Home Properties Reports Fourth Quarter and Full Year 2014 Results
-2015 Guidance Provided
-Dividend Increase of 4.1% Announced
ROCHESTER, N.Y., Feb. 5, 2015 /PRNewswire/ -- Home Properties, Inc. (NYSE: HME) today reported financial results for the fourth quarter and year ended December 31, 2014. All per share results are reported on a diluted basis.
Results for the Quarter
- Earnings per share ("EPS") was $1.14 compared to $0.99 in the fourth quarter of 2013.
- Funds from Operations ("FFO") was $1.16 per share compared to $1.11 per share in the prior year period.
- Operating Funds from Operations ("OFFO) was $1.16 per share compared to $1.12 per share in the prior year period.
- Results for the quarter were negatively impacted by the Company's decision to exit the business of developing new apartment communities as announced on July 31, 2014. During the quarter, net severance and other charges of $0.5 million were expensed in connection with the elimination of development employee positions. The Company also recognized $623,000 of interest expense related to land and predevelopment carrying costs that would have otherwise been capitalized. The impact to fourth quarter OFFO on a per share basis is summarized below:
| OFFO as Reported |
$1.16 |
| Severance and Other Charges |
0.01 |
| Reduced Capitalized Interest on Land Parcels |
0.01 |
| OFFO as Adjusted for Impact of Exit From |
$1.18 |
Results for the Year
- EPS was $2.78 per share compared to $2.93 per share for year ended December 31, 2013. The $0.15 per share decrease is primarily attributable to charges of $0.08 per share incurred in connection with the Company's exit from the business of developing new apartment communities and a $0.16 reduction in discontinued operations, partially offset by an increase of $0.10 per share from continuing operations.
- FFO was $4.33 per share compared to $4.37 per share in the prior year period. The decrease is primarily attributable to charges related to the Company's exit from the new development business.
- OFFO was $4.39 per share compared to $4.37 per share in the prior year period.
Definitions of FFO and OFFO and reconciliations of GAAP net income to these measures are provided in the financial data section of this release.
"Today we provide initial guidance for 2015 that reflects higher FFO and NOI growth than 2014," said Edward J. Pettinella, President and Chief Executive Officer. "Fundamentals for our business continue to be positive; and we look for our largest region, Washington, D.C., to improve in the second half of the year. As a result of our positive expectations, we are pleased to announce a 4.1% increase in the annual dividend."
Same-Property Operating Results (1)
| Fourth Quarter 2014 Compared to |
Fourth Quarter 2014 Compared to |
|
| Fourth Quarter 2013 |
Third Quarter 2014 |
|
| Rental Income |
3.0% increase |
0.3% increase |
| Total Revenues |
3.5% increase |
1.4% increase |
| Property Level |
||
| Operating Expenses |
5.8% increase |
2.1% increase |
| Net Operating Income ("NOI") |
2.2% increase |
1.0% increase |
| Average Physical |
95.0%, or a |
95.0%, or a |
| Occupancy(2) |
20 basis point increase |
30 basis point decrease |
| Average Monthly Rental Rates |
2.8% increase to $1,345 |
0.4% increase to $1,345 |
| (1) |
For 113 core properties containing 39,253 apartment units owned since January 1, 2013. |
| (2) |
Average physical occupancy – defined as the number of occupied apartment units divided by total apartment units. |
"We were very active in the transaction arena over the last 12 months," continued Mr. Pettinella. "Double-digit unlevered IRRs generated by the dispositions illustrate the value created by HME's repositioning strategy. The reinvestment of proceeds in assets meeting our stringent criteria provided new inventory for our team to begin the process again. This recycling of capital is fundamental to our strategy and continues to create value for our shareholders."
Acquisitions
On November 12, 2014, the Company acquired a 428-unit garden apartment community in its Chicago region for $66 million.
For the year ended December 31, 2014, the Company acquired three apartment communities with a total of 1,052 units for a combined purchase price of $141.5 million.
On January 7, 2015, the Company acquired a 710-unit garden apartment community in its Chicago region for $92 million.
Dispositions
In December, the Company sold two communities in its Washington, D.C. region with a total of 663 units for $106.8 million, resulting in a gain on sale of $50.5 million.
For the year ended December 31, 2014, the Company sold three apartment communities with a total of 1,527 units for $216.8 million.
On January 26, 2015, the Company sold a 672-unit garden apartment community in its Chicago region for $49.3 million.
Development
Construction has been completed on Eleven55 Ripley in Silver Spring, Maryland, with 379-units ready for occupancy. Approximately 84% of the units are currently leased.
Construction continues on the Company's last remaining development project. The Courts at Spring Mill Station in Conshohocken, Pennsylvania is expected to be completed in the second quarter of 2015. The first of two buildings in the community became ready for occupancy in the fourth quarter. Approximately 21% of the units are currently leased.
Capital Markets
"We continued to strengthen our balance sheet in 2014 with all key credit metrics improving," said David P. Gardner, Executive Vice President and Chief Financial Officer. "Our multi-year goal to reduce debt and obtain investment grade credit ratings from all three agencies was achieved with attainment of the S&P rating in October."
On October 3, Standard & Poor's Ratings Services assigned its 'BBB' corporate credit rating to Home Properties Inc. with a stable outlook.
In connection with the November 12 acquisition, the Company assumed a $31.9 million, 4.62% fixed-rate mortgage with a September 1, 2020 maturity date.
On November 19, the Company entered into an unsecured six month term loan for $100 million with a May 18, 2015 maturity date. The loan bears interest based on a margin plus one-month LIBOR and has covenants that match the Company's existing line of credit agreement.
In connection with a December disposition, the Company repaid a $43.4 million, 4.23% fixed-rate mortgage with a November 1, 2018 maturity date.
As of December 31, 2014:
- The Company had approximately $11 million of cash on hand and an additional $177 million of available capacity on its corporate credit facility.
- Unencumbered assets represented 56.7% of total undepreciated assets, up from 51.9% at December 31, 2013.
- The Company's ratio of debt-to-total market capitalization was 35.6%.
- Total debt of $2.5 billion was outstanding at a weighted average interest rate of 4.2% and staggered maturities averaging 3.4 years.
- Approximately 84% of total indebtedness was at fixed rates.
- Interest coverage for the quarter was 4.1 times and the fixed charge ratio was 3.9 times. For the full year, interest coverage was 4.0 times and the fixed charge ratio was 3.7 times.
2015 Guidance
For 2015, the Company expects FFO per share between $4.57 and $4.73, which will produce growth of 5.6% to 9.3% when compared to 2014 results.
The guidance range of expected FFO per share for the first quarter of 2015 is $1.08 to $1.12.
Guidance reflects management's current assessment of economic and market conditions. Assumptions for 2015 guidance are included in the supplemental information.
Dividend Declared
On January 31, 2015, the Company declared a regular cash dividend on the Company's common shares of $0.76 per share for the quarter ended December 31, 2014. This is an increase of $0.03 per share, or 4.1%. The dividend is payable on February 27, 2015 to shareholders of record on February 17, 2015 and is equivalent to an annualized rate of $3.04 per share. The current annual dividend represents a 4.3% yield based on the January 30 closing price of $70.50. Home Properties' common stock will begin trading ex-dividend on February 12, 2015.
Supplemental Information
The Company produces supplemental information that includes details regarding property operations, other income, acquisitions, dispositions, 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 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. 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 of the Company's website, www.homeproperties.com. For live audio-only participation, please dial 800-913-1647 (International 212-231-2900).
First Quarter Conference/Event Schedule
Home Properties is scheduled to participate in Citi's 2015 Global Property CEO Conference March 2-4, 2015 in Hollywood, Florida. Presentation materials will be available at www.homeproperties.com in the "Investors" section.
First Quarter Earnings Release and Conference Call
The Company's first quarter 2015 financial results are scheduled to be released after the stock market closes on Thursday, April 30, 2015. A conference call, which will be simultaneously webcast, is scheduled for Friday, May 1, 2015 at 11:00 AM ET. It will be accessible following the instructions for the current quarter's conference call.
Forward-Looking Statements
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 are described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K and in other filings with the Securities and Exchange Commission and 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. The Company assumes no obligation to update or supplement forward-looking statements because of subsequent events.
About Home Properties
Home Properties is a publicly traded multifamily real estate investment trust that owns, operates, acquires and repositions apartment communities in suburbs of major metropolitan areas, primarily along the East Coast of the United States. An S&P 400 Company, Home Properties owns and operates 121 communities containing 42,145 apartment units. For more information, please visit the Company's website at www.homeproperties.com.
| HOME PROPERTIES, INC. |
||||
| SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS |
||||
| (in thousands, except per share data – Unaudited) |
||||
| Three Months Ended |
Year Ended |
|||
| December 31 |
December 31 |
|||
| 2014 |
2013 |
2014 |
2013 |
|
| Rental income |
$ 157,936 |
$ 148,258 |
$ 616,160 |
$ 587,052 |
| Property other income |
14,535 |
13,029 |
55,391 |
51,571 |
| Other income |
20 |
508 |
364 |
1,179 |
| Total revenues |
172,491 |
161,795 |
671,915 |
639,802 |
| Operating and maintenance |
63,162 |
57,451 |
249,509 |
230,098 |
| General and administrative |
5,014 |
5,935 |
26,686 |
28,507 |
| Interest |
25,485 |
25,353 |
99,635 |
110,076 |
| Depreciation and amortization |
46,913 |
42,954 |
181,123 |
167,375 |
| Other expenses |
117 |
264 |
734 |
312 |
| Impairment and other charges |
516 |
- |
5,382 |
- |
| Total expenses |
141,207 |
131,957 |
563,069 |
536,368 |
| Income from continuing operations |
31,284 |
29,838 |
108,846 |
103,434 |
| Discontinued operations |
||||
| Income (loss) from discontinued operations |
(3,667) |
1,191 |
(1,206) |
6,940 |
| Gain on disposition of property |
50,526 |
36,201 |
81,831 |
81,205 |
| Discontinued operations |
46,859 |
37,392 |
80,625 |
88,145 |
| Net income |
78,143 |
67,230 |
189,471 |
191,579 |
| Net income attributable to noncontrolling interest |
(11,709) |
(10,311) |
(28,533) |
(30,706) |
| Net income attributable to common stockholders |
$ 66,434 |
$ 56,919 |
$ 160,938 |
$ 160,873 |
| Reconciliation from net income attributable to |
||||
| Net income attributable to common stockholders |
$ 66,434 |
$ 56,919 |
$ 160,938 |
$ 160,873 |
| Real property depreciation and amortization |
46,728 |
43,792 |
181,284 |
172,624 |
| Noncontrolling interest |
11,709 |
10,311 |
28,533 |
30,706 |
| Gain on disposition of property |
(50,526) |
(36,201) |
(81,831) |
(81,205) |
| FFO - basic and diluted, as defined by NAREIT |
74,345 |
74,821 |
288,924 |
282,998 |
| Loss from early extinguishment of debt in connection with sale of real estate |
4,530 |
366 |
5,332 |
1,782 |
| FFO - basic and diluted (1) |
$ 78,875 |
$ 75,187 |
$ 294,256 |
$ 284,780 |
| (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. Similarly titled measures disclosed by other companies may not be calculated in the same manner. |
| HOME PROPERTIES, INC. |
||||
| SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS |
||||
| (in thousands, except per share/unit and apartment unit data – Unaudited) |
||||
| Three Months Ended |
Year Ended |
|||
| December 31 |
December 31 |
|||
| 2014 |
2013 |
2014 |
2013 |
|
| FFO – basic and diluted |
$ 78,875 |
$ 75,187 |
$ 294,256 |
$ 284,780 |
| FFO – basic and diluted |
$ 78,875 |
$ 75,187 |
$ 294,256 |
$ 284,780 |
| Acquisition costs of closed deals included in other |
117 |
264 |
734 |
312 |
| Impairment and other charges |
100 |
- |
3,942 |
- |
| Operating FFO (2) |
$ 79,092 |
$ 75,451 |
$ 298,932 |
$ 285,092 |
| FFO – basic and diluted |
$ 78,875 |
$ 75,187 |
$ 294,256 |
$ 284,780 |
| Recurring non-revenue generating capital expenses |
(9,269) |
(8,857) |
(36,783) |
(35,687) |
| AFFO (3) |
$ 69,606 |
$ 66,330 |
$ 257,473 |
$ 249,093 |
| Operating FFO |
$ 79,092 |
$ 75,451 |
$ 298,932 |
$ 285,092 |
| Recurring non-revenue generating capital expenses |
(9,269) |
(8,857) |
(36,783) |
(35,687) |
| Operating AFFO (2) (3) |
$ 69,823 |
$ 66,594 |
$ 262,149 |
$ 249,405 |
| Weighted average shares/units outstanding: |
||||
| Shares – basic |
57,509.7 |
56,944.9 |
57,315.4 |
54,328.5 |
| Shares – diluted |
58,047.1 |
57,327.9 |
57,827.9 |
54,820.2 |
| Shares/units – basic (4) |
67,679.1 |
67,270.3 |
67,515.7 |
64,702.1 |
| Shares/units – diluted (4) |
68,216.5 |
67,653.3 |
68,028.2 |
65,193.8 |
| Per share/unit: |
||||
| Net income – basic |
$1.16 |
$1.00 |
$2.81 |
$2.96 |
| Net income – diluted |
$1.14 |
$0.99 |
$2.78 |
$2.93 |
| FFO – basic |
$1.17 |
$1.12 |
$4.36 |
$4.40 |
| FFO – diluted |
$1.16 |
$1.11 |
$4.33 |
$4.37 |
| Operating FFO (2) |
$1.16 |
$1.12 |
$4.39 |
$4.37 |
| AFFO (3) |
$1.02 |
$0.98 |
$3.78 |
$3.82 |
| Operating AFFO (2) (3) |
$1.02 |
$0.98 |
$3.85 |
$3.83 |
| Common dividend paid |
$0.73 |
$0.70 |
$2.92 |
$2.80 |
| (2) |
Operating FFO is defined as FFO adjusted for the addback of acquisition costs on closed deals and land impairment costs. |
| (3) |
Adjusted Funds From Operations ("AFFO") is defined as FFO less an annual reserve for anticipated recurring, non-revenue generating capitalized costs of $900 and $848 per apartment unit in 2014 and 2013, respectively. 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, 2014 |
December 31, 2013 |
|
| Land |
$ 815,565 |
$ 786,868 |
| Land held for sale |
13,114 |
- |
| Construction in progress |
118,595 |
187,976 |
| Buildings, improvements and equipment |
4,817,453 |
4,645,921 |
| 5,764,727 |
5,620,765 |
|
| Accumulated depreciation |
(1,371,227) |
(1,243,243) |
| Real estate, net |
4,393,500 |
4,377,522 |
| Cash and cash equivalents |
11,131 |
9,853 |
| Cash in escrows |
24,118 |
23,738 |
| Accounts receivable |
19,556 |
14,937 |
| Prepaid expenses |
23,484 |
22,089 |
| Deferred charges |
9,250 |
11,945 |
| Other assets |
7,496 |
7,793 |
| Total assets |
$ 4,488,535 |
$ 4,467,877 |
| Mortgage notes payable |
$ 1,637,175 |
$ 1,814,217 |
| Unsecured notes payable |
550,000 |
450,000 |
| Unsecured line of credit |
269,000 |
193,000 |
| Accounts payable |
25,835 |
27,540 |
| Accrued interest payable |
7,732 |
8,392 |
| Accrued expenses and other liabilities |
38,732 |
33,936 |
| Security deposits |
18,631 |
18,479 |
| Total liabilities |
2,547,105 |
2,545,564 |
| Common stockholders' equity |
1,653,218 |
1,629,253 |
| Noncontrolling interest |
288,212 |
293,060 |
| Total equity |
1,941,430 |
1,922,313 |
| Total liabilities and equity |
$ 4,488,535 |
$ 4,467,877 |
| Total shares/units outstanding: |
||
| Common stock |
57,704.0 |
56,961.6 |
| Operating partnership units |
10,114.4 |
10,287.2 |
| 67,818.4 |
67,248.8 |
|
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SOURCE Home Properties, Inc.
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