SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
March 15, 2007
HOME PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 1-13136 No. 16-1455126
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
850 Clinton Square, Rochester, New York 14604
www.homeproperties.com
(Address of principal executive offices and internet site)
(585) 546-4900
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
HOME PROPERTIES, INC.
CURRENT REPORT
ON FORM 8-K
Item 2.01. Completion of Acquisition of Assets
---------- -----------------------------------
Home Properties, Inc. (the "Company") conducts its business through Home
Properties, L.P., a New York limited partnership (the "Operating Partnership").
During 2006, the Operating Partnership purchased the following eight apartment
communities (referred to herein as the "Acquisition Properties") in six
unrelated transactions. The aggregate purchase price of the eight apartment
communities exceeded 10% of the total assets of the registrant as of December
31, 2005. None of these acquisition transactions constitute a "significant
subsidiary", and the communities were not acquired from a related party.
Community Acquisition Date
--------- ----------------
Highland House May 31, 2006
Liberty Place June 6, 2006
The Heights at Marlborough September 7, 2006
The Meadows at Marlborough September 7, 2006
Heritage Woods October 4, 2006
Top Field October 4, 2006
The Coves at Chesapeake November 20, 2006
Mount Vernon Square December 27, 2006
Highland House. On May 31, 2006, the Operating Partnership acquired Highland
House with a total of 172 units located in Randolph, Massachusetts.
Consideration for the $17.9 million purchase price included $6.3 million of
assumed mortgage debt at an interest rate of 6.99% maturing on January 1, 2029
(fair market value of $6.6 Million). The balance was funded through the
Company's line of credit.
Liberty Place. On June 6, 2006, the Operating Partnership acquired Liberty Place
with a total of 107 units located in Randolph, Massachusetts. Consideration for
the $14.9 million purchase price included $6.2 million of assumed mortgage debt
at an interest rate of 6.79% maturing on November 1, 2012 (fair market value of
$6.5 million). The balance was funded through the Company's line of credit.
The Heights at Marlborough. On September 7, 2006, the Operating Partnership
acquired The Heights at Marlborough with a total of 348 units located in
Marlborough, Massachusetts. Consideration for the $48.9 million purchase price
included $22.0 million of assumed fixed rate mortgage debt at an interest rate
of 7.63% maturing on October 1, 2010 (fair market value of $23.7 million). The
balance was funded through the Company's line of credit.
The Meadows at Marlborough. On September 7, 2006, the Operating Partnership
acquired The Meadows at Marlborough with a total of 264 units located in
Marlborough, Massachusetts. Consideration for the $34.2 million purchase price
included $20.4 million of assumed fixed rate mortgage debt at an interest rate
of 7.05% maturing on August 1, 2011 (fair market value of $21.7 million). The
Balance was funded through the Company's line of credit.
Heritage Woods. On October 4, 2006, the Operating Partnership acquired Heritage
Woods with a total of 164 units located in Bel Air, Maryland. Consideration for
the $14.0 million purchase price included $5.0 million of assumed mortgage debt
at an interest rate of 5.69% maturing on September 1, 2013 (fair market value of
$5.2 million), $0.5 million of cash, and $8.5 million of Operating Partnership
Units.
Top Field. On October 4, 2006, the Operating Partnership acquired Top Field with
a total of 156 units located in Cockeysville, Maryland. Consideration for the
$18.4 million purchase price included $6.4 million of assumed mortgage debt and
at an interest rate of 5.30% maturing on April 1, 2013, $0.1 million of cash,
and $11.9 million in Operating Partnership Units.
The Coves at Chesapeake. On November 20, 2006, the Operating Partnership
acquired The Coves at Chesapeake with a total of 469 units located in Glen
Burnie, Maryland. Consideration for the $67.0 million purchase price was funded
by the Company's cash on hand.
Mount Vernon Square. On December 27, 2006, the Operating Partnership acquired
Mount Vernon Square with a total of 1,387 units located in Alexandria, Virginia.
Consideration for the $144.8 million purchase price included $90.7 million of
assumed mortgage debt at an interest rate of 5.23% maturing on January 1, 2012
(fair market value of $89.7 million). The balance was funded by the Company's
cash on hand.
The Coves at Chesapeake and Mount Vernon Square are collectively referred to
herein as the "Selected Acquisition Properties". The purchase price of the
Selected Acquisition Properties makes up 58% of the Acquisition Properties and
were selected for audit under Rule 3-14 of Regulation S-X.
In determining the price paid for the Acquisition Properties, the Company
considered the historical and expected cash flow from the properties, the nature
of the occupancy trends and terms of the leases in place, current operating
costs and taxes, the physical condition of the properties, the potential to
increase their cash flow and other factors. The Company also considered the
capitalization rates at which it believes apartment properties have recently
sold in the market, but determined the prices it was willing to pay for the
properties primarily based on the factors discussed above. No independent
appraisals were performed in connection with the acquisitions. The Company,
after investigation of the properties, is not aware of any material factors,
other than those discussed above, that would cause the financial information
reported not to be necessarily indicative of future expected operating results.
Item 9.01. Financial Statements and Exhibits.
---------- ----------------------------------
a. Financial statements of businesses acquired:
(1) Unaudited statements of revenue and certain expenses for each of the
Selected Acquisition Properties for the period January 1, 2006 through
the latest interim period prior to the date of acquisition.
(2) Audited statements of revenue and certain expenses for the year ended
December 31, 2005 for each of the Selected Acquisition Properties.
None of the Acquisition Properties constitute a "significant
subsidiary" pursuant to the Regulation S-X rules. Audited statements
of revenue and certain expenses for the year ended December 31, 2005
and related unaudited financial information for the period through the
latest interim period prior to the date of acquisition are presented
herein only for the Selected Acquisition Properties, which represent a
majority of the Acquisition Properties.
b. Pro forma financial information:
(1) Pro forma condensed consolidated statement of operations of the
Company for the year ended December 31, 2006.
(2) Notes to the pro forma consolidated statement of operations of the
Company for the year ended December 31, 2006.
(3) Estimated twelve-month pro forma statement of taxable net operating
income and operating funds available.
c. Exhibits
Exhibit 23.0 Consent of PricewaterhouseCoopers LLP
Report of Independent Auditors
------------------------------
To the Board of Directors and Shareholders of
Home Properties, Inc.:
We have audited the accompanying Statement of Revenue and Certain Expenses of
The Coves at Chesapeake, located in Glen Burnie, Maryland, (the "Property") for
the year ended December 31, 2005. This Statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
Statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the Statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Statement.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the Current Report on Form 8-K of Home Properties, Inc.) as described in Note
2 and is not intended to be a complete presentation of the Property's revenue
and expenses.
In our opinion, the Statement referred to above presents fairly, in all material
respects, the revenue and certain expenses described in Note 2 of The Coves at
Chesapeake for the year ended December 31, 2005, in conformity with accounting
principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 9, 2007
The Coves at Chesapeake
Statement of Revenue and Certain Expenses
(In thousands)
--------------------------------------------------------------------------------
For the Nine Months
Ended
September 30,
For the Year Ended 2006
December 31, 2005 (unaudited)
----------------- -----------
Revenue:
Rental income $5,470 $4,306
Other income 324 259
------ ------
5,794 4,565
------ ------
Expenses:
Operating and maintenance 1,783 1,425
Real estate taxes 361 287
------ ------
2,144 1,712
------ ------
Revenue in excess of expenses $3,650 $2,853
====== ======
The accompanying notes are an integral part of these financial statements.
The Coves at Chesapeake
Notes to Statement of Revenue and Certain Expenses
For the Year Ended December 31, 2005 and the Nine Months Ended September 30,
2006 (Unaudited)
--------------------------------------------------------------------------------
1. OPERATIONS OF PROPERTIES
The accompanying statement of revenue and certain expenses includes the
operations (see "Basis of Presentation" below) of The Coves at Chesapeake,
a residential property (the "Property") formerly owned and managed by
parties not related to Home Properties, Inc. (the "Company").
On November 20, 2006, the Company, through its subsidiary Home Properties,
L.P., acquired the Property. The Property is a residential community
located in Glen Burnie, Maryland.
Total consideration for the $67.0 million purchase price was funded by the
Company's cash on hand.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The accompanying statement has been prepared on the accrual basis of
accounting.
The accompanying statement is not representative of the actual operations
of the Property for the periods presented. As required by the Securities
and Exchange Commission, Regulation S-X, Rule 3-14, certain expenses, which
may not be comparable to the proposed future operations of the Property
have been excluded. Expenses excluded relate to property management fees,
interest expense, depreciation and amortization expense, and other expenses
unrelated to the future operations of the Property. The Company is not
aware of any material factors relating to the Property that would cause the
reported financial information not to be necessarily indicative of future
operating results.
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue Recognition
-------------------
Rental income attributable to residential leases is recorded when due from
residents, which approximates recognition on a straight-line basis over the
related lease term. Leases are generally for terms of one year.
Other Income
------------
Other income is attributable to real estate service fees and is recorded
when due from residents. The real estate service fees include utility
recovery charges, late charges, lease breakage fees, application fees, pet
charges and other amenities.
The Coves at Chesapeake
Notes to Statement of Revenue and Certain Expenses
For the Year Ended December 31, 2005 and the Nine Months Ended September 30,
2006 (Unaudited)
-------------------------------------------------------------------------------
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Real Estate
-----------
Expenditures for repairs and maintenance items are expensed as incurred.
Real Estate Taxes
-----------------
Real estate taxes are expensed over the period in which the taxes relate.
3. INTERIM UNAUDITED STATEMENT OF REVENUE AND CERTAIN EXPENSES
The accompanying interim statement of revenue and certain expenses for the
nine months ended September 30, 2006 is unaudited. However, in the opinion
of the Company, the interim statement includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results for the interim period. The results for the period presented are
not necessarily indicative of the results for the full year.
Report of Independent Auditors
To the Board of Directors and Shareholders of
Home Properties, Inc.:
We have audited the accompanying Statement of Revenue and Certain Expenses of
Mount Vernon Square, located in Alexandria, Virginia, (the "Property") for the
year ended December 31, 2005. This Statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
Statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the Statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Statement.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the Current Report on Form 8-K of Home Properties, Inc.) as described in Note
2 and is not intended to be a complete presentation of the Property's revenue
and expenses.
In our opinion, the Statement referred to above presents fairly, in all material
respects, the revenue and certain expenses described in Note 2 of Mount Vernon
Square for the year ended December 31, 2005, in conformity with accounting
principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 9, 2007
Mount Vernon Square
Statement of Revenue and Certain Expenses
(In thousands)
-------------------------------------------------------------------------------
For the Nine Months
Ended
September 30,
For the Year Ended 2006
December 31, 2005 (unaudited)
----------------- -----------
Revenue:
Rental income $15,085 $12,327
Other income 1,362 1,449
16,447 13,776
Expenses:
Operating and maintenance 5,124 3,928
Real estate taxes 1,034 696
6,158 4,624
Revenue in excess of expenses $10,289 $ 9,152
The accompanying notes are an integral part of these financial statements.
Mount Vernon Square
Notes to Statement of Revenue and Certain Expenses
For the Year Ended December 31, 2005 and the Nine Months Ended September 30,
2006 (Unaudited)
--------------------------------------------------------------------------------
1. OPERATIONS OF PROPERTIES
The accompanying statement of revenue and certain expenses includes the
operations (see "Basis of Presentation" below) of Mount Vernon Square, a
residential property (the "Property") formerly owned by parties not related
to Home Properties, Inc. (the "Company"). For the period from December 1,
2004 through December 26, 2006, the Company managed the Property for
parties not related to the Company.
On December 27, 2006, the Company, through its subsidiary Home Properties,
L.P., acquired the Property. The Property is a residential community
located in Alexandria, Virginia.
Total consideration for the $144.8 million purchase price included $90.7
million of assumed mortgage debt at an interest rate of 5.23% maturing on
January 1, 2012 (fair market value of $89.7 million). The balance was
funded by the Company's cash on hand.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The accompanying statement has been prepared on the accrual basis of
accounting.
The accompanying statement is not representative of the actual operations
of the Property for the periods presented. As required by the Securities
and Exchange Commission, Regulation S-X, Rule 3-14, certain expenses, which
may not be comparable to the proposed future operations of the Property
have been excluded. Expenses excluded relate to property management fees,
interest expense, depreciation and amortization expense, and other expenses
unrelated to the future operations of the Property. The Company is not
aware of any material factors relating to the Property that would cause the
reported financial information not to be necessarily indicative of future
operating results.
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue Recognition
-------------------
Rental income attributable to residential leases is recorded when due from
residents, which approximates recognition on a straight-line basis over the
related lease term. Leases are generally for terms of one year.
Other Income
------------
Other income is attributable to real estate service fees and is recorded
when due from residents. The real estate service fees include utility
recovery charges, late charges, lease breakage fees, application fees, pet
charges and other amenities.
Mount Vernon Square
Notes to Statement of Revenue and Certain Expenses
For the Year Ended December 31, 2005 and the Nine Months Ended September 30,
2006 (Unaudited)
--------------------------------------------------------------------------------
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate
-----------
Expenditures for repairs and maintenance items are expensed as incurred.
Real Estate Taxes
-----------------
Real estate taxes are expensed over the period in which the taxes relate.
3. INTERIM UNAUDITED STATEMENT OF REVENUE AND CERTAIN EXPENSES
The accompanying interim statement of revenue and certain expenses for the
nine months ended September 30, 2006 is unaudited. However, in the opinion
of the Company, the interim statement includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results for the interim period. The results for the period presented are
not necessarily indicative of the results for the full year.
HOME PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
(Unaudited, in Thousands, Except Share and Per Share Data)
The unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 2006 is presented as if the acquisition by the Company of the
Selected Acquisition Properties (as defined on page 3 of this Current Report on
Form 8-K) had occurred on January 1, 2006.
Such pro forma information is based upon the historical consolidated results of
operations of the Company for the year ended December 31, 2006, giving effect to
the transactions described above. In management's opinion, all adjustments
necessary to reflect the above transactions have been made. The Pro Forma
Consolidated Statements of Operations should be read in conjunction with the
historical financial statements and notes thereto of the Company included in the
Home Properties, Inc. Form 10- K filed February 28, 2007 for the year ended
December 31, 2006.
The unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 2006 are not necessarily indicative of what the actual results of
operations would have been assuming the transactions had occurred as of the
beginning of the period presented, nor does it purport to represent the results
of operations for future periods.
The pro forma Balance Sheet for Home Properties, Inc. as of December 31, 2006 is
not included in this Form 8-K. This pro forma financial information is not
presented in this Form 8-K as the Selected Acquisition Properties are included
in the historical financial statements and notes thereto of the Company included
in the Home Properties, Inc. Form 10-K filed February 28, 2007 for the year
ended December 31, 2006.
HOME PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
(Unaudited, in Thousands, Except Share and Per Share Data)
Home The Coves
Properties, at Total Pro
Inc. Chesapeake Mount Vernon Pro Forma Forma Company Pro
Historical (A) (B) Square (B) Adjustments Adjustments Forma
-------------- ---------- ---------- ----------- ----------- -----
Revenues:
Rental income $420,988 $ 5,100 $ 16,436 $ 690 (H) $22,226 $443,214
Property other income 27,775 306 1,932 - 2,238 30,013
Interest income 1,761 - - - - 1,761
Other income 3,468 - - - - 3,468
-------- -------- --------- ------- ------- --------
Total Revenues 453,992 5,406 18,368 690 24,464 478,456
-------- -------- --------- ------- ------- --------
Expenses:
Operating and maintenance 190,845 2,028 6,165 713 (C) 8,906 199,751
General and administrative 22,626 - - - - 22,626
Interest 106,773 - - 4,926 (D) 4,926 111,699
Depreciation and amortization 96,142 - - 4,640 (E) 4,640 100,782
-------- -------- --------- ------- ------- --------
Total Expenses 416,386 2,028 6,165 10,279 18,472 434,858
-------- -------- --------- ------- ------- --------
Income from operations before
minority interest 37,606 3,378 12,203 (9,589) 5,992 43,598
Minority interest (9,614) (1,847) (F) (11,461)
-------- -------- --------- ------- ------- --------
Income from continuing
operations 27,992 4,145 32,137
Preferred dividends (5,400) - (5,400)
-------- ------- --------
Income applicable to common
shareholders from continuing
operations $ 22,592 $ 4,145 $26,737
======== ======= =======
Basic earnings per share data:
Income applicable to common
shareholders from
continuing operations $0.69 $0.82 (G)
===== =====
Diluted earnings per share data:
Income applicable to common
shareholders from
continuing operations $0.68 $0.80 (G)
===== =====
Weighted average number of
shares outstanding:
Basic 32,697,794 32,697,794
========== ==========
Diluted 33,337,557 33,337,557
========== ==========
The accompanying notes are an integral part of these financial statements.
HOME PROPERTIES, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
(Unaudited, in Thousands)
(A) Reflects the historical audited consolidated statement of operations for
the Company for the year ended December 31, 2006.
(B) Reflects the historical revenue and certain expenses of each of the
Selected Acquisition Properties for the period January 1, 2006 through the
date of acquisition.
(C) Reflects additional property management general and administrative expenses
relating to adding the Selected Acquisition Properties to the Company
portfolio (estimated as 3% of total revenues, and is consistent with
historical costs). These expenses are comprised of the overhead costs
expected to be incurred as a result of the Selected Properties operation
within the Company portfolio of properties.
(D) Reflects the increase in interest expense related to the fair market value
("FMV") of the debt assumed in order to finance Mount Vernon Square. The
fair market value of the debt assumed in acquisition, along with the
respective effective interest rates is summarized as follows:
Acquisition Properties FMV of Debt Assumed Interest rate
---------------------- ------------------- -------------
Mount Vernon Square $89,724 5.49%
(E) Reflects depreciation and amortization related to each of the Selected
Acquisition Properties, as appropriate. The appliances have an estimated
useful life of ten years and the building has an estimated useful life of
forty years. Intangibles are amortized over a period of 5 months to 3
years. The purchase price of the Selected Acquisition Properties is
allocated $8,915 and $56,300 to land, $469 and $1,388 to appliances,
$57,408 and $85,535 to building, $158 and $489 to customer relationship
intangible asset, $208 and $629 to in-place leases intangible asset and
$116 and $574 to below market leasehold interest intangible deferred
income, for The Coves at Chesapeake and Mount Vernon Square, respectively.
(F) Reflects the adjustment to minority interest expense based upon the impact
of the above pro forma adjustments on income before minority interest.
(G) Pro forma income per common share is based upon the weighted average number
of common shares outstanding during 2006.
(H) Reflects rental revenue of acquired in-place below market leases at their
fair value over the weighted average remaining lease term of 5 to 6 months.
In accordance with Statement of Financial Accounting Standard No. 128, Earnings
Per Share, pro forma earnings per share from income applicable to common
shareholders from continuing operations is calculated as follows (in thousands):
December 31,2006
----------------
Income from continuing operations $ 32,137
Less: Preferred dividends 5,400
--------
Basic and Diluted - Income from continuing operations
applicable to common shareholders $ 26,737
========
Basic weighted average number of shares outstanding 32,697,794
Effect of dilutive stock options 639,763
----------
Diluted weighted average number of shares outstanding 33,337,557
==========
Basic earnings per share data:
Income applicable to common shareholders from
continuing operations $ 0.82
======
Diluted earnings per share data:
Income applicable to common shareholders from
continuing operations $ 0.80
======
HOME PROPERTIES, INC.
ESTIMATED TWELVE-MONTH PRO FORMA STATEMENT
OF TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
(UNAUDITED)
The following unaudited statement is a pro forma estimate for a twelve-month
period of taxable income and funds available from operations of the Company. The
unaudited pro forma statement is based on the Company's historical operating
results for the year ended December 31, 2006 adjusted as if the acquisition by
the Company of the Selected Acquisition Properties had occurred on January 1,
2006.
This statement should be read in conjunction with (i) the historical financial
statements and notes thereto of the Company included in the Home Properties,
Inc. Form 10-K filed February 28, 2007 for the year ended December 31, 2006 and
(ii) the pro forma consolidated financial statements of the Company included
herein.
ESTIMATE OF TAXABLE NET OPERATING INCOME (IN THOUSANDS):
Historical earnings from operations, exclusive of
depreciation and amortization (Note 1) $133,748
Selected Acquisition Properties as adjusted, exclusive of
depreciation (Note 2) 10,632
--------
144,380
Estimated tax basis depreciation and amortization (Note 3)
The Company (98,566)
Selected Acquisition Properties (4,591)
--------
Pro Forma taxable operating income before dividends deduction 41,223
Estimated dividends deduction (Note 4) 89,433
--------
Pro Forma taxable operating income (loss) ($ 48,210)
========
ESTIMATE OF PRO FORMA OPERATING FUNDS AVAILABLE (NOTE 5)
(IN THOUSANDS):
Pro Forma taxable operating income before dividends deduction $ 41,223
Add pro forma tax basis depreciation and amortization 103,157
--------
Estimate of pro forma operating funds available $144,380
========
Principle Assumptions:
Note 1 - The historical earnings from operations represents the Company's income
from continuing operations as adjusted for depreciation and amortization
for the year ended December 31, 2006 as reflected in the historical
financial statements.
Note 2 - The historical earnings from operations represents the pro forma
results of the Selected Acquisition Properties acquired since January 1,
2006 for the year ended December 31, 2006.
Note 3 - The tax basis depreciation of the Company is based upon the original
purchase price, excluding intangibles, allocated to the buildings and
equipment, and personal property, depreciated on a straight-line basis over
a 27.5-year life and the mid-month convention; and depreciated using MACRS
over a 5-year life and the half-year convention, respectively.
Note 4 - Estimated dividends deduction includes the Series F preferred dividend
of $5,400 plus the estimated dividend rate of $2.57 per common share.
Common shares outstanding, on a pro forma basis, are 32,697,794.
Note 5 - Operating funds available does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available to fund cash
needs.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOME PROPERTIES, INC.
(Registrant)
Date: March 15, 2007
By: /s/ Edward J. Pettinella
-------------------------------------
Edward J. Pettinella
President and Chief Executive Officer
Date: March 15, 2007
By: /s/ David P. Gardner
-------------------------------------
David P. Gardner
Executive Vice President and
Chief Financial Officer