodology used includes
estimates and, while the Company feels that the estimates are reasonable,
there can be no assurance that the estimates are accurate. There can also
be no assurance that the historical information included on the table will
be consistent with future trends.
Home Properties Market Demographics
ESTI- ESTI-
MATED MATED
NET NEW NET NEW
DECEM- MULTI- MULTI-
BER ESTI- FAMILY FAMILY
JOB DECEM- ESTI- MATED SUPPLY SUPPLY
GROWTH BER MATED ESTI- ESTI- 1998 AS A AS A
1998 TRAIL- JOB DECEM- 1990 1990 1998 MATED MATED NEW % OF % OF
NUM- ING GROWTH BER 1998 % OF % OF NEW 1998 1998 MULTI- 1998 1998
MARKET BER 12 TRAIL- UNEM- 1998 MULTI- ALL MULTI- SUPPLY MULTI- NET NEW FAMILY NEW MULTI-
(PROFORMA % OF OF MTHS ING 12 PLOY. MEDIAN FAMILY HOUSING FAMILY OF FAMILY MULTI- HOUSE- MULTI- FAMILY
HOME PROPERTIES HOUSE- PER- MNTHS RATE HOME HOUSING BUILT HOUSE- MULTI- OBSO- FAMILY HOLD FAMILY HOUSING
OWNED UNITS IN HOLDS CENT ACTUAL VALUE STOCK BEFORE HOLDS FAMILY LESCENCE SUPPLY DEMAND DEMAND STOCK
MARKET) CHANGE 1980
DETROIT, MI MSA 1,684,597 1.9% 41,100 2.9% $93,457 284,897 88.6% 14.8% 3,557 1,424 2,132 4,061 52.5% 0.7%
(17.9%)
ROCHESTER, NY MSA
(12.4%) 410,135 0.2% 1,200 3.6% $95,840 58,611 87.8% 13.0% 505 293 212 104 203.8% 0.4%
NORTHERN NEW
JERSEY (12.2%) (A) 1,997,302 1.7% 45,400 3.6% $210,791 398,520 85.2% 18.0% 2,082 1,993 90 5,449 1.6% 0.0%
EASTERN
PENNSYLVANIA 2,050,599 0.9% 23,900 3.6% $125,189 343,249 87.9% 14.5% 1,936 1,716 220 2,319 9.5% 0.1%
(13.2%) (B)
BUFFALO, NY MSA 462,256 0.1% 400 4.5% $84,665 53,782 92.7% 10.1% 903 269 635 27 2365.8% 1.2%
(10.5%)
BALTIMORE, MD MSA 932,954 1.0% 12,400 3.9% $119,828 185,894 81.5% 17.7% 2,652 929 1,723 1,467 117.5% 0.9%
(7.2%)
SYRACUSE, NY MSA 276,672 1.3% 4,600 3.6% $83,010 45,558 86.6% 14.9% 87 228 -140 458 -30.7% -0.3%
(6.5%)
DOWNSTATE NEW YORK
(6.7%) (C) 1,599,843 2.2% 41,300 2.6% $238,986 247,101 89.5% 14.0% 1,634 1,236 398 3,869 10.3% 0.2%
CHICAGO, IL MSA 2,792,254 1.1% 43,200 4.0% $145,993 850,689 88.2% 27.1% 5,916 4,253 1,662 7,814 21.3% 0.2%
(2.8%)
PORTLAND, ME MSA 92,429 -1.3% -1,900 1.8% $140,999 17,294 79.8% 15.3% 246 86 160 -194 -82.2% 0.9%
(2.5%)
DC-VA-MD-WV MSA
(2.3%) 1,722,683 2.8% 69,700 2.5% $184,525 568,125 75.7% 29.4% 11,141 2,841 8,300 13,648 60.8% 1.5%
MERIDEN, CT MSA 196,461 0.1% 300 2.8% $181,305 43,622 84.5% 18.9% 502 218 283 38 749.3% 0.6%
(2.1%)
SOUTH BEND, IN MSA
(1.3%) 98,048 1.4% 1,900 2.7% $68,346 13,385 87.6% 11.9% 276 67 209 151 138.0% 1.6%
PITTSBURGH, PA MSA 958,513 -0.1% -700 4.0% $69,338 135,482 90.9% 12.4% 1,364 677 687 -58 - 0.5%
(1.2%) 1183.6%
COLUMBUS, OH 564,868 1.6% 13,700 2.3% $96,853 119,180 81.0% 18.6% 2,204 596 1,608 1,696 94.8% 1.3%
(1.0%)
HOME PROPERTIES 15,839,614 1.4% 296,500 3.2% $129,275 3,361,598 86.2% 16.9% 35,006 16,808 18,198 40,669 44.7% 0.5%
MARKETS
United States 100,657,536 2.3% 2,853,000 4.0% $100,583 19,851,980 79.3% 17.2% 334,495 99,260 235,235 326,498 72.0% 1.2%
(A) NORTHERN NEW JERSEY IS DEFINED FOR THIS REPORT AS
MIDDLESEX-SOMERSET-HUNTERDON MSA, BERGEN-PASSAIC MSA,
MONMOUNTH-OCEAN MSA, & NEWARK MSA.
(B) EASTERN PENNSYLVANIA IS DEFINED FOR THIS REPORT AS
PHILADELPHIA, PA MSA & ALLENTOWN-BETHLETHEM-EASTON MSA.
(C) DOWNSTATE NEW YORK IS DEFINED FOR THIS REPORT AS
THE HUDSON VALLEY REGION OF DUTCHESS CO. MSA, ORANGE CO. MSA,
PUTNAM CO. MSA AND ULSTER COUNTIES; LONG ISLAND, NY(NASSAU-SUFFOLK
MSA); WESTCHESTER COUNTY MSA; & ROCKLAND COUNTY MSA
SOURCES: BUREAU OF LABOR STATISTICS (BLS); CLARITAS, INC.;
US CENSUS BUREAU - MANUFACTURING & CONSTRUCTION DIV.; NEW YORK
STATE DEPARTMENT OF LABOR, DIV. OF RESEARCH AND STATISTICS.
DATA INCLUDED IS DATA AVAILABLE AS OF FEBRUARY 3, 1999
AND IN SOME CASES MAY BE PRELIMINARY.
BLS IS THE PRINCIPAL FACT-FINDING AGENCY FOR THE
FEDERAL GOVERNMENT IN THE BROAD FIELD OF LABOR ECONOMICS
AND STATISTICS, AND HAS A DUAL ROLE AS THE STATISTICAL
ARM OF THE US DEPT OF LABOR AND AS AN INDEPENDENT
NATIONAL STATISTICAL AGENCY. CLARITAS,
INC. IS A LEADING PROVIDER OF PRECISION MARKETING
SOLUTIONS AND RELATED PRODUCTS/SERVICES,
INCLUDING LOCAL AREA DEMOGRAPHICS, MARKETING
SOFTWARE, MARKET SEGMENTATION SYSTEMS, AND CUSTOM
MODELING. US CENSUS BUREAU'S PARENT FEDERAL AGENCY IS
THE US DEPT OF COMMERCE, WHICH PROMOTES AMERICAN
BUSINESS AND TRADE, INCLUDING GATHERING AND DISSEMINATING
STATISTICAL DATA, AND MEASURING ECONOMIC GROWTH.
METHODOLOGY
1998 Net New Multifamily Supply = Multifamily permits (1998
figures US Census Bureau, Mfg. & Constr. Div., 5+ permits only)
adjusted by an estimated % of permits resulting in a construction
start (95%) less estimated multifamily obsolescence (0.5% of 1998
multifamily housing stock).
1998 NEW MULTIFAMILY DEMAND = Trailing 12-months job growth
(Nonfarm, not seasonally adjusted payroll employment figures
12/97 & 12/98) multiplied by an estimated tow-thirds of new
household formations resulting from new jobs and the % of
multifamily households in each market (based on the 1990 census figures).
1998 MULTIFAMILY HOUSING STOCK = 1998 total housing stock
multiplied by the % of multifamily housing stock in each MSA
market (based on 1990 US Census figures).
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 significant damage awards 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, 1998, the Owned Properties consisted of 97 multifamily
residential properties containing 23,936 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 communities
containing 3,065 units and simultaneously with the closing of the IPO
acquired an additional four communities containing 926 units.From that
time to December 31, 1998, the Company therefore experienced a net
increase of approximately 600% in the number of apartment units it owned.
In addition, during the first quarter of 1999, the Operating Partnership
has acquired two additional properties, representing an increase of 264
Units, and transferred a 256 unit apartment community to an affiliated
partnership in anticipation of completing a Low Income Housing Tax Credit
transaction.
The Owned Properties are located in established markets and are well
maintained and well leased. Average economic occupancy at the Owned
Properties held throughout 1997 and 1998 was 94.1% for 1998. 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 as of December 31, 1998 was approximately 39% for 1998, which
is significantly below the national average for garden apartments.
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, 1998.
1998 ACQUISITION
COMMUNITIES
1998 1997
(3) (4) (4) Avg Avg
(2) 1998 1998 1997 Mo Mo 12/31/98
Current Aver- 1998 % % Res Ave Ave Rent Rent Total
Number Age age Mature dent age age Rate Rate Cost
of In Year Apt Size Resi- Turn- % Occu- % Occu- per per ($000)
Apts Years Acq (Sq Ft) dents over pancy pancy Apt Apt
Regional Area
CT - Hamden Apple Hill Apartments 498 27 1998 789 33% NA 96.3% NA $713 NA $24,945
IL - Chicago Colonies Apartments 672 25 1998 656 7% NA 77.4% NA 576 NA 24,408
IN - South Bend Candlewood Apartments 310 12 1998 1,000 10% NA 95.5% NA 620 NA 13,735
MD -Baltimore Carriage House
Apartments 50 33 1998 786 4% NA 92.3% NA 502 NA 1,163
MD -Baltimore Country Village
Apartments 344 28 1998 868 37% NA 92.6% NA 587 NA 13,579
MD -Baltimore Morningside Heights
Apartments 1,050 26 1998 870 18% NA 90.9% NA 565 NA 36,429
MD - Baltimore Rolling Park Apartments
144 26 1998 1,125 7% NA 96.0% NA 575 NA 5,802
MD -Baltimore Strawberry Hill
Apartments 145 34 1998 780 6% NA 90.6% NA 531 NA 3,551
ME -Portland Mill Co.Gardens 96 48 1998 550 40% NA 97.7% NA 475 NA 2,081
ME -Portland Redbank Village 500 55 1998 836 36% NA 98.0% NA 516 NA 16,180
MI - Detroit Carriage Hill
Apartments 168 33 1998 783 51% NA 98.9% NA 654 NA 6,870
MI -Detroit Carriage Park
Apartments 256 32 1998 777 14% NA 97.9% NA 615 NA 9,655
MI -Detroit Cherry Hill Club
Apartments 164 27 1998 878 44% NA 96.2% NA 535 NA 5,094
MI - Detroit Cherry Hill Village
Apartments 224 33 1998 742 13% NA 98.9% NA 592 NA 8,005
NJ - Northern East Hill Gardens 33 41 1998 695 48% NA 94.9% NA 779 NA 1,883
NJ - Northern Lakeview Apartments 106 30 1998 492 27% NA 98.8% NA 732 NA 5,299
NJ -Northern Leland Gardens{ (7)} 256 26 1998 575 8% NA NA NA NA NA NA
NJ - Northern Oak Manor Apartments 77 43 1998 775 37% NA 97.9% NA 992 NA 4,912
NJ - Northern Pleasant View Gardens
Apartments 1,142 31 1998 745 31% NA 96.3% NA 702 NA 53,795
NJ - Northern Pleasure Bay Apartments
270 28 1998 667 32% NA 97.7% NA 606 NA 7,864
NJ - Northern Towers, The 137 37 1998 916 60% NA 98.5% NA 913 NA 6,849
NJ - Northern Wayne Village 275 34 1998 725 34% NA 97.7% NA 771 NA 14,981
NJ - Northern Windsor Realty 67 46 1998 675 28% NA 97.9% NA 720 NA 3,818
NY - Downstate Mountainside Apartments
227 26 1998 759 36% NA 98.6% NA 764 NA 8,590
NY - Downstate Patricia Apartments 100 25 1998 770 25% NA 99.2% NA 796 NA 4,818
NY - Downstate Coventry Village 94 24 1998 718 38% NA 93.2% NA 863 NA 3,236
NY - Rochester Pines of Perinton 508 22 1998 818 24% NA 99.2% NA 489 NA 8,957
OH - Central Weston Gardens 242 26 1998 804 11% NA 91.3% NA 444 NA 6,022
PA - Eastern Beechwood Gardens 160 32 1998 775 39% NA 95.8% NA 578 NA 4,180
PA - Eastern Cedar Glen Apartments 110 32 1998 726 56% NA 97.6% NA 433 NA 2,977
PA - Eastern Racquet Club East 467 27 1998 850 26% NA 96.0% NA 742 NA 25,244
Apartments
PA - Eastern Sherry Lake Apartments 298 33 1998 811 15% NA 97.3% NA 785 NA 18,168
PA - Western Payne Hill Gardens 150 18 1998 793 13% NA 88.0% NA 578 NA 4,716
VA - Northern Braddock Lee Apartments
254 44 1998 758 20% NA 97.1% NA 744 NA 12,929
VA - Northern Park Shirlington
Apartments 294 44 1998 758 22% NA 97.0% NA 776 NA 14,795
1998 TOTAL/
WEIGHTED AVERAGE 9,888 30 786 25% NA 94.5% NA $639 NA $385,530
(1) "Core Communities" represents the 6,552 apartment units owned
consistently throughout 1997 and 1998.
(2} "% Mature Residents" is the percentage of residents aged 55 years or
older as of December 31, 1998.
(3) "% Resident Turnover" reflects, on an annual basis, the number of
moveouts divided by the total number of apartment units.
(4) "Average % Occupancy" is the average economic occupancy for the 12 months
ended December 31, 1997 and 1998.
For communities acquired during 1997 and 1998, this is the average occupancy
from the date of acquisition.
(5) Village Green and Fairways at Village Green are consolidated figures in
1998.
(6) The Lansdowne Group consolidated figures are reflected in the Marshall
House line.
(7) Subsequently sold to affiliate for tax credit rehabilitation.
1998 1997
(3) (4) (4) Avg Avg
(2) 1998 1998 1997 Mo Mo
Current Aver- 1998 % Res Ave Ave Rent Rent 12/31/98
Number Age age % Mature dent age age Rate Rate Total
of In Year Apt Size Resi- Turn- % Occu- % Occu- per per Cost
Apts Years Acq (Sq Ft) dents over pancy pancy Apt Apt ($000)
1997 ACQUISITION
COMMUNITIES
Regional Area
MI - Detroit Canterbury Square 336 27 1997 789 14% 16% 98.5% 99.3% $632 $608 $13,766
MI - Detroit Charter Square 494 28 1997 914 21% 35% 96.3% 96.9% 693 668 22,838
MI - Detroit Fordham Green 146 23 1997 869 24% 24% 97.0% 92.9% 701 660 6,459
MI - Detroit Golfview Manor 44 40 1997 662 14% 16% 96.8% 99.2% 468 426 687
MI - Detroit Greentrees Apartments 288 28 1997 863 23% 21% 95.1% 96.0% 541 528 10,122
MI - Detroit Kingsley Apartments 328 29 1997 792 32% 36% 94.0% 94.2% 602 564 13,632
MI - Detroit Oak Park Manor 298 44 1997 887 10% 27% 98.6% 97.9% 594 568 10,626
MI - Detroit Parkview Gardens 483 45 1997 731 3% 13% 95.9% 95.8% 505 445 8,754
MI - Detroit Scotsdale Apartments 376 24 1997 790 21% 44% 95.6% 97.3% 575 559 14,150
MI - Detroit Southpointe Square 224 28 1997 776 21% 24% 95.7% 98.8% 542 528 5,778
MI - Detroit Stephenson House 128 32 1997 668 13% 38% 98.2% 97.4% 552 534 3,212
MI - Detroit Woodland Gardens 337 33 1997 719 9% 53% 96.0% 97.1% 622 600 12,888
NJ - Northern Royal Gardens 550 31 1997 800 12% 30% 92.9% 96.2% 744 724 23,790
NY - Buffalo Emerson Square 96 29 1997 650 40% 46% 89.4% 78.6% 521 484 3,223
NY - Buffalo Fairways Apartments 32 38 1997 900 23% 22% 75.8% 39.1% 587 509 1,255
NY - Buffalo Paradise Lane at
Raintree 324 27 1997 676 11% 50% 78.0% 79.6% 534 498 10,722
NY - Downstate Lake Grove 368 29 1997 879 15% 33% 96.2% 96.0% 820 774 22,633
NY - Downstate Mid-Island Estates 232 34 1997 690 32% 28% 95.3% 97.2% 788 758 11,137
NY - Rochester 1600 East Avenue 164 40 1997 800 97% 48% 80.2% 83.4% 1,252 1,205 11,101
NY - Rochester Hill Court South 95 35 1997 730 41% 27% 94.8% 95.8% 565 554 2,900
NY - Rochester Ivy Ridge Apartments 135 35 1997 740 46% 28% 91.4% 83.2% 560 547 4,059
NY - Rochester Woodgate Place 120 26 1997 1,100 10% 53% 97.2% 93.9% 662 637 4,915
PA - Eastern Chesterfield
Apartments 247 26 1997 812 17% 36% 94.2% 94.2% 632 616 10,169
PA - Eastern Curren Terrace 318 28 1997 782 6% 42% 96.9% 96.0% 665 662 14,409
PA - Eastern Executive House 100 34 1997 696 54% 49% 90.4% 90.2% 648 637 4,751
PA -Eastern Glen Manor 174 23 1997 667 19% 32% 97.5% 99.0% 570 557 5,791
PA - Eastern Lansdowne Group-Karen
Court 49 36 1997 844 * * * * * * 2,007
PA - Eastern Lansdowne Group-
Landon Court 44 29 1997 873 * * * * * * 1,823
PA - Eastern Lansdowne Group-
Marshall House*{(6)} 63 70 1997 653 44% 31% 95.5% 91.7% 611 605 2,127
PA -Eastern Lansdowne Group-
Patricia Court 66 31 1997 838 * * * * * * 2,723
PA - Eastern New Orleans Park 308 28 1997 693 15% 40% 97.3% 96.2% 573 559 12,175
PA - Eastern Springwood Apartments 77 25 1997 755 40% 48% 92.3% 87.9% 557 543 2,366
PA - Eastern Valley View
Apartments 176 26 1997 769 21% 59% 92.2% 88.1% 591 574 7,364
PA - Eastern Village Square 128 26 1997 795 11% 48% 91.4% 94.7% 600 582 4,762
PA - Western Cloverleaf Village 148 41 1997 716 32% 55% 85.8% 97.8% 489 484 3,667
1997 TOTAL/
WEIGHTED AVERAGE 7,496 31 786 21% 35% 94.0% 94.5% $635 $610 $292,781
(1) "Core Communities" represents the 6,552 apartment units owned
consistently throughout 1997 and 1998.
(2) "% Mature Residents" is the percentage of residents aged 55 years or
older as of December 31, 1998.
(3) "% Resident Turnover" reflects, on an annual basis, the number of
moveouts divided by the total number of apartment units.
(4) "Average % Occupancy" is the average economic occupancy for the 12 months
ended December 31, 1997 and 1998.
For communities acquired during 1997 and 1998, this is the average occupancy
from the date of acquisition.
(5) Village Green and Fairways at Village Green are consolidated figures in
1998.
(6) The Lansdowne Group consolidated figures are reflected in the Marshall
House line.
(7) Subsequently sold to affiliate for tax credit rehabilitation.
CORE COMMUNITIES
COMMUNITIES
WHOLLY OWNED
AND MANAGED BY HOME
PROPERTIES
1998 1997
(3) (4) (4) Avg Avg
(2) 1998 1998 1997 Mo Mo
Aver- 1998 % Res Ave Ave Rent Rent 12/31/98
Number Age age % Mature dent age age Rate Rate Total
of In Year Apt Size Resi- Turn- % Occu- % Occu- per per Cost
Apts Years Acq (Sq Ft) dents over pancy pancy Apt Apt ($000)
Regional Area
Core
Communities (1)
NY - Buffalo Garden Village 315 27 1994 850 79% 25% 97.8% 98.1% $601 $584 $10,278
NY - Buffalo Idylwood 720 29 1995 700 10% 61% 95.5% 95.6% 560 539 22,002
NY - Buffalo Raintree Island 504 27 1985 704 35% 39% 95.1% 94.9% 587 576 16,467
NY - Buffalo Williamstowne Village 528 27 1985 708 100% 19% 92.7% 96.8% 609 592 17,739
NY - Downstate Carriage Hill 140 26 1996 845 18% 52% 93.5% 93.1% 768 734 5,538
NY - Downstate Cornwall Park 75 32 1996 1,320 10% 53% 88.7% 87.1% 954 827 5,681
NY - Downstate Lakeshore Villas 152 24 1996 956 9% 43% 96.3% 95.3% 618 605 5,944
NY - Downstate Sunset Gardens 217 28 1996 662 22% 52% 93.7% 92.9% 574 559 6,350
NY - Rochester 1600 Elmwood 210 39 1983 891 9% 50% 95.6% 95.9% 748 742 10,863
NY - Rochester Brook Hill 192 27 1994 999 22% 56% 89.7% 96.3% 785 745 9,840
NY - Rochester Finger Lakes Manor 153 28 1983 924 48% 44% 95.6% 96.6% 684 669 7,240
NY - Rochester Hamlet Court 98 28 1996 696 70% 39% 93.2% 93.3% 613 595 2,953
NY - Rochester Newcastle Apartments 197 24 1982 873 34% 51% 92.1% 91.0% 677 659 10,093
NY - Rochester Northgate Manor 224 36 1994 800 33% 40% 92.5% 93.9% 596 579 9,106
NY - Rochester Perinton Manor 224 29 1982 928 51% 32% 95.6% 96.1% 716 698 11,155
NY - Rochester Riverton Knolls 240 25 1983 911 8% 69% 93.2% 97.0% 714 689 12,044
NY - Rochester Spanish Gardens 220 25 1994 1,030 32% 33% 93.9% 94.8% 608 593 11,364
NY - Rochester Springcreek 82 26 1984 913 70% 32% 98.7% 96.5% 540 531 2,986
NY - Rochester The Meadows 113 28 1984 890 38% 29% 95.9% 94.4% 601 593 4,952
NY - Syracuse Candlewood Gardens 126 28 1996 855 37% 41% 97.9% 96.7% 475 456 3,202
NY - Syracuse Conifer Village 199 20 1994 499 95% 14% 100.0% 100.0% 566 566 9,146
NY - Syracuse Fairview Heights 210 35 1985 798 6% 88% 94.0% 92.1% 714 704 9,793
NY - Syracuse Harborside Manor 281 26 1995 823 10% 48% 92.8% 94.1% 562 547 8,169
NY - Syracuse Pearl Street 60 28 1995 855 10% 53% 95.1% 94.7% 464 453 1,378
NY - Syracuse Village Green
(incl. Fairways){(5)} 448 11 1994 908 23% 44% 90.0% 90.7% 594 574 17,318
NY - Syracuse Westminster Place 240 27 1996 913 7% 48% 95.3% 93.0% 541 546 7,138
PA - Eastern Valley Park South 384 26 1996 987 13% 42% 94.0% 92.9% 724 708 19,378
CORE COMMUNITIES 6,552 27 830 34% 44% 94.1% 94.7% $627 $609 $258,117
TOTAL/
WEIGHTED AVG
OWNED PORTFOLIO 23,936 30 798 26% 39% 94.2% 94.5% $641 $603 $936,428
TOTAL/
WEIGHTED AVG
(1) "Core Communities" represents the 6,552 apartment units owned
consistently throughout 1997 and 1998.
(2) "% Mature Residents" is the percentage of residents aged 55 years or
older as of December 31, 1998.
(3) "% Resident Turnover" reflects, on an annual basis, the number of
moveouts divided by the total number of apartment units.
(4) "Average % Occupancy" is the average economic occupancy for the 12 months
ended December 31, 1997 and 1998.
For communities acquired during 1997 and 1998, this is the average occupancy
from the date of acquisition.
(5) Village Green and Fairways at Village Green are consolidated figures in
1998.
(6) The Lansdowne Group consolidated figures are reflected in the Marshall
House line.
(7) Subsequently sold to affiliate for tax credit rehabilitation.
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 housing. In
1996, the Operating Partnership acquired substantially all of the assets
of C.O.F., Inc. (formerly Conifer Realty, Inc.) and Conifer Development,
Inc. (collectively, "Conifer"), a developer and manager of government-
assisted multifamily housing. Through these 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.
Through affiliated partnerships, in 1998 the Company commenced development
or redevelopment of 762 units in five communities, completed two
communities with 136 units and continued progress on 868 units being
rehabilitated. 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 1 million rental units for low or moderate income Americans.
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 been introduced to increase the housing credit allocations by 40% to
$1.75 per capita. It is expected that the cap increase, 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
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% or less of the area
median income, or 40% of the units at 60% or less 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.
HUD SECTION 8 PROGRAM. Within a decade, it is expected that virtually all
of HUD's roughly three million Section 8 project and tenant-based
contracts will expire. Many of the affected 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 two Section 8
communities in its owned portfolio, Conifer Village (199 units) and Pines
of Perinton (508 units). In both cases, the rental subsidy contracts
extend for several more years.
PROPERTY MANAGEMENT
As of December 31, 1998, the Managed Properties consist of: (i) 7,482
apartment units where Home Properties is the general partner of the entity
that owns the property; (ii) 2,811 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; and (vii) 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.
SUPPLEMENTAL PROPERTY INFORMATION
At December 31, 1998, 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 1998.
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.
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, 1999), positions and offices.
NAME AGE POSITION
Norman P. Leenhouts 63 Chairman, Co-Chief Executive Officer and Director of Home Properties, Chairman and Director of
HP Management and Director of Conifer Realty
Nelson B. Leenhouts 63 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 59 Executive Vice President and Director of Home Properties and President, Chief Executive Officer and
Director of Conifer Realty
Amy L. Tait 40 Executive Vice President and Director of Home Properties and Director of HP Management
David P. Gardner 43 Vice President, Chief Financial Officer and Treasurer of Home Properties, Conifer Realty and HP
Management
Ann M. McCormick 42 Vice President, General Counsel and Secretary of Home Properties and HP Management and General
Counsel and Secretary of Conifer Realty
William E. Beach 52 Vice President, Commercial Property Management of Home Properties and HP Management
A. Terence Butwid 54 Vice President, Development of Home Properties, Executive Vice President of Conifer
Realty and Vice President of HP
Management
Lavonne R. Childs 36 Vice President, Residential Property Management of Home Properties
Scott A. Doyle 38 Vice President, Residential Property Management of Home Properties
Kathleen M. Dunham 53 Vice President, Residential Property Management of
Home Properties and Conifer Realty
Johanna A. Falk 34 Vice President, Information Systems of Home
Properties
John H. Fennessey 60 Vice President, Development of Home Properties, Conifer Realty and HP Management
Rhonda Finehout 48 Vice President, Residential Property Management of Home Properties and Conifer Realty
Timothy A. Florczak 43 Vice President, Residential Property Management of Home Properties
Thomas L. Fountain 40 Vice President, Commercial Property Management of Home Properties, Conifer Realty and HP
Management
Timothy Fournier 38 Vice President, Development of Home Properties, Executive Vice President of Conifer Realty and Vice
President of HP Management
Gerald B. Korn 52 Vice President, Mortgage Finance of Home Properties
Laurie Leenhouts 42 Vice President, Residential Property Marketing of Home Properties and HP Management
Leslie J. Lewiston 33 Vice President, Residential Property Management of Home Properties
Robert J. Luken 34 Vice President and Controller of Home Properties, Conifer Realty and HP Management
Paul O'Leary 47 Vice President, Acquisitions and Due Diligence of Home Properties
John Oster 49 Vice President, Development of Home Properties, Conifer Realty and HP Management
James B. Quinn, Jr. 43 Vice President, Residential Property Management of Home Properties
Sharon Sanfratello 44 Vice President, Residential Property Management of Home Properties
John E. Smith 47 Vice President, Acquisitions of Home Properties
Eric Stevens 43 Vice President, Residential Property Management of Home Properties and Conifer Realty
Richard J. Struzzi 45 Vice President, Development of Home Properties and HP Management
Robert C. Tait 41 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.
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. She
has also served as Secretary and General Counsel of Conifer Realty since
1998. 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 also served as
Vice President of HP Management since 1998. 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 15 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 1978 and was named Vice
President in 1990. Ms. Dunham is a Certified Property Manager (CPM) as
designated by the Institute of Real Estate Management.
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 has also been a Vice President of HP Management
since 1998. 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).
RHONDA FINEHOUT has served as a Vice President of the Company and Conifer
Realty since 1998. She joined the Company in 1996 as a regional property
manager with responsibilities in market rate, rural development, low
income housing tax credit and fee managed properties. Ms. Finehout is a
graduate of the State University of New York at Oswego.
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 has also been a Vice
President of HP Management since 1998. 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.
GERALD B. KORN has served as a Vice President and been employed at the
Company since 1998. From 1984 until 1998, he was employed by Rochester
Community Savings Bank in various capacities, including as a Senior Vice
President in charge of the bank's national commercial real estate
portfolio. Prior to 1984, Mr. Korn was employed for 11 years as a FDIC
Bank Examiner. Mr. Korn graduated from Rochester Institute of Technology
with high honors.
LAURIE LEENHOUTS has served as a Vice President of the Company since its
inception and has been a Vice President of HP Management since 1998. 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.
LESLIE LEWISTON has served as a Vice President of the Company since 1998.
She joined the Company in 1997 as a Regional Manager and prior to that
had 12 years property management experience. Ms. Lewiston is a Magna Cum
Laude graduate of Pomona College.
ROBERT J. LUKEN has served as Controller of the Company since 1996 and as
a Vice President since 1997. He has also served as a Vice President and
Controller of Conifer Realty and HP Management since 1998. 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 has also been a Vice President of HP Management since
1998. He joined Conifer as a Vice President in 1988. Before joining
Conifer, Mr. Oster was Director of Operations for the New York State
Division of Housing and Community Renewal. He is a graduate of Hamilton
College.
JAMES B. QUINN, JR. has served as Vice President of the Company since
1998. He joined the Company in 1997 as the regional leader for the
Philadelphia region. Prior to joining the Company, Mr. Quinn was Vice
President of Millcreek Realty Group. Mr. Quinn is a graduate of Drexel
University.
SHARON SANFRATELLO has served as a Vice President of the Company since
1998. She joined Home Properties in 1993 as a property manager. Mrs.
Sanfratello has been in property management for 18 years. Prior to
joining Home Properties, Mrs. Sanfratello worked for Beacon Residential.
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.
ERIC STEVENS has served as a Vice President of the Company and Conifer
Realty since 1998. He joined the Company in 1996 in connection with the
merger with Conifer. At Conifer, he was a property manager for 13 years
in the affordable housing area, including working with the Low Income
Housing Tax Credit Program, New York State Housing Finance Agency, New
York State Division of Housing and Community Renewal and the U.S.
Department of Housing and Urban Development. Mr. Stevens is on the Board
of Directors of the Housing Council in Monroe County, Inc. Mr. Stevens
is a graduate of Babson College.
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, holds a Masters
Degree in Business Administration from Boston University and holds the
Real Property Administrator Degree from the Building Owners and Managers
International Institute. Married to Amy L. Tait, he is the son-in-law of
Norman Leenhouts.
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
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
First Quarter $28-1/16 $24-15/16 $.45
Second Quarter $27-7/8 $24-7/8 $.45
Third Quarter $27-3/16 $21-3/16 $.45
Fourth Quarter $26-15/16 $24-1/4 $.48
As of March 17, 1999, the Company had approximately 3,400 shareholders.
It has historically paid distributions on a quarterly basis in the months
of February, May, August and November. The Credit Agreements relating to
each of the Company's two $50 million lines of credit provide 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 operations and
110% of cash available for distribution; and (ii) the amounts required to
maintain the Company's status as a REIT.
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.
ORIG.
COMPANY PROPERTIES*
--------------------------------------------------- --------
8/4/94 1/1/94
Through Through
1998 1997 1996 1995 12/31/94 8/3/94
(in thousands, except share, per share and property data)
Revenues:
Rental Income $137,557 $64,002 $42,214 $31,705 $10,995 $11,526
Other Income 11,686 5,695 3,456 2,596 948 494
Property management income (1) - - - - - 834
TOTAL REVENUES 149,243 69,697 45,670 34,301 11,943 12,854
Expenses:
Operating and maintenance 63,136 31,317 21,859 15,911 5,267 6,329
Property management (1) - - - - - 625
General & administrative 6,685 2,255 1,482 1,200 400 407
Interest 23,980 11,967 9,208 6,432 1,444 3,126
Depreciation & amortization 23,191 11,200 8,077 6,258 2,191 1,584
TOTAL EXPENSES 116,992 56,739 40,626 29,801 9,302 12,071
Income before loss on disposition of property,
minority interest and extraordinary item 32,251 12,958 5,044 4,500 2,641 783
Loss on disposition of property - 1,283 - - - -
Income before minority interest and
extraordinary item 32,251 11,675 5,044 4,500 2,641 783
Minority interest 12,603 4,248 897 455 256 -
Income before extraordinary item 19,648 7,427 4,147 4,045 2,385 783
Extraordinary item, prepayment penalties,
net of allocation to minority interest (960) (1,037) - (1,249) (2,498) -
Net income (loss) $18,688 $6,390 $4,147 $2,796 $(113) $783
Net income (loss) per common share:
Basic $1.34 $.86 $.74 $.52 ($.02) N/A
Diluted $1.33 $.84 $.74 $.52 ($.02) N/A
Cash dividends declared per common
share $1.83 $1.74 $1.69 $1.66 $.26 N/A
Balance Sheet Data:
Real estate, before accumulated depreciation $940,788 $525,128 $261,773 $198,203 $162,991 $77,371
Total assets 1,012,235 543,823 248,631 181,462 148,709 60,014
Total debt 418,942 218,846 105,176 91,119 52,816 57,952
Stockholders' equity/Owners' (deficit) 361,956 151,432 83,030 75,780 81,941 (2,741)
Other Data:
Funds from Operations (2) $56,260 $24,345 $13,384 $11,025 $4,822 $2,348
Cash available for distribution (3) $49,044 $21,142 $11,022 $9,348 $4,369 $1,885
Net cash provided by (used in) operating activities $60,548 $27,285 $14,241 $9,811 $3,151 $2,527
Net cash provided by (used in) investing activities ($297,788) ($102,460) ($25,641) ($21,348) ($71,110) ($1,168)
Net cash provided by (used in) financing activities $266,877 $77,461 $12,111 $10,714 $68,315 ($1,689)
Weighted average number of shares outstanding:
Basic 13,898,221 7,415,888 5,601,027 5,408,474 5,408,230 N/A
Diluted 14,022,329 7,558,167 5,633,004 5,408,474 5,408,230 N/A
Total communities owned at end of period 96** 63 28 20 19 12
Total apartment units owned at end of period 23,680** 14,048 7,176 5,650 4,744 3,065
*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.
**Excludes 256 units at Leland Gardens in New Jersey owned at December 31, 1998
in an affiliated entity in contemplation of rehabilitating under the Low Income
Housing Tax Credit Program. In January, 1999, a 99% limited partnership
interest was transferred to the ultimate tax credit partner.
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, extraordinary items, 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
1998 1997 1996 1995 12/31/94 8/3/94
Net income (loss) $18,688 $6,390 $4,147 $2,796 ($113) $783
Depreciation - real property* 23,715 11,387 8,332 6,525 2,181 1,565
Non-recurring interest amortization 294 - - - - -
Loss on disposition of property - 1,283 8 - - -
Minority interest 12,603 4,248 897 455 256 -
Extraordinary item (prepayment penalties) 960 1,037 - 1,249 2,498 -
Funds from Operations 56,260 $24,345 $13,384 $11,025 $4,822 $2,348
Weighted average shares/units:
Basic 22,871.7 11,373.9 6,813.2 6,015.1 5,983.6 N/A
Diluted 22,995.8 11,516.1 6,845.1 6,015.1 5,983.6 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.
Quarterly information on Funds from Operations for the two most recent
years is as follows:
1998 1st 2nd 3rd 4th Total
Funds from
Operations before
minority interest $ 9,181 $ 12,813 $ 16,380 $ 17,886 $ 56,260
Weighted Average
Shares/Units:
Basic 17,303.6 21,312.3 25,603.7 27,129.4 22,871.7
Diluted 17,501.1 21,500.9 25,746.9 27,245.7 22,995.8
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
Item 6. SELECTED FINANCIAL DATA NOTES (CONTINUED)
(3) Cash Available for Distribution is defined as Funds from Operations less
an annual reserve for anticipated recurring, non-revenue generating
capitalized costs of $375 ($350 for 1996-1997 and $300 for 1994-1995) 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, 1998, the Company operated 259 apartment communities with 34,229
apartments. Of this total, the Company owned 97 communities, consisting
of 23,936 apartments, managed as general partner 123 partnerships that
owned 7,482 apartments and fee managed 2,811 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 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, 1998 TO YEAR ENDED DECEMBER 31,
1997.
The Company owned 27 communities with 6,552 apartment units throughout
1997 and 1998 where comparable operating results are available for the
years presented (the "1998 Core Properties"). For the year ending
December 31, 1998, the 1998 Core Properties showed an increase in rental
revenues of 2.3% and a net operating income increase of 6.9% over the
1997 year-end period. Property level operating expenses decreased 1.9%.
Average economic occupancy for the 1998 Core Properties decreased from
94.7% to 94.1%, with average monthly rental rates increasing 2.9% to
$627.
A summary of the 1998 Core Property net operating income is as
follows:
1998 1997 % CHANGE
Rent $46,587,000 $45,542,000 2.3%
Property Other Income 1,613,000 1,428,000 13.0%
Total Income 48,200,000 46,970,000 2.6%
Operating and Maintenance (22,491,000) (22,919,000) 1.9%
Net Operating Income $25,709,000 $24,051,000 6.9%
During 1998, the Company acquired a total of 9,632 apartment units in
34 newly acquired communities (the "1998 Communities"). In addition,
the Company experienced full year results for the 7,496 apartment
units in 35 newly acquired apartment communities (the "1997
Communities") acquired during 1997. The inclusion of these acquired
communities generally accounted for the significant changes in
operating results for the year ended December 31, 1998. The 1998
Communities exclude 256 units at Leland Gardens in New Jersey owned
at December 31, 1998 in an affiliated entity in contemplation of
rehabilitating under the Low Income Housing Tax Credit Program. In
January, 1999, a 99% limited partnership interest was transferred to
the ultimate tax credit partner.
The Company also disposed of two communities during 1997 with 624
apartment units and a 202-site manufactured home community, all of
which had partial results in 1997 (the "1997 Disposed Communities").
For the year ended December 31, 1998, operating income (income before
loss on disposition of property, minority interest and extraordinary
item) increased by $19,293,000 when compared to the year ended
December 31, 1997. The increase was primarily attributable to the
following factors: an increase in rental income of $73,555,000 and
an increase in other income of $5,991,000. These changes were
partially offset by an increase in operating and maintenance expense
of $31,819,000, an increase in general and administrative expense of
$4,430,000, an increase in interest expense of $12,013,000 and an
increase in depreciation and amortization of $11,991,000.
Of the $73,555,000 increase in rental income, $38,127,000 is
attributable to the 1997 Communities and $37,316,000 is attributable
to the 1998 Communities, offset in part by a $2,933,000 reduction
attributable to the 1997 Disposed Communities. The balance is a 2.3%
increase from the 1998 Core Properties due primarily to an increase
of 2.9% in weighted average rental rates, offset by a decrease in
occupancy from 94.7% to 94.1%.
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
1998 by $1,392,000. Of this increase, $643,000 is attributable to
the 1997 Communities, $1,026,000 is attributable to the 1998
Communities and $185,000 represents a 13.0% increase from the 1998
Core Properties. In addition, $452,000 represents the decrease in
the net results for limited partnerships accounted for on the equity
method.
Interest income increased in 1998 by $2,906,000, primarily
attributable to an increase in construction loans and advances made
to affiliated tax credit development partnerships.
Other income increased in 1998 by $1,693,000, including $1,093,000
from increased management fees from residential properties and
$329,000 from increased development fee income recognized directly by
the Company from communities developed under the federal government's
Low Income Housing Tax Credit Program where the Company is the
general partner. The increased management fee activity resulted from
full year results on 1,020 units managed in Detroit (acquired
October, 1997) and 1,337 units in 46 Rural Development properties
added in May of 1998.
Of the $31,819,000 increase in operating and maintenance expenses,
$18,469,000 is attributable to the 1997 Communities, $15,236,000 is
attributable to the 1998 Communities and a reduction of $1,458,000 is
attributable to the 1997 Disposed Communities. The balance for the
1998 Core Properties, a $428,000 reduction in operating expenses, is
primarily due to lower gas rates and relatively mild winter weather.
Core Property operating expenses, excluding utility expenses,
increased approximately 2.0%.
The operating expense ratio (the ratio of operating and maintenance
expense compared to rental and property other income) for the 1998
Core Properties was 46.7% and 48.8% for 1998 and 1997, respectively.
This 2.1% reduction is a direct result of lower than normal utility
expenses. 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 its markets and the Company's
practice, typical in its markets, of including heating expenses in
base rent.
General and administrative expenses increased in 1998 by $4,430,000,
or 196% from $2,255,000 in 1997 to $6,685,000 in 1998. A higher
bonus in 1998 compared to 1997 ($1,210,000 versus $287,000) resulted
from our incentive compensation plan which rewards exceptional FFO
growth per share, contributing 40% of the 196% increase in total G&A.
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 70% as
of December 31, 1998 compared to a year ago. The growth of
management fee income recognized directly by the Company, along with
its affect on G&A, makes it difficult to compare G&A to historical
numbers. If the management fee income is netted against G&A expense,
the percentage of remaining G&A compared to adjusted revenue is 3.5%
and 2.7% for 1998 and 1997, respectively.
Interest expense increased in 1998 by $12,013,000 as a result of the
acquisition of the 1998 Communities and full year interest expense
for the 1997 Communities. The 1997 Communities, costing in excess of
$266,000,000, were acquired with $87,000,000 of assumed debt in
addition to the use of UPREIT Units. The 1998 Communities, costing in
excess of $376,000,000, were acquired with $82,000,000 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 1998 and 1997. In addition, amortization
from deferred charges relating to the financing of properties
totaling $457,000 and $276,000 was included in interest expense for
1998 and 1997, respectively. Finally, $294,000 of unamortized fees
related to a standby loan facility, which allowed the Company to
enter into a non-contingent contract for a 17 property portfolio
acquisition, were written off during the third quarter, as the
facility was only partially used and quickly repaid.
The December 31, 1998 balance sheet reflects an unrealized loss on
available-for-sale securities of $1,607,000. This reduction to Other
Assets and Stockholders Equity represents a markdown from $11,649,000
to $10,042,000 relative to a strategic investment in the common stock
of Associated Estates Realty Corporation (NYSE:AEC) of 850,000
shares, representing approximately 4% of the outstanding shares of
AEC.
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 "1997 Core Properties"),
including 464 units in three communities acquired January 1, 1996.
For the year ending December 31, 1997, the 1997 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 1997 Core Properties increased to 95.3%
from 94.1%, with average monthly rental rates increasing 3.1% to
$600. A summary of the 1997 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 1997 Disposed Communities consist 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. 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.
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 1997 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 1997 Core Properties. In addition, $416,000
represents the increase in the net results for limited
partnerships accounted for on the equity method.
Interest income and Other income combined, 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 1997 Core Properties, or
$136,000, represents a 0.7% increase over 1996. The major
areas of increase in the 1997 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 1997 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 its markets 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 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity demands are expected to be
distributions to stockholders and Operating Partnership
unitholders, capital improvements and repairs and maintenance
for the properties, acquisition of additional properties,
property development and debt repayments. The Company 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,
1998, the Company owned twenty-three properties, with 3,709
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, $40,750,000 of common shares were issued under
this shelf registration including $15,000,000 sold directly to
two institutional investors and $25,750,000 placed with an
investment banking firm which was immediately resold to the
public. During the first four months of 1998, $9,500,000 of
common shares were sold to an investment banking firm who
included the shares in a unit investment trust and $36,000,000
were issued to one institutional investor. The remaining
balance on the shelf, $13,750,000, was added to a new $400
million shelf declared effective in May, 1998. During the
balance of the year, $27,400,000 of common shares were sold to
an investment banking firm who included the shares in a unit
investment trust and $52,700,000 ($49 million net of
underwriter's discount) was issued in the Company's first
public offering of stock since the IPO. The available balance
on the shelf at December 31, 1998 is $333,650,000.
The issuance of UPREIT Units for property acquisitions
continues to be a significant source of capital. During 1998,
4,512 apartment units in eight separate transactions were
acquired for a total cost of $176,000,000, using UPREIT Units
valued at approximately $71,000,000 with the balance paid in
cash or assumed debt. 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. The Company repurchased an additional
59,600 shares in September, 1998 at a cost of $1,437,000.
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 1998,
over $72,000,000 of common stock was issued under this plan,
approximately twice the level of the previous year.
As of December 31, 1998, the Company had an unsecured line of
credit from Chase Manhattan Bank of $50,000,000 and a
$50,000,000 supplemental unsecured revolving credit facility
with M&T Bank, both with no outstanding balances. Borrowings
under the facilities bear interest, at the Company's option, at
either 1.25% over the one-month LIBOR rate or at a money market
rate as quoted on a daily basis by the lending institutions.
The lines of credit expire on September 4, 1999, with a one
year extension at the Company's option.
As of December 31, 1998, the weighted average rate of interest
on the Company's mortgage debt is 7.2% and the weighted average
maturity of such indebtedness is approximately ten years. All
of the debt was at fixed rates of interest, with maturities
staggered. This limits the exposure to changes in interest
rates, minimizing the effect of interest rate fluctuations on
results of operations and financial condition.
The Company's net cash provided by operating activities
increased from $27,285,000 for the year ended December 31,
1997 to $60,548,000 for the year ended December 31, 1998. The
increase was principally due to the acquisition of the 1997 and
1998 Communities.
Net cash used in investing activities increased from
$102,460,000 in 1997 to $297,788,000 in 1998, resulting from a
higher level of acquisitions in 1998 (9,632 apartment units)
than in 1997 (6,872 apartment units, net of sales).
The Company's net cash provided by financing activities
increased from $77,461,000 in 1997 to $266,877,000 in 1998.
The major source of financing in 1997 was $100,400,000 of
proceeds from sales of shares of common stock and net debt
proceeds which were used to fund property acquisitions and
additions. In 1998, proceeds from the sale of common stock and
net debt proceeds totaling $316,045,000 were used to fund
property acquisitions and additions.
CAPITAL IMPROVEMENTS
Total capital improvement expenditures increased from
$15,962,000 in 1997 to $42,896,000 in 1998. Of the $42,896,000
expenditures, $8,795,000 is attributable to the 1998
Communities and $21,167,000 is attributable to the 1997
Communities. The balance of $12,934,000 is allocated between
the 1998 Core Properties of $10,579,000 and $2,355,000 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 1998, approximately $375 per unit was
spent on capital replacements to maintain the condition of its
properties.
Of the $10,579,000 incurred for the 1998 Core Properties
referred to above, $8,080,000 was incurred to fund non-
recurring, revenue enhancing upgrades, including the following:
construction of one new community center; the installation of
new windows and other energy conservation measures; and the
modernization of kitchens and bathrooms. Management believes
that these upgrades contributed significantly towards achieving
6.9% average growth in net operating income at the 1998 Core
Properties. Of the combined $29,962,000 incurred on 1998 and
1997 acquisition properties referenced above, over $25,000,000
in substantial rehabilitations was incurred 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 1999, management expects that the communities will
benefit further from improvements completed in 1998 and plans
to continue to fund similar non-recurring, revenue enhancing
upgrades in addition to normal capital replacements.
IMPACT OF THE YEAR-2000 ON SYSTEM PROCESSING
THE YEAR 2000 ("Y2K") PROBLEM CONCERNS THE INABILITY OF
INFORMATION SYSTEMS TO PROPERLY
RECOGNIZE AND PROCESS DATE-SENSITIVE INFORMATION BEYOND JANUARY
1, 2000. AS A RESULT, THE Y2K PROBLEM CAN AFFECT ANY SYSTEM
THAT USES DATE DATA, INCLUDING MAINFRAMES, PCS, AND EMBEDDED
MICROPROCESSORS THAT CONTROL SECURITY SYSTEMS, CALL-PROCESSING
SYSTEMS, BUILDING CLIMATE SYSTEMS, ELEVATORS, OFFICE EQUIPMENT
AND EVEN FIRE ALARMS. ALL REFERENCES TO PERCENT COMPLETE BELOW
ARE AS OF 3/15/99.
The Company's State of Readiness
The Company began addressing the Y2K issue in September 1997.
As such it divided its review into two segments: business
critical and mission critical systems. Business critical
systems are those with the potential to affect the financial and
operational infrastructure of the Company. Mission critical are
those systems with a potential to affect the delivery of
electricity and natural gas to our residents, commercial tenants
and employees and the safety of residents, commercial tenants
and employees.
Recognizing that the mission critical systems rely heavily on
public service vendors, the Company's focus to date has been on
business critical systems under the assumption that market
forces and regulatory agencies would encourage and monitor the
compliance of the telecommunications, utilities and emergency
service industries. The Company has set up systems to monitor
the progress of mission critical service providers and will
develop contingency plans, possibly in coordination with
industry organizations, as needed, to minimize the possibility
that the Y2K problem would disrupt the lives of its residents,
commercial tenants and employees.
The Company relies exclusively on micro computers (PC's). PC's
exist in the corporate office, regional offices and at the
communities. The Company is 95% complete with its review and
modification of corporate office systems towards Y2K compliance.
Outstanding projects include: upgrading the voicemail system and
installing Y2K compliant modules of non-critical property
management software. Specifically, the software vendors have
advised the Company that the property management, accounts
payable and general ledger software and payroll software is
compliant. The Company will continue a dialog with all software
service providers so that any additional upgrades can be
completed as necessary.
The Company is 50% complete with its review and modification of
regional office systems and 30% complete with its review and
modification of community based systems. The Company has one and
one-half full-time employees dedicated to upgrading regional
offices and community based systems. Additional information
systems employees will assist as needed. Employee participation
in this effort is slightly greater than originally anticipated
resulting in additions to our dedicated staff. The Company
anticipates its regional office systems will be tested for
compliance by July 1999 and that its community based systems
will be tested for compliance by September 1999. Both of the
testing targets have been extended in recognition of the
Company's need for more resources than originally anticipated.
Once all hardware and software components are believed to be Y2K
ready, the Company plans to periodically match its systems'
inventory against hardware and software component manufacturer
upgrade releases to assure that its systems have the most
current Y2K upgrades (including any properties acquired).
The ability of the Company to successfully transact monetary
exchanges is key to continued successful operation. For this
reason, all financial institutions which the Company has a
relationship will be identified and queried for Y2K readiness
status during the second quarter of 1999. This evaluation has
been delayed as it was felt that a delay would result in a more
accurate picture of the bank's status. The Company's
significant relationships are with regional and national
financial institutions which are also subject to the oversight
of various federal regulatory agencies for their Y2K compliance.
Delivery of goods and services (i.e., building and elevator
access, security systems, HVAC, life safety, etc.) to the
Company's communities and offices must continue to be provided
without interruption. The Company expects to have surveyed all
critical suppliers by June to determine their Y2K readiness
status.
CONTINGENCY PLANS
Testing will begin in August 1999 to determine the Company's
business critical system readiness. Based on testing results,
contingency plans may be put in place. This target date has
been changed as management is more comfortable that the time
required to develop contingency plans will be less than
originally planned.
RISKS
Since the Company's major source of income is rental payments
under term leases at communities located in different
municipalities, the failure of business critical systems at any
one community is not expected to have a material adverse effect
on the Company's financial condition, results of operations and
liquidity. Given the complexity and general uncertainty of the
Y2K issues in the gas, electric, telecommunications, banking and
related industries, even the most comprehensive program,
however, cannot assure that unforeseen problems will not occur.
The Company therefore is unable at this time to determine
whether any unforeseen impacts could have a material effect on
the Company's financial condition. The Company believes that
upon the full implementation of our upgraded business system and
assuming Y2K compliance of our public service vendors, the
possibility of significant interruptions of normal operations
should not be material.
COSTS
The total cost of the Company's Y2K activities, which is
estimated at $675,000, is not expected to have a material effect
on the Company's financial position. Approximately $375,000 has
been expended as of March 15, 1999. The remaining expenditures
to be incurred will be funded from operations. A majority of
these costs are an acceleration of the amounts the Company would
anticipate incurring to upgrade business systems, regardless of
the Y2K problem, considering the evolution of technology and the
requirements for running newly acquired and improved system
applications.
ENVIRONMENTAL ISSUES
Phase I environmental audits have been completed on
substantially all of the 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
The Company is not aware of any pronouncements which would have
a material impact.
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Note 4 - Mortgage Notes Payable in the Consolidated
Financial Statements of the Company concerning interest rate
risk.
See Management's Discussion and Analysis of Financial
Condition and Results of
Operations concerning market risk on available-for-sale
securities.
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.
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 1999 Shareholders' Meeting.
The information sets forth, as of February 28, 1999, 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. 83 1994
William Balderston, III 71 1994
Richard J. Crossed 59 1996
Alan L. Gosule 58 1996
Leonard F. Helbig, III 53 1994
Roger W. Kober 65 1994
Nelson B. Leenhouts 63 1993
Norman Leenhouts 63 1993
Clifford W. Smith, Jr. 52 1994
Paul L. Smith 63 1994
Amy L. Tait 40 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.
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 is also Executive Vice President of HP Management. He served
as President and Chief Executive Officer of 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 New 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
relating to the transaction.
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. He has been a
Vice President of Conifer Realty since 1998. 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 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 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. 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, 1998, all Section 16(a) filing
requirements applicable to its executive officers, directors and
greater than 10% beneficial owners were satisfied.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to the Company's proxy statement to be issued in
connection with the Annual Meeting of the Stockholders of the
Company to be held on May 4, 1999 under "Executive
Compensation", which proxy statement will be filed within 120
days after the end of the Company's fiscal year.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated herein by
reference to the Company's proxy statement to be issued in
connection with the Annual Meeting of Stockholders of the
Company to be held on May 4, 1999 under "Security Ownership of
Certain Beneficial Owners and Management", which proxy statement
will be filed within 120 days after the end of the Company's
fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by
reference to the Company's proxy statement to be issued in
connection with the Annual Meeting of Stockholders of the
Company to be held on May 4, 1999 under "Certain Relationships
and Transactions", which proxy statement will be filed within
120 days after the end of the Company's fiscal year.
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, 1998 and 1997 F-3
Consolidated Statements of Operations
for the Years Ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Comprehensive Income
for the Years Ended December 31, 1998, 1997 and 1996 F-6
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-8
Report of Independent Accountants on Financial
Statement Schedule F-26
Schedule III:
Real Estate and Accumulated Depreciation F-27
(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.
2.5 Agreement and Plan of Merger, dated July 31, 1997 between Home
Properties of New York, L.P. and Chesfield Partnership.
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 Partnership.
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
Partnership 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
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.
2.18 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 17, 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.
2.23 Purchase and Sale Agreement dated November 26, 1997 among Home
Properties of New York, L.P. and Cedar Glen Associates.
2.24 Contribution Agreement dated March 2, 1998 among Home Properties
of New York, L.P., Braddock Lee Limited Partnership and Tower
Construction Group, LLC.
2.25 Contribution Agreement dated March 2, 1998 among Home Properties
of New York, L.P., Park Shirlington Limited Partnership and
Tower Construction Group, LLC.
2.26 Contract of Sale between Lake Grove Associates Corp. and Home
Properties of New York, L.P., dated December 12, 1996, relating
to the Lake Grove Apartments.
2.27 Form of Contribution Agreement among Home Properties of New
York, L.P. and Strawberry Hill Apartment Company LLLP, Country
Village Limited Partnership, Morningside Six, LLLP, Morningside
North Limited Partnership and Morningside Heights Apartment
Company Limited Partnership with schedule setting forth material
details in which documents differ from form.
2.28 Form of Purchase and Sale Agreement with schedule setting forth
material details in which documents differ from form.
3.1 Articles of Amendment and Restatement of the Articles of
Incorporation of Home Properties of New York, Inc.
3.2 Articles of Amendment of the 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 Home 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 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.
4.8 Amended and Restated Stock Benefit Plan of Home Properties of
New York, Inc.
4.9 Amended and Restated Dividend Reinvestment, Stock Purchase,
Resident Stock Purchase and Employee Stock Purchase Plan
4.10 Amendment No. One to Amended and Restated Dividend Reinvestment,
Stock Purchase, Resident Stock Purchase and Employee Stock
Purchase Plan.
4.11 Amendment No. Two to Amended and Restated Dividend Reinvestment,
Stock Purchase, Resident Stock Purchase and Employee Stock
Purchase Plan.
4.12 Amended and Restated Dividend Reinvestment, Stock Purchase,
Resident Stock Purchase and Employee Stock Purchase Plan.
4.13 Amendment No. Three to Amended and Restated Dividend
Reinvestment, Stock Purchase, Resident Stock Purchase and
Employee Stock Purchase Plan.
4.14 Directors' Stock Grant Plan.
4.15 Director, Officer and Employee Stock Purchase and Loan Program.
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 Home Properties Trust Declaration of Trust, dated September 19,
1997.
10.8 Employment Agreement between Home Properties of New York, L.P.
and Norman P. Leenhouts.
10.9 Amendments No. One, Two and Three to the Employment Agreement
between Home Properties of New York, L.P. and Norman P.
Leenhouts.
10.10 Employment Agreement between Home Properties of New York, L.P.
and Nelson B. Leenhouts.
10.11 Amendments No. One, Two and Three to the Employment Agreement
between Home Properties of New York, L.P. and Nelson B. Leenhouts.
10.12 Employment Agreement between Home Properties of New York, L.P.
and Richard J. Crossed.
10.13 Amendments No. One and Two to the Employment Agreement between
Home Properties of New York, L.P. and Richard J. Crossed.
10.14 Indemnification Agreement between Home Properties of New York,
Inc. and certain officers and directors.
10.15 Indemnification Agreement between Home Properties of New
York, Inc. and Richard J. Crossed.
10.16 Indemnification Agreement between Home Properties of New York,
Inc. and Alan L. Gosule.
10.17 Registration 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.
10.18 Lockup 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.
10.19 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.
10.20 Amendment 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.
10.21 Agreement 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.
10.22 Second Amended and Restated Incentive Compensation Plan of Home
Properties of New York, Inc.
10.23 Indemnification 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.
10.24 Form 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.
10.25 Form of Pledge Security Agreement executed by officers and
directors in connection with Executive and Director Stock
Purchase and Loan Program.
10.26 Schedule of Participants, loan amounts and shares issued in
connection with the Executive and Director Stock Purchase and
Loan Program.
10.27 Subordination Agreement between Home Properties of New York,
Inc. and The Chase Manhattan Bank relating to the Executive and
Director Stock Purchase and Loan Program.
10.28 Partnership 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.
10.29 Registration Rights Agreement, dated as of December 23, 1996
between Home Properties of New York, Inc. and State of Michigan
Retirement Systems.
10.30 Lock-Up Agreement, dated December 23, 1996 between Home
Properties of New York, Inc. and State of Michigan Retirement
Systems.
10.31 Agreement, dated as of April 13, 1998, between Home Properties
of New York, Inc. and the Treasurer of the State of Michigan.
10.32 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.
10.33 Amendment 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.
10.34 Promissory Note, dated September 4, 1997 from Home Properties
of New York, L.P. to The Chase Manhattan Bank.
10.35 Promissory Note, dated September 4, 1997 from Home Properties
of New York, L.P. to Manufacturers and Traders Trust Company.
10.36 Amendment No. Nine to the Second Amended and Restated Agreement
of Limited Partnership to the Operating Partnership.
10.37 Credit Agreement dated as of July 6, 1998 among Home Properties
of New York, L.P. and Manufacturers and Traders Trust Company.
10.38 Agreement and Amendment No. One to Credit Facility Agreement,
dated December 11,
1998 between Home Properties of New York, Inc. and Manufacturers
and Traders Trust Company.
10.39 Master Credit Facility Agreement by and among Home Properties
of New York, Inc., Home Properties of New York, L.P., Home
Properties WMF I LLC and Home Properties of New York, L.P. and
P-K Partnership doing business as Patricia Court and Karen Court
and WMF Washington Mortgage Corp., dated as of August 28, 1998.
10.40 First Amendment to Master Credit Facility Agreement, dated as
of December 11, 1998 among Home Properties of New York, Inc.,
Home Properties of New York, L.P., Home Properties WMF I LLC and
Home Properties of New York, L.P. and P-K Partnership doing
business as Patricia Court and Karen Court and WMF Washington
Mortgage Corp. and Fannie Mae.
10.41 Amendments No. Ten through Seventeen to the Second Amended and
Restated Limited Partnership Agreement.
21 List of Subsidiaries of Home Properties of New York, Inc.
23 Consent of PricewaterhouseCoopers LLP.
27 Financial Data Schedule.
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 17, 1999
Norman P. Leenhouts Board of Directors and
Co-Chief Executive
Officer (Co-Principal
Executive Officer)
/S/ NELSON B. LEENHOUTS Director, President March 17, 1999
Nelson B. Leenhouts and Co-Chief Executive
Officer (Co-Principal
Executive Officer)
/S/ RICHARD J. CROSSED Director, Executive Vice March 17, 1999
Richard J. Crossed President
/S/ AMY L. TAIT Director, Executive Vice March 17, 1999
Amy L. Tait President
/S/ DAVID P. GARDNER Vice President, Chief Financial March 17, 1999
David P. Gardner Officer and Treasurer
(Principal Financial and
Accounting Officer)
SIGNATURE TITLE DATE
/S/ BURTON S. AUGUST, SR. Director March 17, 1999
Burton S. August, Sr.
/S/ WILLIAM BALDERSTON, III Director March 17, 1999
William Balderston, III
/S/ ALAN L. GOSUL Director March 17, 1999
Alan L. Gosule
/S/ LEONARD F. HELBIG, III Director March 17, 1999
Leonard F. Helbig, III
/S/ ROGER W. KOBER Director March 17, 1999
Roger W. Kober
/S/ CLIFFORD W. SMITH, JR. Director March 17, 1999
Clifford W. Smith, Jr.
/S/ PAUL L. SMITH Director March 17, 1999
Paul L. Smith
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, 1998 and 1997 F-3
Consolidated Statements of Operations
for the Years Ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Comprehensive Income
for the Years Ended December 31, 1998, 1997 and 1996 F-6
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-8
Report of Independent Accountants on
Financial Statement Schedule F-26
Schedule III:
Real Estate and Accumulated Depreciation F-27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Home Properties of New York, Inc.
In our opinion, the accompanying consolidated financial
statements listed in item 14(a)(1) and (2) of this Form 10-K
present fairly, in all material respects, the financial
position of Home Properties of New York, Inc. (the "Company")
at December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in
the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Rochester, New York
January 30, 1999
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 and 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1998 1997
ASSETS
Real estate:
Land $ 119,221 $ 62,640
Buildings, improvements and equipment 821,567 462,488
940,788 525,128
Less: accumulated depreciation ( 65,627) (46,531)
Real estate, net 875,161 478,597
Cash and cash equivalents 33,446 3,809
Cash in escrows 17,431 10,211
Accounts receivable 6,269 3,531
Prepaid expenses 6,155 5,305
Deposit 175 605
Investment in and advances to affiliates 54,229 35,585
Deferred charges 2,749 1,637
Other assets 16,620 4,543
Total assets $1,012,235 $543,823
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $ 418,942 $210,096
Line of Credit - 8,750
Accounts payable 8,300 5,082
Accrued interest payable 1,962 1,077
Accrued expenses and other liabilities 4,962 4,374
Security deposits 11,404 6,165
Total liabilities 445,570 235,544
Minority interest 204,709 156,847
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Common stock, $.01 par value; 50,000,000
shares authorized; 17,635,000 and 9,317,556 shares
issued and outstanding at December 31, 1998 and
1997, respectively 177 93
Excess stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Additional paid-in capital 401,814 176,021
Distributions in excess of accumulated earnings ( 26,622) (19,700)
Unrealized loss on available-for-sale securities ( 1,607) -
Treasury stock, at cost, 79,600 and 20,000 shares at
December 31, 1998 and 1997, respectively ( 1,863) ( 426)
Officer and director notes for stock purchases ( 9,943) ( 4,556)
Total stockholders' equity 361,956 151,432
Total liabilities and stockholders' equity $1,012,235 $543,823
The accompanying notes are an integral part of these consolidated financial
statements.
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1998 1997 1996
Revenues:
Rental income $137,557 $64,002 $42,214
Property other income 3,614 2,222 1,025
Interest income 5,102 2,196 643
Other income 2,970 1,277 1,788
Total Revenues 149,243 69,697 45,670
Expenses:
Operating and maintenance 63,136 31,317 21,859
General and administrative 6,685 2,255 1,482
Interest 23,980 11,967 9,208
Depreciation and amortization 23,191 11,200 8,077
Total Expenses 116,992 56,739 40,626
Income before loss on disposition of
property, minority interest and
extraordinary item 32,251 12,958 5,044
Loss on disposition of property - 1,283 -
Income before minority interest and
extraordinary item 32,251 11,675 5,044
Minority interest 12,603 4,248 897
Income before extraordinary item 19,648 7,427 4,147
Extraordinary item, prepayment
penalties, net of $595 in 1998 and
$737 in 1997 allocated to minority
interest (960) (1,037) -
Net Income $18,688 $ 6,390 $ 4,147
Basic earnings per share data:
Income before extraordinary item $ 1.41 $ 1.00 $ .74
Extraordinary item ($ .07) ($ .14) -
Net income $ 1.34 $ .86 $ .74
Diluted earnings per share data:
Income before extraordinary item $ 1.40 $ .98 $ .74
Extraordinary item ($ .07) ($ .14) -
Net income $ 1.33 $ .84 $ .74
Weighted average number of shares outstanding:
Basic 13,898,221 7,415,888 5,601,027
Diluted
14,022,329 7,558,167 5,633,004
The accompanying notes are an integral part of these consolidated financial
statements.
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Officer/
Distributions Director
Additional in Excess of Accumulated Notes for
Common Stock Paid-In Accumulated Comprehensive Treasury Stock
Shares Amount Capital Earnings Income Stock Purchase
Balance, January 1, 1996 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 3,148,750 31 77,087 (2,272)
Interest on notes for stock
purchase ( 223)
Net income 6,390
Conversion of UPREIT Units
for stock 44,308 1 842
Purchase of treasury stock (20,000) ( 426)
Dividends paid ($1.74 per share) ( 13,028) ______ _____
Balance, December 31, 1997 9,317,556 93 176,021 ( 19,700) - ( 426) (4,556)
Issuance of common stock, net 8,301,072 83 205,483 (5,236)
Interest on notes for stock
purchase ( 151)
Net income 18,688
Unrealized loss on
available-for-sale securities (1,607)
Conversion of UPREIT Units for
stock 75,972 1 800
Purchase of treasury stock (59,600) (1,437)
Adjustment of minority interest 19,510
Dividends paid ($1.83 per share) _________ _____ ________ _(25,610) - _______ _______
17,635,000 $177 $401,814 ($26,622) ($1,607) ($1,863) ($9,943)
The accompanying notes are an integral part of these consolidated financial
statements.
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
1998 1997 1996
Net Income $18,688 $6,390 $4,147
Comprehensive income:
Unrealized loss on
available-for-sale securities (1,607) - -
Net comprehensive income $17,081 $6,390 $4,147
The accompanying notes are an integral part of these consolidated financial
statements.
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
1998 1997 1996
Cash flows from operating activities:
Net income $ 18,688 $ 6,390 $ 4,147
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in income of affiliates 146 ( 285) 81
Income allocated to minority interest 12,603 4,248 897
Extraordinary item allocated to minority interest ( 595) ( 737) -
Depreciation and amortization 24,405 11,938 8,667
Unrealized loss on available-for-sale securities 1,607 - -
Loss on disposition of property - 1,283 -
Changes in assets and liabilities:
Other assets ( 6,236) ( 4,555) ( 1,422)
Accounts payable and accrued liabilities 9,930 9,003 1,871
Total adjustments 41,860 20,895 10,094
Net cash provided by operating activities 60,548 27,285 14,241
Cash flows used in investing activities:
Purchase of properties, net of mortgage notes assumed
and UPREIT Units issued (225,490) (71,876) (14,026)
Additions to properties ( 42,896) ( 15,962) ( 8,843)
Deposits on property 430 ( 605) ( 1,900)
Advances to affiliates ( 54,105) ( 41,121) (15,379)
Payments on advances to affiliates 35,922 13,791 14,507
Proceeds from sale of properties - 13,313 -
Purchase of available-for-sale securities (11,649) - -
Net cash used in investing activities (297,788) (102,460) (25,641)
Cash flows from financing activities:
Proceeds from sale of common stock 200,179 74,625 12,625
Purchase of treasury stock ( 1,437) ( 426) -
Proceeds from mortgage notes payable 187,481 72,175 4,530
Payments of mortgage notes payable ( 60,536) ( 54,388) (21,822)
Proceeds from line of credit 156,800 153,650 34,030
Payments on line of credit (165,550) (144,900) (38,530)
Additions to deferred loan costs ( 2,329) ( 762) ( 243)
Additions to cash escrows ( 7,220) ( 4,574) ( 1,883)
Dividends and distributions paid ( 40,511) ( 17,939) (11,537)
Capital contribution to minority interest _____ - - 34,941
Net cash provided by financing activities 266,877 77,461 12,111
Net increase in cash 29,637 2,286 711
Cash and cash equivalents:
Beginning of year 3,809 1,523 812
End of year $ 33,446 $ 3,809 $ 1,523
The accompanying notes are an integral part of these consolidated
financial statements.
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 apartment
communities in the Northeastern, Mid-Atlantic and Midwestern United
States. The Company conducts its business through Home Properties of New
York, L.P. (the "Operating Partnership"), a New York limited partnership.
As of December 31, 1998, the Company operated 259 apartment communities
with 34,229 apartments. Of this total, the Company owned 97 communities,
consisting of 23,936 apartments, managed as general partner 123
partnerships that owned 7,482 apartments and fee managed 2,811 apartments
for affiliates and third parties. The Company also fee managed 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 64.0% (56.1% at December 31, 1997) general partnership
interest in the Operating Partnership. The remaining 36.0% (43.9% at
December 31, 1997) 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 $189, $0 and
$63 of interest capitalized in 1998, 1997 and 1996, respectively.
Ordinary repairs and maintenance are expensed as incurred.
The Company quarterly reviews its properties 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.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 $23,067, $11,104 and $7,979 for the
years ended December 31, 1998, 1997 and 1996, respectively.
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 $2,592 and $1,791 as of December 31, 1998 and 1997, respectively.
AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities are recorded at fair market value based upon
quoted prices,
with the unrealized gain (loss) recorded as a component of stockholders'
equity.
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 $2,891, $1,291 and $1,256 for the years
ended December 31, 1998, 1997 and 1996, respectively.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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, 1998, 1997 and 1996. Stockholders are taxed on
dividends and must report such dividends as either ordinary income,
capital gains, or as return of capital.
EARNINGS PER SHARE
Basic Earnings Per Share ("EPS") is computed as net income divided by the
weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur from common
shares issuable through stock-based compensation including stock options.
The exchange of an Operating Partnership Unit for common stock will have
no effect on diluted EPS as unitholders and stockholders effectively share
equally in the net income of the Operating Partnership.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER 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, 1998, 1997 and
1996 is as follows:
1998 1997 1996
Basic weighted average number
of shares outstanding
13,898,221 7,415,888 5,601,027
Effect of dilutive stock options
124,108 142,279 31,977
Diluted weighted average number
of shares outstanding
14,022,329 7,558,167 5,633,004
Unexercised stock options to purchase 138,500, 116,500, and 52,146
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, 1998, 1997 and 1996, respectively.
ACCOUNT RECLASSIFICATIONS
Certain account balances at December 31, 1997 and December 31, 1996 were
reclassified to conform to account classifications used by the Company at
December 31, 1998. These changes had no effect on reported results of
operations or financial position.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
INVESTMENT IN AND ADVANCES TO AFFILIATES
The Company has investments in and advances to approximately 130 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, 1998 and
1997:
1998 1997
Balance Sheets:
Real estate, net $225,128 $141,625
Other assets 29,796 23,319
Total assets $254,924 $164,944
Mortgage notes payable $165,838 $113,380
Advances from general partner 39,437 27,577
Other liabilities 32,324 11,946
Partners' equity 17,325 12,041
Total liabilities and partners' equity $254,924 $164,944
1998 1997 1996
Operations:
Gross revenues $38,958 $26,536 $22,495
Operating expenses (21,078) (13,817) (11,628)
Mortgage interest expense (8,036) (6,699) (5,417)
Depreciation and amortization (10,725) (7,359) (6,325)
Net loss $(881) $(1,339) $(875)
Company's share (included in
property other income) $(259) $193 $(223)
Reconciliation of interests in the underlying net assets to the Company's
carrying value of property investments in and advances to affiliates:
1998 1997
Partners' equity, as above $17,325 $12,041
Equity of other partners 12,383 9,982
Company's share of investments in limited
partnerships 4,942 2,059
Advances to limited partnerships, as above 39,437 27,577
Company's investment in and advances to limited
partnerships 44,379 29,636
Company's investment in Management Companies
(see Note 9) 388 607
Company's advances to Management Companies 9,462 5,342
Carrying value of investments in and advances to
affiliates $54,229 $35,585
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
MORTGAGE NOTES PAYABLE
Mortgage notes, collateralized by certain properties, are as follows:
DECEMBER 31 Current Fixed Maturity
1998 1997 INTEREST RATE DATE
Various $ - $ 41,864 N/A N/A
Unsecured note payable 3 38 2.50 1999
Perinton & Riverton 11,872 11,983 6.75 * 2000
Philadelphia (2 properties) 4,839 4,949 8.50 2001
New York (4 properties) 19,537 19,867 7.75 2002
Royal Gardens 11,649 11,919 7.66 2002
Racquet Club 12,136 - 7.63 2003
Rolling Park 2,866 - 7.88 2003
Curren Terrace 9,597 9,731 8.36 2003
Sherry Lake 6,623 - 7.88 2004
Glen Manor 3,701 3,752 8.13 2004
Colonies 12,535 - 8.88 2004
Springcreek & Meadows 3,162 3,200 7.63 * 2004
Idylwood 9,305 9,390 8.63 2005
Carriage Hill - MI 3,914 - 7.36 2006
Carriage Park 5,637 - 7.48 2006
Cherry Hill 4,527 - 7.99 2006
Mid-Island Estates 6,675 6,675 7.50 * 2006
Newcastle 6,150 6,150 6.00 * 2006
Country Village 6,670 - 8.39 2006
Raintree Island 6,400 6,495 8.50 2006
Woodgate Place 3,440 3,473 7.87 2007
Strawberry Hill 2,073 - 8.26 2007
Detroit Portfolio (10 properties) 49,293 50,000 7.51 2008
Hamlet Court 1,792 1,812 7.11 * 2008
Candlewood - IN 7,909 - 7.02 2008
Valley Park South 10,079 10,175 6.93 2008
Conifer Village 2,765 2,910 7.20 2010
Multi-Property (7) 58,881 - 6.16 2011
Baltimore (2 properties) 20,419 - 6.99 2013
Multi-Property (22) 100,000 - 6.48 2013
Pines of Perinton 8,875 - 8.50 2018
Fairways at Village Green 4,436 4,513 8.23 2019
Raintree Island 1,182 1,200 8.50 2020
Total/Average $418,942 $210,096 7.17
*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, 1998 are as follows:
1999 $ 4,269
2000 16,088
2001 9,101
2002 33,191
2003 26,766
Thereafter 329,527
$418,942
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 $430,000 at December 31, 1998.
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 $1,555 and $1,774 for the years
ended December 31, 1998 and 1997, respectively. The 1998 paydowns totaled
$54,879 from 14 debt instruments which were financed by three new
borrowings in excess of $179,000. The 1997 paydowns totaled $34,626 from
one debt instrument which was financed by one new borrowing of $50,000.
5 LINE OF CREDIT
As of December 31, 1998, the Company had an unsecured line of credit from
Chase Manhattan Bank of $50,000 and a $50,000 supplemental unsecured
revolving credit facility with M&T Bank, both with no outstanding
balances. The lines of credit expire 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.
6 MINORITY INTEREST
The changes in minority interest for the two years ended December 31:
1998 1997
Balance, beginning of year $156,847 $ 52,730
Issuance of UPREIT Units associated with
property acquisitions 71,067 106,359
Adjustment from minority interest to stockholders' equity ( 19,510) -
Exchange of Units for Shares ( 801) ( 843)
Net income 12,008 3,511
Distributions (14,902) ( 4,910)
Balance, end of year $204,709 $156,847
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 "DRIP" ).
The DRIP
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 $72 million, $34 million and $12
million, net of officer and director notes, was raised through this
program during 1998, 1997 and 1996, respectively.
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 DRIP
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 DRIP 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.
STOCK PURCHASE AND LOAN PLAN
In May, 1998, the Company adopted the Director, Officer and Employee Stock
Purchase and Loan Plan (the "Stock Purchase Plan"). The program provides
for the sale and issuance, from time to time as determined by the Board of
Directors, of up to 500,000 shares of the Company's Common Stock to the
directors, officers and key employees of the Company for consideration of
not less than 97% of the market price of the Common Stock. The Stock
Purchase Plan also allows the Company to loan the participants up to 100%
of the purchase price (50% for non-employee directors).
On August 12, 1998, thirty officers/key employees and the six independent
directors purchased an aggregate of 238,239 shares of common stock through
the Stock Purchase Plan at the price of $24.11. The purchases for the
officers/key employees were financed 100% by a recourse loan from the
Company (50% for non-employee directors). The loans bear interest at
7.13% per annum and mature on the earlier of the maturity of the 1996 and
1997 phases of the loan program or August, 2018. The loans are
collateralized by pledges of the common stock and are expected to be
repaid from the regular quarterly dividends paid on the shares.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7 STOCKHOLDERS' EQUITY (CONTINUED)
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
1996 51.1% 48.9%
1997 50.1% 49.9%
1998 79.4% 20.6%
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% for
an additional five years, or (b) the actual dividends paid to common
shareholders on 1,666,667 shares. The current dividend of $.48 per
quarter (effective with the November, 1998 dividend) is equivalent to
an annualized dividend rate of $1.92 per share, which exceeds the 9.0%
preferred return. 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, 1998, 17,635,000 common shares and 9,929,461 UPREIT
Units/interests were outstanding, for a total of 27,564,461.
8 SEGMENT REPORTING
Effective January 1, 1998, the Company has adopted the Financial
Accounting Standards Board Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131). The Company has engaged in two primary
business segments - the ownership and management of market rate
apartment communities and the management and development of government
assisted housing. Company management views each apartment community
as a separate component of the operating segment. The Company's two
reportable segments are managed separately as each requires different
operating strategies and management expertise. There are no material
intersegment sales or transfers.
Non-segment revenue to reconcile total revenue consists of
unconsolidated management and development fees and interest income.
Non-segment assets to reconcile to total assets include cash, cash in
escrows, accounts receivable, prepaid expenses, deposits, investments
in and advances to affiliates, deferred charges and other assets.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8 SEGMENT REPORTING (CONTINUED)
The accounting policies of the segments are the same as those
described in Note 1.
The Company assesses and measures segment operating results based on a
performance measure referred to as Funds from Operations ("FFO"). The
National Association of Real Estate Investment Trusts defines FFO as
net income (loss), before gains (losses) from the sale of property,
extraordinary items, plus real estate depreciation including
adjustments for unconsolidated partnerships and joint ventures. FFO
is not a measure of operating results or cash flows from operating
activities as measured by generally accepted accounting principles and
it is not indicative of cash available to fund cash needs and should
not be considered an alternative to cash flows as a measure of
liquidity.
THE REVENUES, PROFIT (LOSS), AND ASSETS FOR EACH OF THE REPORTABLE
SEGMENTS ARE SUMMARIZED AS FOLLOWS FOR THE YEARS ENDED DECEMBER 31,
1998, 1997, AND 1996.
1998 1997 1996
REVENUES
Apartments owned $141,171 $66,224 $43,239
Management & development fees 10,908 7,335 6,558
Reconciling items ( 2,836) ( 3,862) ( 4,127)
Total Revenue $149,243 $69,697 $45,670
PROFIT (LOSS)
Funds from operations:
Apartments owned $78,035 $34,907 $21,380
Management & development fees 2,970 1,277 1,788
Reconciling items 5,102 2,196 643
Segment contribution to FFO 86,107 38,380 23,811
General & administrative expenses ( 6,685) ( 2,255) (1,482)
Interest expense (23,980) (11,967) (9,208)
Unconsolidated depreciation 733 324 390
Non-recurring amortization 294 - -
Non-real estate depreciation/amort. ( 209) ( 137) ( 135)
Unconsolidated loss on disposition - - 8
Funds from Operations 56,260 24,345 13,384
Depreciation - apartments owned (22,982) (11,063) (7,942)
Unconsolidated depreciation ( 733) ( 324) ( 390)
Non-recurring amortization ( 294) - -
Unconsolidated loss on disposition
of property - - ( 8)
Loss on disposition of properties - ( 1,283) -
Minority interest in earnings (12,603) ( 4,248) ( 897)
Extraordinary items, net of minority
interest ( 960) ( 1,037) -
Net Income $18,688 $6,390 $4,147
ASSETS
Apartments owned $875,161 $478,597 $221,536
Apartments managed 388 607 514
Reconciling items 136,686 64,619 26,581
Total Assets $1,012,235 $543,823 $248,631
REAL ESTATE CAPITAL EXPENDITURES
New property acquisitions $376,735 $266,799 $54,727
Apartment improvements 42,896 15,962 8,843
Total Real Estate Capital Expenditures $419,631 $282,761 $63,570
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
9 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. On December 31, 1998,
additional shares representing a 4% economic interest were sold and issued
to the same inside directors. Therefore, effective January 1, 1999, the
Operating Partnership is entitled to receive 95% of the economic interest
of each Management 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 $113, $92
and $142 for the years ended December 31, 1998, 1997 and 1996,
respectively. Summarized combined financial information of the Management
Companies at and for the years ended December 31, 1998, 1997 and 1996 is
as follows:
1998 1997 1996
Management fees $3,471 $3,141 $2,942
Development and construction
management fees 4,581 3,010 1,971
General and administrative (6,953) ( 5,561) ( 4,448)
Other expenses ( 985) ( 497) ( 322)
Net income $ 114 $ 93 $ 143
Total assets $11,288 $6,037 $3,279
Total liabilities $10,848 $5,428 $2,762
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10 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 $13,492, $8,427 and $6,170 for the years ended
December 31, 1998, 1997 and 1996, respectively.
The Company leases its corporate office space from an affiliate. The
lease requires an annual base rent of $336 through June, 2000 and $355
from July, 2000 through the August, 2003 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 $619,
$387 and $349 for the years ended December 31, 1998, 1997 and 1996,
respectively.
From time to time, the Company advances funds as needed to the Management
Companies which total $9,462 and $5,342 at December 31, 1998 and 1997,
respectively, and bear interest at 1% over prime.
11 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 $186, $180 and $174 including contingent rents of
$116, $110 and $104 for the years ended December 31, 1998, 1997 and 1996,
respectively. At December 31, 1998, 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.
The matching expense under this plan was $208, $161 and $108 for the years
ended December 31, 1998, 1997 and 1996, respectively.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11 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 ("FFO") per share/unit (computed based on the basic
shares/units outstanding). No cash bonuses will be payable under the
Incentive Compensation Plan unless the increase in FFO per share, after
giving effect to the bonuses, is equal to or greater than 2%. The
Incentive Compensation Plan was amended in 1998 by establishing a floor of
5% in per share/unit FFO growth. The bonus expense charged to operations
(including Management Companies) was $1,997, $1,193 and $495 for the years
ended December 31, 1998, 1997 and 1996, 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.
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 (42% of the owned
portfolio) for a period of time unless in a tax deferred Internal Revenue
Code Section 1031 like-kind exchange.
DEBT COVENANTS
The line of credit loan agreements contain restrictions which, among other
things, require maintenance of certain financial ratios and limit the
payment of dividends. At December 31, 1998, the Company was in compliance
with these covenants.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11 COMMITMENTS AND CONTINGENCIES (CONTINUED)
GUARANTEES
The Company has guaranteed a total of $711 of debt associated with four
entities where the Company is the general partner. In addition, the
Company has guaranteed the Low Income Housing Tax Credit to limited
partners in forty-six partnerships totalling approximately $37,000. As of
December 31, 1998, 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, 1998 is approximately $48,300. Any
expenditures on behalf of the Company to meet this guarantee have not been
required. In addition, the Company, acting as general partner in certain
partnerships, is obligated to advance funds to meet partnership operating
deficits.
EXECUTIVE RETENTION PLAN
Effective February 2, 1999, the Executive Retention Plan provides for
severance benefits and other compensation to be received by certain
employees in the event of a change in control of the Company and a
subsequent termination of their employment without cause or voluntarily
with good cause.
12 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
(103,000) 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,
1998. At December 31, 1998, 0 and 46,446 common shares were available for
future grant of options or awards under the Plan for officers and
employees and non-employee directors, respectively. The Board of
Directors anticipates amending the Plan in the future to provide for the
issuance of additional options to purchase shares. This amendment does
not require stockholder approval because the Plan, under New York Stock
Exchange rules, is "broadly based".
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
12 STOCK BENEFIT PLAN (CONTINUED)
Details of stock option activity during 1998, 1997 and 1996 are as
follows:
Number Option Price
OF SHARES PER SHARE
Options outstanding at January 1, 1996 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)
Granted, 1998 217,100 25.125-27.06
Exercised, 1998 (240,739) 17.875-20.50
Cancelled, 1998 (11,000) 19.00-26.50
Options outstanding at December 31, 1998 800,863 $17.875-$27.06
(395,441 shares exercisable)
The following table summarizes information about options outstanding at
December 31, 1998:
Weighted
Average Weighted Weighted
Remaining Average Average
Year Number Contractual Fair Value Number Exercise
GRANTED OUTSTANDING LIFE OF OPTIONS EXERCISABLE PRICE
1994 288,373 5 N/A 242,927 $19.000
1995 15,000 1 $1.39 15,000 17.875
1996 146,767 7 $1.01 65,549 19.554
1997 139,323 8 $1.59 47,465 24.555
1998 211,400 9 $1.39 24,500 27.060
Totals 800,863 7 395,441 $20.215
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
12 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 1998, 1997 and 1996, the Company's proforma net
income and proforma basic earnings per share would have been $18,563,
$6,299 and $4,031 and $1.34, $.85 and $.72, 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 1998, 1997 and 1996: 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%.
13 PROPERTY ACQUISITIONS
For the years ended December 31, 1998, 1997 and 1996, 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
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
Candlewood South Bend 2/9/98 1986 310 13,506 44
Cedar Glen Philadelphia 3/2/98 1966 110 2,733 25
2 Property Portfolio Northern, VA 3/13/98 1954 548 26,848 49
Apple Hill Hamden, CN 3/27/98 1971 498 23,833 48
4 Property Portfolio Baltimore 4/30/98 1964-80 1,589 53,363 34
Colonies Chicago 6/24/98 1973 672 23,027 34
Racquet Club Philadelphia 7/7/98 1971 467 24,975 53
16 Property Portfolio Various 7/8/98 1943-80 3,746 148,509 40
Sherry Lake Philadelphia 7/23/98 1965 298 18,000 60
Coventry Village Long Island 7/31/98 1974 94 3,112 33
Rolling Park Baltimore 9/15/98 1972 144 5,753 40
3 Property Portfolio Detroit 9/29/98 1965-66 648 24,213 37
Pines of Perinton Rochester 9/30/98 1976 508 8,863 17
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
13 PROPERTY ACQUISITIONS (CONTINUED)
PROFORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited proforma information was prepared as if the 1998
transactions related to the acquisitions of 34 apartment communities in
thirteen separate transactions had occurred on January 1, 1997. 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 1997, nor does it purport to represent the
results of operations for future periods.
For the years ended
December 31,
1998 1997
Total revenues $182,627 $140,688
Income before extraordinary item 21,062 12,142
Net income 20,158 11,223
Per share data:
Income before extraordinary item:
Basic $1.52 $1.64
Diluted $1.45 $1.51
Net income:
Basic $1.50 $1.61
Diluted $1.44 $1.48
Weighted average numbers of
shares outstanding: 13,898,221 7,415,888
Basic
Diluted 14,022,329 7,558,167
14 SUPPLEMENTAL CASH FLOW DISCLOSURES
For the years ended December 31, 1998, 1997 and 1996 are as follows:
1998 1997 1996
Cash paid for interest $23,284 $ 10,880 $ 8,441
Mortgage loans assumed associated with
property acquisitions 81,094 87,134 35,849
Issuance of UPREIT Units associated
with property and other acquisitions 77,425 106,359 10,168
Notes issued in exchange for officer
and director stock purchases 5,444 2,495 2,061
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
15 QUARTERLY FINANCIAL STATEMENT INFORMATION (UNAUDITED)
Quarterly financial information for the years ended December 31, 1998 and
1997 are as follows:
1998
----------------------------------
FIRST SECOND THIRD FOURTH
Revenues $26,773 $32,312 $43,158 $47,000
Income before minority interest
and extraordinary item 4,947 7,971 10,023 9,310
Minority interest 2,172 3,297 3,726 3,408
Extraordinary item, net of minority
interest N/A (290) (156) (514)
Net income 2,775 4,384 6,141 5,388
Basic earnings per share:
Income before extraordinary item .29 .37 .39 .34
Extraordinary item N/A (.02) (.01) (.03)
Net income .29 .35 .38 .31
Diluted earnings per share:
Income before extraordinary item .28 .37 .39 .34
Extraordinary item N/A (.02) (.01) (.03)
Net income .28 .35 .38 .31
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.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Home Properties of New York, Inc.
In our opinion, the accompanying financial statement schedule is fairly
stated in all material respects in relation to the basic financial
statements, taken as a whole, of Home Properties of New York, Inc. as of
and for the three years ended December 31, 1998, which are covered by our
report dated January 30, 1999 presented previously in this document. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. This information is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Rochester, New York
January 30, 1999
HOME PROPERTIES OF NEW YORK, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(IN THOUSANDS)
Total
Initial Costs Total Cost,
Cost Capital- Cost, Net of
Buildings, ized Buildings, Accumu- Accumu-
Improve- Subsequent Improve- lated lated Year of
Encum- ments & Adjust- to Acqui- ments & Total Depre- Depre- Acqui-
brances Land Equipment ments(a) sition Land Equipment (b) ciation ciation sition
Apple Hill Apartments 13,935 3,486 20,347 1,112 3,486 21,459 24,945 486 24,459 1998
Beechwood Gardens 560 3,442 178 560 3,620 4,180 66 4,114 1998
Braddock Lee Apartments 7,000 3,810 8,657 462 3,810 9,119 12,929 268 12,661 1998
Brook Hill Apartments 4,860 330 7,920 1,590 330 9,510 9,840 1,314 8,526 1994
Candlewood Apartments 387 2,592 223 387 2,815 3,202 271 2,931 1996
Candlewood Apartments-Indiana 7,909 1,550 11,956 229 1,550 12,185 13,735 305 13,430 1998
Canterbury Square 6,699 2,352 10,790 624 2,352 11,414 13,766 468 13,298 1997
Carriage Hill Apartments 570 3,826 1,142 570 4,968 5,538 386 5,152 1996
Carriage Hill Apartments-Michigan 3,914 840 5,975 55 840 6,030 6,870 53 6,817 1998
Carriage House Apartments 694 250 860 53 250 913 1,163 20 1,143 1998
Carriage Park Apartments 5,637 1,280 8,184 191 1,280 8,375 9,655 75 9,580 1998
Cedar Glen Apartments 715 2,018 244 715 2,262 2,977 67 2,910 1998
Charter Square 11,321 3,952 18,245 641 3,952 18,886 22,838 776 22,062 1997
Cherry Hill Club Apartments 2,375 492 4,111 491 492 4,602 5,094 75 5,019 1998
Cherry Hill Village 4,527 1,120 6,827 58 1,120 6,885 8,005 61 7,944 1998
Chesterfield Apartments 5,327 1,482 8,206 481 1,482 8,687 10,169 333 9,836 1997
Cloverleaf Village 370 2,668 629 370 3,297 3,667 141 3,526 1997
Colonies Apartments 12,535 1,680 21,350 1,378 1,680 22,728 24,408 352 24,056 1998
Conifer Village Apartments 2,765 358 8,555 233 358 8,788 9,146 1,163 7,983 1994
Cornwall Park Townhouses 439 2,947 2,295 439 5,242 5,681 371 5,310 1996
Country Village Apartments 6,670 2,236 11,149 194 2,236 11,343 13,579 234 13,345 1998
Coventry Village 784 2,328 124 784 2,452 3,236 33 3,203 1998
Curren Terrace 9,597 1,908 10,956 1,545 1,908 12,501 14,409 459 13,950 1997
East Hill Apartments 231 1,560 92 231 1,652 1,883 29 1,854 1998
Emerson Square 384 2,018 821 384 2,839 3,223 128 3,095 1997
Executive House 2,034 600 3,420 731 600 4,151 4,751 165 4,586 1997
Fairview Heights & Fairview Manor 4,585 580 5,305 2,828 1,080 580 9,213 9,793 3,247 6,546 1985
Fairway Apartments 128 673 454 128 1,127 1,255 49 1,206 1997
Finger Lakes Manor Apartments 3,430 200 4,536 1,882 622 200 7,040 7,240 2,223 5,017 1983
Fordham Green 3,140 876 5,280 303 876 5,583 6,459 201 6,258 1997
Garden Village Apartments 4,575 354 8,546 1,378 354 9,924 10,278 1,596 8,682 1994
Glen Manor 3,701 1,044 4,494 253 1,044 4,747 5,791 165 5,626 1997
Golfview Manor 330 110 541 36 110 577 687 26 661 1997
Greentrees Apartments 4,979 1,152 8,607 363 1,152 8,970 10,122 327 9,795 1997
Hamlet Court Apartments 1,792 351 2,351 251 351 2,602 2,953 248 2,705 1996
Harborside Manor 4,068 250 6,113 1,806 250 7,919 8,169 1,075 7,094 1995
HOME PROPERTIES OF NEW YORK, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(IN THOUSANDS)
Initial Costs Total Total
Cost Capital- Cost, Cost,
Buildings, ized Buildings, Net of
Improve- Subse- Improve- Accumu- Accumu-
ments & quent to ments & Lated Lated Year of
Encum- Equip- Adjust- Acqui- Equip- Total Depre- Depre- Acqui-
brances Land ment ments(a) sition Land ment (b) ciation ciation sition
Hill Court South 333 2,428 139 333 2,567 2,900 108 2,792 1997
Idylwood Apartments 9,305 700 16,927 4,375 700 21,302 22,002 2,613 19,389 1995
Ivy Ridge Apartments 438 3,449 172 438 3,621 4,059 155 3,904 1997
Kingsley Apartments 6,788 1,640 11,670 322 1,640 11,992 13,632 492 13,140 1997
Lake Grove 7,360 11,952 3,321 7,360 15,273 22,633 909 21,724 1997
Lakeshore Villa Apartments 573 3,848 1,523 573 5,371 5,944 373 5,571 1996
Lakeview Apartments 2,940 636 4,552 111 636 4,663 5,299 82 5,217 1998
Lansdowne Group - Karen Court 1,084 294 1,654 59 294 1,713 2,007 75 1,932 1997
Lansdowne Group - Landon Court 1,084 264 1,444 115 264 1,559 1,823 66 1,757 1997
Lansdowne Group - Marshall House 1,084 378 1,617 132 378 1,749 2,127 78 2,049 1997
Lansdowne Group - Patricia Court 1,083 396 2,229 98 396 2,327 2,723 101 2,622 1997
Meadows Apartments 1,960 208 2,776 1,216 752 208 4,744 4,952 1,471 3,481 1984
Mid-Island Estates 6,675 4,176 6,580 381 4,176 6,961 11,137 378 10,759 1997
Mill Company 1,210 384 1,671 26 384 1,697 2,081 31 2,050 1998
Morningside Apartments 19,725 6,750 28,699 980 6,750 29,679 36,429 623 35,806 1998
Mountainside Apartments 1,362 7,083 145 1,362 7,228 8,590 113 8,477 1998
New Orleans Park 6,165 1,848 8,886 1,441 1,848 10,327 12,175 387 11,788 1997
Newcastle Apartments 6,150 197 4,007 3,684 2,205 197 9,896 10,093 3,319 6,774 1982
Northgate Manor Apartments 4,500 290 6,987 1,829 291 8,815 9,106 1,295 7,811 1994
Oak Manor Apartments 2,900 616 4,111 185 616 4,296 4,912 75 4,837 1998
Oak Park Manor 5,294 1,192 9,187 247 1,192 9,434 10,626 390 10,236 1997
Paradise Lane at Raintree 972 7,132 2,618 972 9,750 10,722 423 10,299 1997
Park Shirlington Apartments 8,425 4,410 9,971 414 4,410 10,385 14,795 307 14,488 1998
Parkview Gardens 1,207 7,200 347 1,207 7,547 8,754 334 8,420 1997
Patricia Apartments 600 4,196 22 600 4,218 4,818 64 4,754 1998
Payne Hill Apartments 525 4,085 106 525 4,191 4,716 60 4,656 1998
Pearl Street 49 1,189 140 49 1,329 1,378 161 1,217 1995
Perinton Manor Apartments 6,209 224 6,120 3,629 1,182 224 10,931 11,155 3,750 7,405 1982
Pines of Perinton 8,875 1,524 7,339 94 1,524 7,433 8,957 - 8,957 1998
Pleasant View Apartments 31,915 5,710 47,816 269 5,710 48,085 53,795 840 52,955 1998
Pleasure Bay Apartments 4,640 1,620 6,234 10 1,620 6,244 7,864 99 7,765 1998
Racquet Club Apartments 12,136 1,868 23,107 269 1,868 23,376 25,244 353 24,891 1998
Raintree Island Apartments 7,582 - 6,654 3,217 6,596 - 16,467 16,467 4,243 12,224 1985
Redbank Village 8,450 2,000 14,030 150 2,000 14,180 16,180 253 15,927 1998
HOME PROPERTIES OF NEW YORK, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(IN THOUSANDS)
Initial Costs Total Cost, Total
Cost Capital- Buildings, Cost,
Buildings, ized Improve- Net of
Improve- Subse- ments & Accumu- Accumu-
ments & quent TO EQUIP- Lated Lated Year of
ENCUM- EQUIP- ADJUST- ACQUI- MENT TOTAL DEPRE- DEPRE- ACQUI-
BRANCES LAND MENT MENTS(A) SITION LAND (B) CIATION CIATION SITION
Riverton Knolls Apartments 5,663 240 6,640 2,523 2,641 240 11,804 12,044 4,025 8,019 1983
Rolling Park Apartments 2,866 720 5,033 49 720 5,082 5,802 40 5,762 1998
Royal Gardens 11,649 5,500 14,067 4,223 5,500 18,290 23,790 810 22,980 1997
1600 East Avenue 1,000 8,520 1,581 1,000 10,101 11,101 422 10,679 1997
1600 Elmwood Ave. Apartments 5,337 303 5,698 3,339 1,523 299 10,564 10,863 4,130 6,733 1983
Scotsdale Apartments 7,875 1,692 11,914 544 1,692 12,458 14,150 415 13,735 1997
Sherry Lake Apartments 6,623 2,384 15,616 168 2,384 15,784 18,168 199 17,969 1998
Southpointe Square 2,810 896 4,609 273 896 4,882 5,778 210 5,568 1997
Spanish Gardens Apartments 373 9,263 1,728 398 10,966 11,364 1,521 9,843 1994
Springcreek Apartments 1,202 128 1,702 745 411 128 2,858 2,986 901 2,085 1984
Springwood Apartments 1,481 462 1,770 134 462 1,904 2,366 86 2,280 1997
Stephenson House 1,553 640 2,407 165 640 2,572 3,212 110 3,102 1997
Strawberry Hill Apartments 2,073 725 2,694 132 725 2,826 3,551 62 3,489 1998
Sunset Gardens Apartments 696 4,661 993 696 5,654 6,350 454 5,896 1996
The Towers 3,990 685 6,088 76 685 6,164 6,849 108 6,741 1998
Valley Park South Apartments 10,079 2,459 16,454 465 2,459 16,919 19,378 1,118 18,260 1996
Valley View Apartments 3,358 1,056 4,959 1,349 1,056 6,308 7,364 227 7,137 1997
Village Green Apartments 9,201 1,043 13,283 2,992 1,103 16,215 17,318 1,894 15,424 1994-1996
Village Square Apartments 2,630 768 3,581 413 768 3,994 4,762 149 4,613 1997
Wayne Village 8,285 1,925 12,895 161 1,925 13,056 14,981 227 14,754 1998
Wedgewood Shopping Center 100 504 15 240 100 759 859 292 567 1986
Westminster Apartments 3,107 860 5,763 515 860 6,278 7,138 620 6,518 1996
Weston Gardens 2,960 847 4,736 439 847 5,175 6,022 86 5,936 1998
Williamstowne Vlg. 9,800 390 9,748 5,115 2,486 390 17,349 17,739 5,168 12,571 1985
Apartments
Windsor Realty 2,000 402 3,300 116 402 3,416 3,818 60 3,758 1998
Woodgate Place 3,440 480 3,797 638 480 4,435 4,915 207 4,708 1997
Woodland Gardens 6,379 2,022 10,479 387 2,022 10,866 12,888 448 12,440 1997
Other Assets _______ 907 - 125 2,469 2,388 1,113 3,501 361 3,140
418,939 117,658 714,364 28,318 80,448 119,221 821,567 940,788 65,627 875,161
(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 $768,000.
HOME PROPERTIES OF NEW YORK, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(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,
1998, are as follows:
1998 1997 1996
Balance, beginning of year $525,128 $261,773 $198,203
New property acquisition 376,735 266,799 54,727
Additions 42,896 15,962 8,843
Disposals and retirements (3,971) (19,406) -
Balance, end of year $940,788 $525,128 $261,773
The changes in accumulated depreciation for the three years ended December
31, 1998, are as follows:
1998 1997 1996
Balance, beginning of year $46,531 $40,237 $32,258
Depreciation for the year 23,067 11,104 7,979
Disposals and retirements (3,971) (4,810) -
Balance, end of year $65,627 $46,531 $40,237
HOME PROPERTIES OF NEW YORK, INC.
FORM 10-K
For Fiscal Year Ended December 31, 1998
Exhibit Index
Exhibit Exhibit Location
Number
2.1 Agreement among Home Properties of New Incorporated by reference to the Form 8-
York, Inc. and Philip J. Solondz, Daniel K filed by Home Properties of New York,
Solondz and Julia Weinstein relating to Inc. dated 6/6/97 (the
Royal Gardens I, together with Amendment "6/6/97 8-K")
No. 1
2.2 Agreement among Home Properties of New Incorporated by reference to the 6/6/97
York, Inc. and Philip Solondz and Daniel 8-K
Solondz relating to Royal Gardens II,
together with Amendment No. 1
2.3 Purchase and Sale Agreement dated July 25, Incorporated by reference to the Form 8-
1997 by and between Home Properties of New K filed by Home Properties of New York,
York, L.P. and Louis S. and Molly S. Wolk Inc., dated 9/26/97 (the "9/26/97 8-K").
Foundation.
2.4 Purchase and Sale Agreement dated April 30, Incorporated by reference to the 9/26/97
1997 between Home Properties of New York, 8-K.
L.P. and Briggs Wedgewood Associates, L.P.
2.5 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97
31, 1997 between Home Properties of New 8-K.
York, L.P. and Chesfield Partnerhsip.
2.6 Agreement and Plan of Merger dated July 31, Incorporated by reference to the 9/26/97
1997 between Home Properties of New York, 8-K.
L.P. and Valspring Partnership.
2.7 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97
31, 1997 between Home Properties of New 8-K
York, L.P. and Exmark Partnerhsip.
2.8 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97
31, 1997 between Home Properties of New 8-K.
York, L.P. and New Orleans East Limited
Partnership.
2.9 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97
31, 1997 between Home Properties of New 8-K.
York, L.P. and Glenvwk Partnership.
2.10 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97
31, 1997 between Home Properties of New 8-K.
York, L.P. and PK Partnership.
2.11 First Amendment to Agreement and Plan of Incorporated by reference to the 9/26/97
Merger, dated September 1, 1997 between 8-K.
Home 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 9/26/97
Merger, dated September 1, 1997 between 8-K.
Home 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 9/26/97
between Home Properties of New York, L.P. 8-K.
and Lamar Partnership.
2.14 Agreement and Plan of Merger, dated July Incorporated by reference to the Form 8-
31, 1997 between Home Properties of New K filed by Home Properties of New York,
York, L.P. and Curren Partnership. Inc., dated 10/3/97.
2.15 Contribution Agreement, dated October __, Incorporated by reference to the Form 8-
1997 between Home Properties of New York, K filed by Home Properties of New York,
L.P. andBerger/Lewiston Associates Limited Inc. dated 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 Incorporated by reference to the the
York, L.P. and Erie Partners, L.L.C. Form 8-K filed by Home Properties of New
relating to Woodgate PlaceApartments, York, Inc., dated 10/31/97 (the
together with Amendment No. 1 "10/31/97 8-K").
2.17 Agreement among Home Properties of New Incorporated by reference to the
York, L.P. and Mid-Island Limited 10/31/97 8-K.
Partnership 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 Form 8-
1997 among Home Properties of New York, K filed by Home Properties of New York,
L.P. and various individuals relating to Inc., dated 2/20/98 (the "2/20/98 8-K").
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 Incorporated by reference to the 2/20/98
between Home Properties of New York, L.P. 8-K.
and Hudson Palisades Associates relating to
Cloverleaf Apartments.
2.21 Contribution Agreement, dated November 17, Incorporated by reference to the 2/20/98
1997 among Home Properties of New York, 8-K.
L.P. and various trusts relating to
Scotsdale Apartments.
2.22 Contribution Agreement, dated November 7, Incorporated by reference to the 2/20/98
1997among Home Properties of New York, L.P. 8-K
and Donald H. Schefmeyer and Stephen W.
Hall relating to Candlewood Apartments,
together with Amendment No. One dated
December 3, 1997.
2.23 Purchase and Sale Agreement dated November Incorporated by reference to the Form 8-
26, 1997 among Home Properties of New York, K filed by Home Properties of New York,
L.P. and Cedar Glen Associates. Inc. on 3/24/98 (the "3/24/98
8-K").
2.24 Contribution Agreement dated March 2, 1998 Incorporated by reference to the 3/24/98
among Home Properties of New York, L.P., 8-K.
Braddock Lee Limited Partnership and Tower
Construction Group, LLC.
2.25 Contribution Agreement dated March 2, 1998 Incorporated by reference to the 3/24/98
among Home Properties of New York, L.P., 8-K.
Park Shirlington Limted Partnership and
Tower Construction Group, LLC.
2.26 Contract of Sale between Lake Grove Incorporated by reference to the Form
Associates Corp. and Home Properties of New 10-K filed by Home Properties of New
York, L.P., dated December 17, 1996, York, Inc. for the year ended 12/31/96
relating to the Lake Grove Apartments. (the "12/31/96 10-K").
2.27 Form of Contribution Agreement among Home Incorporated by reference to the Form 8-
Properties of New York, L.P. and Strawberry K filed by Home Properties of New York,
Hill Apartment Company LLLP, Country Inc. on 5/22/98 (the "5/22/98
Village Limited Partnership, Morningside 8-K).
Six, LLLP, Morningside North Limited
Partnership and Morningside Heights
Apartment Company Limited Partnership with
schedule setting forth material details in
which documents differ from form.
2.28 Form of Purchase and Sale Agreement with Incorporated by reference to the 5/22/98
schedule setting forth material details in 8-K.
which documents differ from form.
3.1 Articles of Amendment and Restatement of Incorporated by reference to Home
Articles of Incorporation of Home Properties of New York, Inc.
Properties of New York, Inc. Registration Statement on Form S-11,
File No. 33-78862 (the "S-11
Registration Statement").
3.2 Articles of Amendment of the Articles of Incorporated by reference to to Home
Incorporation of Home Properties of New Properties of New York, Inc.
York, Inc. Registration Statement on Form S-3, File
. No. 333-52601 filed May 14, 1998 (the
"5/14/98 S-3").
3.3 Amended and Restated By-Laws of Home Incorporated by reference to the Form 8-
Properties of New York, Inc. (Revised K filed by Home Properties of New York,
12/30/96). Inc. dated December 23, 1996 (the
"12/23/96 8- K").
4.1 Form of certificate representing Shares of Incorporated by reference to the Form
Common Stock. 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 the
Inc. to file instruments defining the 12/31/94 10-K.
rights 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 Form
Traders Trust Company, Home Properties of 10-Q filed by Home Properties of New
New York, L.P. and Home Properties of New York, Inc. for the quarterly period
York, Inc. ended 6/30/94 (the "6/30/94 10-Q").
4.4 Amendment Agreement between Manufacturers Incorporated by reference t the 12/31/94
and Traders Trust Company, Home Properties 10-K.
of New 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 6/30/94
Modification Agreement between 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 6/30/94
of New York, L.P. payable to Manufacturers 10-Q.
and Traders Trust Company in the principal
amount of $12,298,000.
4.7 Spreader, Consolidation, Modification and Incorporated by reference to the Form
Extension Agreement between Home Properties 10-K filed by Home Properties of New
of New YorkL.P. and John Hancock Mutual York, Inc. for the period ended 12/31/95
Life Insurance Company, (the "12/31/95 10-K").
dated as of October 26, 1995, relating to
indebtedness in the principal amount of
$20,500,000.
4.8 Amended and Restated Stock Benefit Plan of Incorporated by reference to the 6/6/97
Home Properties of New York, Inc. 8-K.
4.9 Amended and Restated Dividend Incorporated by reference to the Form 8-
Reinvestment, Stock Purchase, Resident K filed by Home Properties of New York,
Stock Purchase and Employee Inc., dated 12/23/97.
Stock Purchase Plan.
4.10 Amendment No. One to Amended and Restated Incorporated by reference to the Home
Dividend Reinvestment, Stock Purchase, Properties of New York, Inc.
Resident Stock Purchase and Employee Stock Registration Statement on Form S-3, File
Purchase Plan. No. 333-49781, filed on 4/9/98 (the
"4/9/98 S-3").
4.11 Amendment No. Two to Amended and Restated Incorporated by reference to the Home
Dividend Reinvestment, Stock Purchase, Properties of New York, Inc.
Resident Stock Purchase and Employee Stock Registration Statement on Form S-3, File
Purchase Plan No. 333-58799, filed on 7/9/98 (the
"7/9/98 S-3").
4.12 Amended and Restated Dividend Reinvestment, Incorporated by reference to the Home
Stock Purchase, Resident Stock Purchase and Properties of New York, Inc. Form 10-Q
Employee Stock Purchase Plan for the Quarter ended 6/30/98 (the
"6/30/98 10-Q").
4.13 Amendment No. Three to Amended and Restated Incorporated by reference to the the
Dividend Reinvestment, Stock Purchase, Home Properties of New York, Inc.
Resident Stock Purchase and Employee Stock Registration Statement on Form S-3,
Purchase Plan Registration No. 333-67733, filed on
11/23/98(the "11/23/98 S-3").
4.14 Directors' Stock Grant Plan Incorporated by reference to the 5/22/98
8-K.
4.15 Director, Officer and Employee Stock Incorporated by reference to the 5/22/98
Purchase and Loan Plan 8-K.
10.1 Second Amended and Restated Agreement of Incorporated by reference to the 9/26/97
Limited Partnership of Home Properties of 8-K.
New York, L.P.
10.2 Amendments No. One through Eight to the Incorporated by reference to the Form
Second Amended and Restated Agreement of 10-K of Home Properties of New York,
LimitedPartnership of Home Properties of Inc. for the period ended 12/31/97 (the
New York, L.P. "12/31/97 10-K").
10.3 Articles of Incorporation of Home Incorporated by reference to . to S-11
Properties Management, Inc Registration 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 Home Properties Trust Declaration of Trust, Incorporated by reference to the 9/26/97
dated September 19, 1997 8-K.
10.8 Employment Agreement between Home Incorporated by reference to 6/30/94 10-
Properties of New York, L.P. and Norman Q.
P.Leenhouts.
10.9 Amendments No. One, Two and Three to the Filed herewith
Employment Agreement between Home
Properties of New York, L.P. and Norman P.
Leenhouts
10.10 Employment Agreement between Home Incorporated by reference to the 6/30/94
Properties of New York, L.P. and Nelson B. 10-Q.
Leenhouts
10.11 Amendments No. One, Two and Three to the Filed herewith
Employment Agreement between Home
Properties of New York, L.P. and Nelson B.
Leenhouts.
10.12 Employment Agreement between Home Incorporated by reference to 12/31/95
Properties of New York, L.P. and Richard J. 10-K.
Crossed.
10.13 Amendments No. One and Two to the Filed herewith
Employment Agreement between Home
Properties of New York, L.P. and Richard J.
Crossed.
10.14 Indemnification Agreement between Home Incorporated by reference to the 6/30/94
Properties of New York, Inc. and certain 10-Q.
officers and directors.
10.15 Indemnification Agreement between Home Incorporated by reference to 12/31/95
Properties of New York, Inc. and Richard 10-K.
J. Crossed.
10.l6 Indemnification Agreement between Home Incorporated by reference to 12/31/96
Properties of New York, Inc. and Alan L. 10-K.
Gosule.
10.17 Registration Rights Agreement among Home Incorporated by reference to the 6/30/94
Properties of New York, Inc., Home Leasing 10-Q.
Corporation, 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.
10.18 Lockup Agreements by Home Properties of New Incorporated by reference to 12/31/95
York, Inc. and Conifer Realty, Inc., 10- K.
Conifer Development, Inc., Richard J.
Crossed, Peter J. Obourn and John F.
Fennessey.
10.19 Contribution Agreement between Home Incorporated by reference to the Form 8-
Properties of New York, L.P. and Conifer K filed by Home Properties ofNew York,
Realty, Inc., Conifer Development, Inc., dated September 14, 1995.
Inc.,.Richard J. Crossed, Peter J. Obourn
and John H. Fennessey.
10.20 Amendment to Contribution Agreement between Incorporated by reference to the Form 8-
Home Properties of New York, L.P. and K filed by Home Properties of New York,
Conifer Realty, Inc., Conifer Development, Inc., dated January 9, 1996.
Inc., Richard J. Crossed, Peter J. Obourn
and John H. Fennessey
10.21 Agreement of Operating Sublease, dated Incorporated by reference to S-11
October1, 1986, among KAM, Inc., Morris Registration Statement.
Massry and Raintree Island Associates, as
amended by Letter Agreement Supplementing
Operating Sublease dated October 1, 1986.
10.22 Second Amended and Restated Incentive Incorporated by reference to 12/31/95
Compensation Plan of Home Properties of New 10-K.
York, Inc.
10.23 Indemnification and Pledge Agreement Incorporated by reference to 12/31/95
between Home Properties of New York, L.P. 10- K.
and Conifer Realty, Inc., Conifer
Development, Inc., Richard J. Crossed,
Peter J. Obourn and John H. Fennessey.
10.24 Form of Term Promissory Note payable to Incorporated by reference to 12/31/96
Home Properties of New York, Inc. by 10-K.
officers and directors in association with
the Executive and Director Stock Purchase
and Loan Program.
10.25 Form of Pledge Security Agreement executed Incorporated by reference to 12/31/96
by officers and directors in connection 10-K.
with Executive and Director Stock Purchase
and Loan Program.
10.26 Schedule of Participants, loan amounts and Incorporated by reference to 12/31/96
shares issued in connection with the 10-K.
Executive and Director Stock Purchase and
Loan Program.
10.27 Subordination Agreement between Home Incorporated by reference to 12/31/96
Properties of New York, Inc. and The Chase 10-K.
Manhattan Bank relating to the Executive
and Director Stock Purchase and Loan
Program.
10.28 Partnership Interest Purchase Agreement, Incorporated by reference to 12/23/96 8-
dated as of December 23, 1996 among Home K.
Properties of New York, Inc., Home
Properties of New York, L.P. and State
of Michigan Retirement Systems.
10.29 Registration Rights Agreement, dated as of Incorporated by reference to 12/23/96
December 23, 1996 between Home Properties 8-K.
of New York, Inc. and State of Michigan
Retirement Systems.
10.30 Lock-Up Agreement, dated December 23, 1996 Incorporated by reference to 12/23/96 8-
between Home Properties of New York, Inc. K.
and State of Michigan Retirement Systems.
10.31 Agreement dated as of April 13, 1998 Incorporated by reference to the Home
between Home Properties of New York, Inc. Properties of New York, Inc. Form 8-K
and the Treasurer of the State of Michigan filed 4/15/98 (the "4/15/98 8-K")
10.32 Credit Agreement dated as of September 4, Incorporated by reference to the 9/26/97
1997 among Home Properties of New York, 8-K.
L.P. and The Chase Manhattan Bank, as
Administrative Agent, Chase Securities
Inc., as Arranger, Manufacturers and
TradersTrust Company, as Co-Agent.
10.33 Amendment No. One, to Credit Agreement, Incorporated by reference to the
dated as of September 4, 1997, among Home 9/26/97 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.
10.34 Promissory Note, dated September 4, 1997 Incorporated by reference to the
from Home Properties of New York, L.P. to 9/26/97 8-K.
The Chase Manhattan Bank.
10.35 Promissory Note, dated September 4, 1997 Incorporated by reference to the 9/26/97
from Home Properties of New York, L.P. to 8-K.
Manufacturers and Traders Trust Company.
10.36 Amendment No. Nine to the Second Amended Incorporated by reference to the 5/14/98
and Restated Agreement of Limited S-3.
Partnership of the Operating Partnership
10.37 Credit Agreement dated as of July 6, 1998 Incorporated by reference to the 6/30/98
among Home Properties of New York, L.P. and 10-Q.
Manufacturers and Traders Trust Company.
10.38 Agreement and Amendment No. 1 to a Credit Filed herewith.
Facility Agreement, dated December 11, 1998
between Home Properties of New York, Inc.
and Manufacturers and Traders Trust
Company.
10.39 Master Credit Facility Agreement by and Incorporated by reference to the Home
among Home Properties of New York, Inc., Properties of New York, Inc. Form 10-Q
Home Properties of New York, L.P., Home for the quarter ended 9/30/98 (the
Properties WMF I LLC and Home Properties of "9/30/98 Form 10-Q").
New York, L. P. and P-K Partnership doing
business as Patricia Court and Karen Court
and WMF Washington Mortgage Corp., dated as
of August 28, 1998.
10.40 First Amendment to Master Credit Facility Filed herewith.
Agreement, dated as of December 11, 1998
among Home Properties of New York, Inc.,
Home Properties of New York, L.P., Home
Properties WMF I LLC and Home Properties of
New York, L.P. and P-K Partnership doing
business as Patricia Court and Karen Court
and WMF Washington Mortgage Corp. and
Fannie Mae.
10.41 Amendments Nos. Ten through Seventeen to Filed herewith.
the Second Amended and Restated Limited
Partnership Agreement.
21 List of Subsidiaries of Home Properties Filed herewith.
of New York, Inc.
23 Consent of PricewaterhouseCoopers LLP Filed herewith.
27 Financial Data Schedule Filed herewith.