Home Properties Reports First Quarter 2011 Results

ROCHESTER, N.Y., May 5, 2011 /PRNewswire/ -- Home Properties (NYSE: HME) today released financial results for the first quarter ended March 31, 2011.  All results are reported on a diluted basis.

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"Year-over-year first quarter growth of 8.8% in same-store net operating income was the largest quarterly increase since the first quarter of 2007, contributing to results in Funds From Operations per share that were better than both internal and street expectations," said Home Properties' President and CEO Edward J. Pettinella.  "This excellent performance continues to reflect the improving economic climate, the success of our property management and development operations, and the stability of our geographic markets."

Earnings per share ("EPS") for the quarter ended March 31, 2011 was $0.19, compared to $0.07 for the quarter ended March 31, 2010.  The $0.12 increase in EPS was attributable to an increase in income from continuing operations from both the properties owned throughout 2010 and 2011 (the "Core" properties) and those acquired/developed subsequent to January 1, 2010 (the "Acquisition" properties).

For the quarter ended March 31, 2011, Funds From Operations ("FFO") was $43.2 million, or $0.86 per share, compared to $33.2 million, or $0.71 per share, for the quarter ended March 31, 2010, which equates to a 22% increase on a per-share basis.  The first quarter 2010 FFO included $0.05 per share in costs related to record severe storms that increased snow removal costs and insurance costs from flooding in the Company's Mid-Atlantic and Boston area markets, respectively, that were non-recurring in 2011.  First quarter 2011 FFO of $0.86 per share was $0.05 above both the analysts' mean estimate, as reported by Thomson, and the midpoint of the guidance range provided by management.  A reconciliation of GAAP net income to FFO is included in the financial data accompanying this news release.

First Quarter Operating Results

For the first quarter of 2011, same-property comparisons (for 104 Core properties containing 35,798 apartment units owned since January 1, 2010) reflected an increase in total revenues of 3.2% compared to the same quarter a year ago.  Net operating income ("NOI") increased by 8.8% from the first quarter of 2010.  Property level operating expenses decreased by 3.9% compared to the prior year quarter, primarily due to decreases in electricity, natural gas heating costs, property insurance, and snow and trash removal costs, which were partially offset by an increase in water and sewer expense.

Average physical occupancy for the Core properties was 95.3% during the first quarter of 2011, up from 94.8% during the first quarter of 2010.  Average monthly rental rates of $1,151 represent a 2.2% increase compared to the year-ago period.

On a sequential basis, compared to the 2010 fourth quarter results for the Core properties, rental income (excluding utility recovery) increased 0.7% in the first quarter of 2011, total revenues increased 2.9%, expenses were up 6.5% and net operating income increased 0.5%.  The sequential expense growth can be attributed to the typical seasonality of higher gas heating and snow removal costs incurred in the first quarter.  Removing the effects of seasonality by reducing higher first quarter utility reimbursement income and gas and snow removal expenses to equal fourth quarter results, sequential NOI would be up 1.6%.  Average physical occupancy increased 0.2% to 95.3%.

Physical occupancy for the 3,063 apartment units acquired/developed between January 1, 2010 and March 31, 2011 averaged 94.0% during the first quarter of 2011, at average monthly rents of $1,272.

Acquisitions/Dispositions

There were no acquisitions or dispositions of apartment communities during the first quarter of 2011.

On April 19, 2011, the Company acquired Hunters Glen, a 108-unit apartment community located in Frederick, Maryland for a total $7.0 million.  The property is currently 94.4% occupied at monthly rents averaging $963.  The projected weighted average first year capitalization rate is 7.2% after allocating 2.7% of rental revenues for management and overhead expenses and before normalized capital expenditures.  The property, built in 1984, includes six garden-style buildings and will be managed with Home Properties' Elmwood Terrace Apartments, located across the street.  Hunters Glen is located less than one mile from historic downtown Frederick, is 45 miles northwest of Washington, D.C. and 50 miles west of Baltimore.  Acquisition costs of approximately $83,000 will be included in other expenses in the second quarter of 2011.

Development

Phase One of The Courts at Huntington Station, comprised of 202 units, is complete with 98.5% of the units leased.  Construction of Phase Two, which will have 219 units, is scheduled to be completed in the second quarter of 2011 and is projected to reach stabilized occupancy a year later.

The Company previously announced the groundbreaking of The Apartments at Cobblestone Square, located in Fredericksburg, Virginia.  The 314-unit, class-A community will feature eight four-story buildings and a refurbished 100-year-old rail depot.  The first of the eight apartment buildings, along with the rail depot renovation and amenities, is slated for completion in late 2011.  The entire project should be completed in 2012.

Capital Markets Activities

As of March 31, 2011, the Company's ratio of debt-to-total market capitalization was 46.6% (based on a March 31, 2011 stock price of $58.95 to determine equity value), with $42.5 million outstanding on its $175 million revolving credit facility and $11 million of unrestricted cash on hand.  Total debt of $2.6 billion was outstanding, at rates of interest averaging 5.1% and with staggered maturities averaging approximately seven years.  Approximately 90% of total indebtedness is at fixed rates.  Interest coverage for the quarter averaged 2.3 times and the fixed charge ratio averaged 2.2 times.

The Company has an At-The-Market (ATM) equity offering program through which it may sell up to 3.6 million common shares.  During the first quarter, 841,000 shares were issued at an average price of $56.51 generating net proceeds of $46.6 million.  As of March 31, 2011, there were 2.8 million common shares remaining under this program.

Outlook

Based on first quarter 2011 results, the Company has increased the midpoint of its prior guidance by five cents to $3.43 and the range of FFO per share to $3.37 to $3.49 from $3.30 to $3.46.  This guidance range reflects management's current assessment of economic and market conditions.

The quarterly breakdown for the balance of 2011 guidance on FFO per share results remains unchanged and is as follows:  Second quarter $0.82 to $0.86; third quarter $0.83 to $0.87; fourth quarter $0.86 to $0.90.

Dividend Declared

The Company announced a regular cash dividend on the Company's common shares of $0.62 per share for the quarter ended March 31, 2011.  The dividend is payable on May 27, 2011 to shareholders of record on May 17, 2011 and is equivalent to an annualized rate of $2.48 per share.  The current annual dividend represents a 3.9% yield based on the May 3 closing price of $62.84.  Home Properties' common stock will begin trading ex-dividend on May 13, 2011.

Corporate Governance

At its Annual Meeting on May 3, 2011, stockholders elected eight directors, approved, on an advisory basis, the compensation of executive officers, voted to hold an advisory vote on executive compensation every year and approved the 2011 Stock Benefit Plan.

Supplemental Information

The Company produces supplemental information that includes details regarding property operations, other income, acquisitions, sales, market geographic breakdown, debt and new development.  The supplemental information is available via the Company's website through the "Investors" section, e-mail or facsimile upon request.

First Quarter 2011 Earnings Conference Call

The Company will conduct a conference call and simultaneous webcast tomorrow at 11:00 AM ET to review and comment on the information reported in this release.  To listen to the call, please dial 800-913-1647 (International 212-231-2900).  An audio replay of the call will be available through May 11, 2011, by dialing 800-633-8284 or 402-977-9140 and entering the passcode 21510466.  The Company webcast, which includes audio and a slide presentation, will be available, live at 11:00 AM and archived by 1:00 PM, through the "Investors" section home page of the website homeproperties.com.

Second Quarter 2011 Conference/Event Schedule

Home Properties is scheduled to participate in REITWeek 2011: NAREIT's Investor Forum® from June 7-9, 2011 in New York City.  Management will present information and answer questions about its operations on Wednesday, June 8, from 3:45-4:15 PM.  The audio presentation and related materials will be available at homeproperties.com in the "Investors" section.

Second Quarter 2011 Earnings Release and Conference Call

The second quarter financial results are scheduled to be released after the stock market closes on Thursday, August 4, 2011.  A conference call, which will be simultaneously webcast, is scheduled for Friday, August 5, 2011 at 11:00 AM ET and is accessible following the above instructions.

This press release 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 and new development activities within anticipated budgets, the actual pace of future acquisitions and dispositions, and continued access to capital to fund growth.

Home Properties is a publicly traded apartment real estate investment trust that owns, operates, develops, acquires and rehabilitates apartment communities primarily in selected Northeast and Mid-Atlantic markets.  Currently, Home Properties owns and operates 116 communities containing 38,972 apartment units.  For more information, visit Home Properties' website at homeproperties.com.

SOURCE Home Properties