Home Properties Reports Fourth Quarter and Full Year 2013 Results - WKRN News 2

Home Properties Reports Fourth Quarter and Full Year 2013 Results

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SOURCE Home Properties, Inc.

ROCHESTER, N.Y., Feb. 6, 2014 /PRNewswire/ -- Home Properties, Inc. (NYSE: HME) today released financial results for the fourth quarter and year ended December 31, 2013.  All results are reported on a diluted basis.

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"Home Properties continued its track record of consistent performance in 2013, delivering solid operating results as well as further strengthening its balance sheet to enhance future financial flexibility," said Edward J. Pettinella, Home Properties President and CEO.

Earnings per share ("EPS") for the quarter ended December 31, 2013 was $0.99 compared to $1.34 for the quarter ended December 31, 2012.  The $0.35 reduction in fourth quarter 2013 EPS was primarily attributable to a $24.7 million lower gain on dispositions of property, partially offset by an $8.0 million increase in income from continuing operations from both the properties owned throughout 2012 and 2013 (the "Core" properties) and those acquired, developed or redeveloped subsequent to January 1, 2012 (the "Non-Core" properties).  EPS for the year ended December 31, 2013 was $2.93 compared to $2.69 for the year ended December 31, 2012.  The $0.24 increase in EPS in 2013 is primarily attributable to a $33.6 million increase in income from continuing operations.

For the quarter ended December 31, 2013, Funds From Operations ("FFO") was $75.2 million, or $1.11 per share, compared to $68.3 million, or $1.09 per share, for the quarter ended December 31, 2012, which equates to a 1.6% increase on a per-share basis. FFO for the year ended December 31, 2013 was $4.37 per share, compared to $4.13 per share in the year-ago period, which equates to a 5.9% increase on a per-share basis.  A reconciliation of GAAP net income to FFO is included in the financial data accompanying this news release.

Fourth Quarter Operating Results

For the fourth quarter of 2013, same-property comparisons (for 112 Core properties containing 38,440 apartment units owned since January 1, 2012) reflected an increase of 2.9% in base rental rates and an increase of 2.7% in total revenues compared to the same quarter a year ago.  Net operating income ("NOI") increased by 3.2% from the fourth quarter of 2012.  Property level operating expenses increased by 1.9% compared to the prior year quarter, primarily due to increases in repairs & maintenance, legal & professional expense, and snow removal costs, which were partially offset by a decrease in natural gas heating costs.

Average physical occupancy for the Core properties was 94.9% during the fourth quarter of 2013, compared to 95.4% during the fourth quarter of 2012.  Average monthly rental rates of $1,309 represent a 2.9% increase compared to the year-ago period.

On a sequential basis, compared to the 2013 third quarter results for Core properties, rental income (excluding utility recovery) increased 0.6% in the fourth quarter of 2013, total revenues increased 1.3%, expenses were up 2.3% and NOI increased 0.7%.  Average physical occupancy decreased 0.1% to 94.9%.

Physical occupancy for the 3,640 apartment units acquired/developed/redeveloped between January 1, 2012 and December 31, 2013 averaged 92.0% during the fourth quarter of 2013, at average monthly rents of $1,314

Full Year Operating Results

For the year ended December 31, 2013, same-property comparisons for the Core properties reflected an increase in total revenues of 3.2% and an increase in total expenses of 1.8%, resulting in a 4.0% increase in NOI compared to 2012.  Property level operating expenses increased primarily due to personnel expense, real estate taxes and snow removal costs.  These increases were partially offset by decreases in repairs & maintenance, office & telephone and property insurance expense.

Average physical occupancy for the Core properties was 95.3% during 2013, down slightly from 95.4% a year ago, with average monthly rental rates of $1,294, an increase of 3.2% over the prior year period.

Acquisitions/Dispositions

As previously reported, during the fourth quarter of 2013, the Company acquired one apartment community with 205 units in the Philadelphia region and one apartment community with 252 units in the Boston region. The combined purchase price of $55.8 million was paid in cash. In connection with these acquisitions, closing costs of $0.2 million were incurred and are included in other expenses in the fourth quarter of 2013.

During the fourth quarter of 2013, as previously reported, the Company sold a 344-unit apartment community in the Washington, D.C. region for $68 million.  A gain on sale of $36.2 million was recorded in the fourth quarter of 2013 related to this sale.

For the year ended December 31, 2013, the Company sold four apartment communities with 1,013 units for a total consideration of $192.1 million.  The weighted average historical capitalization rate on these sales was 5.8% after applying a 2.7% management fee and before capital expenditures.

Development

Construction continued as planned on Eleven55 Ripley and Courts at Spring Mill Station.

The Company purchased a land parcel located in Linthicum, Md. in the fourth quarter of 2013 for $13.8 million, which includes the closing costs.  A construction start date for the approximately 300 apartment units which will comprise the Concorde Circle community has not been determined, but is not anticipated to occur earlier than late 2014 or into 2015.

Capital Markets Activities

On November 11, 2013, Moody's Investors Services assigned a Baa2 issuer rating to Home Properties.

As of December 31, 2013, the Company's ratio of debt-to-total market capitalization was 40.5% (based on a December 31, 2013 stock price of $53.62 used to determine equity value), with $193 million outstanding on its $450 million revolving credit facility and $9.9 million of unrestricted cash on hand.  Total debt of $2.5 billion was outstanding, at interest rates averaging 4.4% and with staggered maturities averaging four years.  Approximately 89% of total indebtedness was at fixed rates.  Interest coverage for the quarter was 3.9 times and the fixed charge ratio was 3.6 times.  For the full year, interest coverage was 3.5 times and the fixed charge ratio was 3.3 times.

During the quarter, the Company repaid a $27.6 million variable-rate mortgage in connection with a property disposition, which triggered a prepayment penalty of $0.3 million. In addition, the Company repaid two mortgages securing one property totaling $29.1 million.  This property is now part of the unencumbered asset pool.  As of December 31, 2013, the unencumbered asset pool represented 47.8% of total value, up from 37.5% at December 31, 2012.

During the fourth quarter of 2013, the Company did not issue any new shares through its
At-The-Market equity offering program. There are approximately two million common shares that remain available under this program.

Outlook

For 2014, the Company expects FFO between $4.44 and $4.60 per share, which will produce FFO per share growth of 1.6% to 5.3% when compared to 2013 results.  "FFO growth in 2014, especially the first half of the year, is impacted by the continued dilution from the Company's July 2013 public stock offering," said David P. Gardner, Executive Vice President and Chief Financial Officer.

The guidance range on FFO per share results for the first quarter of 2014 is $1.02 to $1.06. This guidance range reflects management's current assessment of economic and market conditions. The assumptions for the 2014 projections are included with the published supplemental information.

Supplemental Information

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

Fourth Quarter 2013 Earnings Conference Call

The Company will conduct a conference call and simultaneous webcast on February 7, 2014 at 11:00 AM ET to review and comment on the information reported in this release.  The 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.  For live audio-only participation, please dial 800-913-1647 (International 212-231-2900).

First Quarter 2014 Conference/Event Schedule

Home Properties is scheduled to participate in Wells Fargo Securities' Real Estate Securities Conference on February 27, 2014 in New York City and in Citi's 2014 Global Property CEO Conference March 3-5, 2014 in Hollywood, FL. Presentation materials will be available at www.homeproperties.com in the "Investors" section.

First Quarter 2014 Earnings Release and Conference Call

The Company's first quarter 2014 financial results are scheduled to be released after the stock market closes on Thursday, May 1, 2014.  A conference call, which will be simultaneously webcast, is scheduled for Friday, May 2, 2014 at 11:00 AM ET and will be accessible following the instructions above for the current quarter's conference call.

This 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, 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.  An S & P 400 Company, Home Properties owns and operates 120 communities containing 42,297 apartment units.  For more information, visit Home Properties' website at www.homeproperties.com.

 


HOME PROPERTIES, INC.

SUMMARY OF OCCUPANCY AND PROPERTY OPERATING RESULTS



Avg. Physical



Fourth Quarter Results:

Occupancy(a)

4Q 2013

4Q 2013 vs. 4Q 2012 % Growth




Average








Monthly

Base







Rent/

Rental

Total

Total



4Q 2013

4Q 2012

Occ Unit

Rates

Revenue

Expense

NOI

Core Properties(b)

94.9%

95.4%

$1,309

2.9%

2.7%

1.9%

3.2%

Non-Core Properties(c)

92.0%

NA

$1,314

NA

NA

NA

NA

TOTAL PORTFOLIO

94.7%

NA

$1,310

NA

NA

NA

NA









Avg. Physical






Year-To-Date Results:

Occupancy(a)

YTD 2013

YTD 2013 vs. YTD 2012 % Growth




Average








Monthly

Base





YTD

YTD

Rent /

Rental

Total

Total



2013

2012

Occ Unit

Rates

Revenue

Expense

NOI

Core Properties(b)

95.3%

95.4%

$1,294

3.2%

3.2%

1.8%

4.0%

Non-Core Properties(c)

91.0%

NA

$1,306

NA

NA

NA

NA

TOTAL PORTFOLIO

95.0%

NA

$1,295

NA

NA

NA

NA



(a)  

Average physical occupancy is defined as total possible rental income, net of vacancy expense, as a percentage of total possible rental income. Total possible rental income is determined by valuing occupied units at contract rates and vacant units at market rents.





(b)   

Core Properties consist of 112 properties with 38,440 apartment units owned throughout 2012 and 2013.



(c) 

Non-Core Properties consist of 7 properties with 3,640 apartment units acquired, developed, or   


redeveloped subsequent to January 1, 2012, such that full year comparable operating results are not 


available. Non-Core Properties excludes properties still under development where construction is not


100% complete.

 

 


HOME PROPERTIES, INC.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data – Unaudited)





Three Months Ended

Year Ended


December 31

December 31


2013

2012

2013

2012

Rental income

$153,793

$149,169

$608,994

$575,969

Property other income

13,490

12,896

53,426

50,709

Other income

508

247

1,180

311

   Total revenues

167,791

162,312

663,600

626,989

Operating and maintenance

59,647

58,553

238,510

229,290

General and administrative

5,935

6,807

28,507

34,174

Interest

26,334

31,597

113,911

123,874

Depreciation and amortization

44,335

42,074

172,903

161,047

Other expenses

264

15

312

2,741

   Total expenses

136,515

139,046

554,143

551,126

Income from continuing operations

31,276

23,266

109,457

75,863

Discontinued operations





   Income (loss) from discontinued operations

(247)

(88)

917

7,227

   Gain on disposition of property

36,201

60,865

81,205

80,532

Discontinued operations

35,954

60,777

82,122

87,759

Net income

67,230

84,043

191,579

163,622

Net income attributable to noncontrolling interest

(10,311)

(14,269)

(30,706)

(28,320)

Net income attributable to common stockholders

$  56,919

$  69,774

$160,873

$135,302

Reconciliation from net income attributable to
    common stockholders to Funds From Operations:





Net income attributable to common stockholders

$  56,919

$  69,774

$160,873

$135,302

Real property depreciation and amortization

43,792

42,970

172,624

166,411

Noncontrolling interest

10,311

14,269

30,706

28,320

Gain on disposition of property

(36,201)

(60,865)

(81,205)

(80,532)

FFO - basic and diluted, as defined by NAREIT

74,821

66,148

282,998

249,501

Loss from early extinguishment of debt in connection with sale of real estate

366

2,157

1,782

2,157

FFO - basic and diluted (1)

$  75,187

$  68,305

$284,780

$251,658










(1) 

Pursuant to the updated guidance for Funds From Operations provided by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), FFO is defined as net income (computed in accordance with accounting principles generally accepted in the United States of America ("GAAP")) excluding gains or losses from disposition of property, impairment write-downs of depreciable real estate, noncontrolling interest and extraordinary items plus depreciation from real property.  The Company adds back debt extinguishment costs and other one-time costs incurred as a result of repaying property specific debt triggered upon sale of a property.  Because of the limitations of the FFO definition as published by NAREIT as set forth above, the Company has made certain interpretations in applying the definition.  The Company believes all adjustments not specifically provided for are consistent with the definition.  Other similarly titled measures may not be calculated in the same manner.









 

 


HOME PROPERTIES, INC.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data – Unaudited)



Three Months Ended

Year Ended


December 31

December 31


2013

2012

2013

2012

FFO – basic and diluted

$ 75,187

$ 68,305

$ 284,780

$ 251,658

FFO – basic and diluted

$ 75,187

$ 68,305

$ 284,780

$ 251,658

Acquisition costs of closed deals included in other 
   
expenses

264

15

312

2,741

Operating FFO (2)

$ 75,451

$ 68,320

$ 285,092

$ 254,399

FFO – basic and diluted

$ 75,187

$ 68,305

$ 284,780

$ 251,658

Recurring non-revenue generating capital expenses

(8,857)

(9,163)

(35,687)

(36,457)

AFFO (3)

$ 66,330

$ 59,142

$ 249,093

$ 215,201

Operating FFO

$ 75,451

$ 68,320

$ 285,092

$ 254,399

Recurring non-revenue generating capital expenses

(8,857)

(9,163)

(35,687)

(36,457)

Operating AFFO (2) (3)

$ 66,594

$ 59,157

$ 249,405

$ 217,942

Weighted average shares/units outstanding:





   Shares – basic

56,944.9

51,314.0

54,328.5

49,744.6

   Shares – diluted

57,327.9

51,920.1

54,820.2

50,382.6

   Shares/units – basic (4)

67,270.3

61,829.4

64,702.1

60,364.7

   Shares/units – diluted (4)

67,653.3

62,435.6

65,193.8

61,002.7

Per share/unit:





   Net income – basic

$1.00

$1.36

$2.96

$2.72

   Net income – diluted

$0.99

$1.34

$2.93

$2.69

   FFO – basic

$1.12

$1.10

$4.40

$4.17

   FFO – diluted

$1.11

$1.09

$4.37

$4.13

   Operating FFO (2)

$1.12

$1.09

$4.37

$4.17

   AFFO (3)

$0.98

$0.95

$3.82

$3.53

   Operating AFFO (2) (3)

$0.98

$0.95

$3.83

$3.57

   Common Dividend paid

$0.70

$0.66

$2.80

$2.64






(2)   

Operating FFO is defined as FFO adjusted for the addback of acquisition costs on closed deals.



(3)   

Adjusted Funds From Operations ("AFFO") is defined as FFO less an annual reserve for anticipated 


recurring, non-revenue generating capitalized costs of $848 per apartment unit. The resulting sum is divided


by the weighted average shares/units on a diluted basis to arrive at AFFO per share/unit.



(4)   

Basic includes common stock outstanding plus operating partnership units in Home Properties, L.P., which


can be converted into shares of common stock. Diluted includes additional common stock equivalents.

 

 

HOME PROPERTIES, INC.

SUMMARY CONSOLIDATED BALANCE SHEETS

(in thousands - Unaudited)





December 31, 2013

December 31, 2012

 

Land

$   786,868

$   791,604

Construction in progress

187,976

83,241

Buildings, improvements and equipment

4,645,921

4,580,381


5,620,765

5,455,226

Accumulated depreciation

(1,243,243)

(1,108,840)

Real estate, net

4,377,522

4,346,386




Cash and cash equivalents

9,853

21,092

Cash in escrows

23,738

26,971

Accounts receivable

14,937

13,406

Prepaid expenses

22,089

19,504

Deferred charges

11,945

13,429

Other assets

7,793

10,704

Total assets

$4,467,877

$4,451,492

Mortgage notes payable

$1,814,217

$2,165,027

Unsecured notes payable

450,000

450,000

Unsecured line of credit

193,000

162,500

Accounts payable

27,540

22,691

Accrued interest payable

8,392

9,974

Accrued expenses and other liabilities

33,936

33,887

Security deposits

18,479

19,146

Total liabilities

2,545,564

2,863,225




Common stockholders' equity

1,629,253

1,320,968

Noncontrolling interest

293,060

267,299

Total equity

1,922,313

1,588,267

Total liabilities and equity

$4,467,877

$4,451,492




Total shares/units outstanding:



Common stock

56,961.6

51,508.1

Operating partnership units

10,287.2

10,455.6


67,248.8

61,963.7

 

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