Home Properties Reports Third Quarter 2013 Results
ROCHESTER, N.Y., Oct. 31, 2013 /PRNewswire/ -- Home Properties, Inc. (NYSE: HME) today released financial results for the third quarter ended September 30, 2013. All results are reported on a diluted basis.
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"In the third quarter, Home Properties made tremendous progress in its multi-year plan to further strengthen the balance sheet and increase future financial flexibility," said Edward J. Pettinella, Home Properties President and CEO. "During the quarter, the Company received net proceeds of $267.6 million from a successful equity offering, which was used to reduce debt, in addition to increasing to $450 million its revolving line of credit and extending the term. Both events significantly enhanced key credit metrics for Home Properties."
Earnings per share ("EPS") for the quarter ended September 30, 2013 was $0.44 compared to $0.71 for the quarter ended September 30, 2012. The $0.27 decrease in EPS is primarily attributable to a $19.7 million decrease in gain on disposition of two properties sold in the third quarter of 2012, partially offset by a $7.2 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 nine months ended September 30, 2013 was $1.92 compared to $1.31 for the nine months ended September 30, 2012. The $0.61 increase in EPS is primarily attributable to a $25.3 million year-over-year increase in gain on disposition of property combined with a $25.8 million increase in income from continuing operations.
For the quarter ended September 30, 2013, Funds From Operations ("FFO") was $73.1 million, or $1.09 per share, compared to $67.3 million, or $1.09 per share, for the quarter ended September 30, 2012. The FFO increase of $5.8 million, or 8.6%, was driven by stronger operating results and lower General and Administrative costs, offset by the dilutive impact of the 4.4 million public share offering on July 12, 2013. FFO for the nine months ended September 30, 2013 was $3.25 per share, compared to $3.03 per share in the year-ago period, which equates to a 7.3% increase on a per-share basis. A reconciliation of GAAP net income to FFO is included in the financial data accompanying this news release.
Third Quarter Operating Results
For the third quarter of 2013, same-property comparisons (for 113 Core properties containing 38,784 apartment units owned since January 1, 2012) reflected an increase of 3.2% in base rental rates and an increase of 2.6% in total revenues compared to the same quarter a year ago. Net operating income ("NOI") increased by 3.2% from the third quarter of 2012. Property level operating expenses increased by 1.4% compared to the prior year quarter, primarily due to increases in personnel expense, property insurance and real estate taxes, which were partially offset by decreases in repairs and maintenance.
Average physical occupancy for the Core properties was 95.0% during the third quarter of 2013, down from 95.5% during the third quarter of 2012. Average monthly rental rates of $1,306 represent a 3.2% increase compared to the year-ago period.
On a sequential basis, compared to the 2013 second quarter results for Core properties, rental income (excluding utility recovery) remained unchanged in the third quarter of 2013, total revenues decreased 0.4%, expenses decreased 1.6% and NOI increased 0.2%. Average physical occupancy decreased 0.9% to 95.0%.
Physical occupancy for the 3,183 apartment units acquired/developed/redeveloped between January 1, 2012 and September 30, 2013 averaged 92.7% during the third quarter of 2013, at average monthly rents of $1,312.
Year-To-Date Operating Results
For the nine months ended September 30, 2013, same-property comparisons for the Core properties reflected an increase in total revenues of 3.3% and an increase in total expenses of 1.6%, resulting in a 4.3% increase in NOI compared to the first nine months of 2012. Property level operating expenses increased primarily due to higher natural gas heating costs, personnel expense, real estate taxes and snow removal costs. These increases were partially offset by decreases in repairs and maintenance and property insurance.
Average physical occupancy for the Core properties was 95.5% during the first nine months of 2013, up from 95.4% a year ago, with average monthly rental rates of $1,291, an increase of 3.3% over the prior-year period.
Acquisitions/Dispositions
There were no acquisitions or dispositions of apartment communities during the third quarter of 2013.
Subsequent to the end of the quarter, on October 15, 2013, the Company sold a 344-unit apartment community in the Washington, D.C. region for $68 million. The weighted average historical capitalization rate on the sale is 5.9% after applying a 2.7% management fee and before capital expenditures. A gain on sale of approximately $36 million will be recorded in the fourth quarter of 2013 related to this sale.
Development
Construction continued as planned on Eleven55 Ripley and Courts at Spring Mill Station.
Capital Markets Activities
As of September 30, 2013, the Company's ratio of debt-to-total market capitalization was 38.6% (based on a September 30, 2013 stock price of $57.75 used to determine equity value), with $106.5 million outstanding on its $450 million revolving credit facility and $11.0 million of unrestricted cash on hand. Total debt of $2.4 billion was outstanding, at interest rates averaging 4.5% and with staggered maturities averaging five years. Approximately 91% of total indebtedness was at fixed rates. Interest coverage for the quarter was 3.6 times and the fixed charge ratio was 3.4 times.
As previously reported, on July 12, 2013, the Company closed on a public offering of 4,427,500 shares of its common stock at a price of $63.00 per share. The net proceeds of the sale were approximately $267.6 million, after underwriting discounts, commissions and offering expenses.
On July 31, 2013, the Company repaid three variable-rate mortgages on three properties for $59.1 million, incurring debt extinguishment costs of $0.9 million, or $0.013 FFO per share, which is included in interest expense. The mortgages averaged a 3.2% interest rate and a three-year maturity date. These properties are now part of the unencumbered asset pool. As of September 30, 2013, the unencumbered asset pool represented 45.6% of total value, up from 37.5% at December 31, 2012.
As previously reported, on August 19, 2013, the Company increased the amount of the unsecured revolving line of credit agreement to $450 million from $275 million. The maturity date of the line was extended to August 18, 2017 from December 8, 2015 and may be extended at the Company's option for an additional one-year period. The rates, terms and conditions remain unchanged from the prior agreement. Based on the Company's current leverage ratio, the LIBOR margin is 1.00% and the annual facility fee is 0.175%. The existing $250 million term loan has been extended until August 18, 2018 from December 8, 2016.
The Company has an At-The-Market equity offering program through which it may sell up to 4.4 million common shares. There were no transactions during the third quarter. There are approximately two million common shares that remain available under this program.
Outlook
Based on slightly lower third quarter results than projected, the Company has decreased from $4.34 to $4.42 the range of its annual FFO per share guidance to $4.34 to $4.38. FFO per share expected for the fourth quarter of 2013 remains unchanged at a range from $1.09 to $1.13.
Dividend Declared
The Company announced a regular cash dividend on the Company's common shares of $0.70 per share for the quarter ended September 30, 2013. The dividend is payable on November 22, 2013 to shareholders of record on November 12, 2013 and is equivalent to an annualized rate of $2.80 per share. Based on the closing price of $60.83 on October 29, 2013, the day prior to the Board's declaration of the dividend, the yield was 4.6%. Home Properties' common stock will begin trading ex-dividend on November 8, 2013.
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.
Third Quarter 2013 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 home page of the website homeproperties.com. For live audio-only participation, please dial 800-913-1647 (International 212-231-2900).
Fourth Quarter 2013 Conference/Event Schedule
Home Properties is scheduled to participate in REITWorld®: NAREIT's Annual Convention for All Things REIT® in San Francisco, November 13-15 and in the Barclays Select Series 2013 Conference – Real Estate: The Year Ahead, December 10-11, 2013 in New York City. Presentation materials will be available at www.homeproperties.com in the "Investors" section.
Fourth Quarter 2013 Earnings Release and Conference Call
The Company's fourth quarter 2013 financial results are scheduled to be released after the stock market closes on Thursday, February 6, 2014. A conference call, which will be simultaneously webcast, is scheduled for Friday, February 7, 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 117 communities containing 41,623 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 |
|||||||
| Third Quarter Results: |
Occupancy(a) |
3Q 2013 |
3Q 2013 vs. 3Q 2012 % Growth |
||||
| Average |
|||||||
| Monthly |
Base |
||||||
| Rent/ |
Rental |
Total |
Total |
||||
| 3Q 2013 |
3Q 2012 |
Occ Unit |
Rates |
Revenue |
Expense |
NOI |
|
| Core Properties(b) |
95.0% |
95.5% |
$1,306 |
3.2% |
2.6% |
1.4% |
3.2% |
| Non-Core Properties(c) |
92.7% |
NA |
$1,312 |
NA |
NA |
NA |
NA |
| TOTAL PORTFOLIO |
94.8% |
NA |
$1,306 |
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) |
95.5% |
95.4% |
$1,291 |
3.3% |
3.3% |
1.6% |
4.3% |
| Non-Core Properties(c) |
90.7% |
NA |
$1,304 |
NA |
NA |
NA |
NA |
| TOTAL PORTFOLIO |
95.1% |
NA |
$1,292 |
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 113 properties with 38,784 apartment units owned throughout 2012 and 2013.
(c) Non-Core Properties consist of 5 properties with 3,183 apartment units acquired, developed, or redeveloped subsequent to January 1, 2012, such that full year comparable operating results are not available. |
|||||||
| HOME PROPERTIES, INC. SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data – Unaudited) |
|||||||||
| Three Months Ended |
Nine Months Ended |
||||||||
| September 30 |
September 30 |
||||||||
| 2013 |
2012 |
2013 |
2012 |
||||||
| Rental income |
$ 154,100 |
$ 149,562 |
$ 459,552 |
$ 430,997 |
|||||
| Property other income |
12,506 |
12,171 |
40,325 |
38,216 |
|||||
| Other income |
207 |
32 |
671 |
63 |
|||||
| Total revenues |
166,813 |
161,765 |
500,548 |
469,276 |
|||||
| Operating and maintenance |
58,855 |
57,726 |
180,298 |
172,243 |
|||||
| General and administrative |
6,152 |
8,018 |
22,572 |
27,367 |
|||||
| Interest |
28,161 |
31,874 |
88,048 |
92,766 |
|||||
| Depreciation and amortization |
44,005 |
41,720 |
129,860 |
120,234 |
|||||
| Other expenses |
16 |
15 |
48 |
2,726 |
|||||
| Total expenses |
137,189 |
139,353 |
420,826 |
415,336 |
|||||
| Income from continuing operations |
29,624 |
22,412 |
79,722 |
53,940 |
|||||
| Discontinued operations |
|||||||||
| Income (loss) from discontinued operations |
- |
2,010 |
(377) |
5,972 |
|||||
| Gain on disposition of property |
- |
19,667 |
45,004 |
19,667 |
|||||
| Discontinued operations |
- |
21,667 |
44,627 |
25,639 |
|||||
| Net income |
29,624 |
44,089 |
124,349 |
79,579 |
|||||
| Net income attributable to noncontrolling interest |
(4,586) |
(7,676) |
(20,395) |
(14,051) |
|||||
| Net income attributable to common stockholders |
$ 25,038 |
$ 36,413 |
$ 103,954 |
$ 65,528 |
|||||
| Reconciliation from net income attributable to |
|||||||||
| Net income available to common stockholders |
$ 25,038 |
$ 36,413 |
$ 103,954 |
$ 65,528 |
|||||
| Real property depreciation and amortization |
43,472 |
42,863 |
128,832 |
123,442 |
|||||
| Noncontrolling interest |
4,586 |
7,676 |
20,395 |
14,051 |
|||||
| Gain on disposition of property |
- |
(19,667) |
(45,004) |
(19,667) |
|||||
| FFO - basic and diluted, as defined by NAREIT |
73,096 |
67,285 |
208,177 |
183,354 |
|||||
| Loss from early extinguishment of debt in connection with sale of real estate |
- |
- |
1,416 |
- |
|||||
| FFO - basic and diluted (1) |
$ 73,096 |
$ 67,285 |
$ 209,593 |
$ 183,354 |
|||||
| (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 |
Nine Months Ended |
|||
| September 30 |
September 30 |
|||
| 2013 |
2012 |
2013 |
2012 |
|
| FFO – basic and diluted |
$ 73,096 |
$ 67,285 |
$ 209,593 |
$ 183,354 |
| FFO – basic and diluted |
$ 73,096 |
$ 67,285 |
$ 209,593 |
$ 183,354 |
| Acquisition costs of closed deals included in other expenses |
16 |
15 |
48 |
2,726 |
| Operating FFO (2) |
$ 73,112 |
$ 67,300 |
$ 209,641 |
$ 186,080 |
| FFO – basic and diluted |
$ 73,096 |
$ 67,285 |
$ 209,593 |
$ 183,354 |
| Recurring non-revenue generating capital expenses |
(8,897) |
(9,363) |
(26,830) |
(27,285) |
| AFFO (3) |
$ 64,199 |
$ 57,922 |
$ 182,763 |
$ 156,069 |
| Operating FFO |
$ 73,112 |
$ 67,300 |
$ 209,641 |
$ 186,080 |
| Recurring non-revenue generating capital expenses |
(8,897) |
(9,363) |
(26,830) |
(27,285) |
| Operating AFFO (2) (3) |
$ 64,215 |
$ 57,937 |
$ 182,811 |
$ 158,795 |
| Weighted average shares/units outstanding: |
||||
| Shares – basic |
56,370.1 |
50,255.2 |
53,444.2 |
49,218.7 |
| Shares – diluted |
56,943.8 |
50,934.2 |
54,051.5 |
49,848.4 |
| Shares/units – basic (4) |
66,717.3 |
60,868.0 |
63,834.0 |
59,873.9 |
| Shares/units – diluted (4) |
67,291.0 |
61,547.0 |
64,441.3 |
60,503.6 |
| Per share/unit: |
||||
| Net income – basic |
$0.44 |
$0.72 |
$1.95 |
$1.33 |
| Net income – diluted |
$0.44 |
$0.71 |
$1.92 |
$1.31 |
| FFO – basic |
$1.10 |
$1.11 |
$3.28 |
$3.06 |
| FFO – diluted |
$1.09 |
$1.09 |
$3.25 |
$3.03 |
| Operating FFO (2) |
$1.09 |
$1.09 |
$3.25 |
$3.08 |
| AFFO (3) |
$0.95 |
$0.94 |
$2.84 |
$2.58 |
| Operating AFFO (2) (3) |
$0.95 |
$0.94 |
$2.84 |
$2.62 |
| Common Dividend paid |
$0.70 |
$0.66 |
$2.10 |
$1.98 |
| (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) |
||
| September 30, 2013 |
December 31, 2012 |
|
| Land |
$ 780,156 |
$ 791,604 |
| Construction in progress |
163,534 |
83,241 |
| Buildings, improvements and equipment |
4,599,949 |
4,580,381 |
| 5,543,639 |
5,455,226 |
|
| Accumulated depreciation |
(1,213,528) |
(1,108,840) |
| Real estate, net |
4,330,111 |
4,346,386 |
| Cash and cash equivalents |
11,024 |
21,092 |
| Cash in escrows |
24,929 |
26,971 |
| Accounts receivable |
11,900 |
13,406 |
| Prepaid expenses |
22,973 |
19,504 |
| Deferred charges |
12,750 |
13,429 |
| Other assets |
7,198 |
10,704 |
| Total assets |
$ 4,420,885 |
$ 4,451,492 |
| Mortgage notes payable |
$ 1,879,090 |
$ 2,165,027 |
| Unsecured notes payable |
450,000 |
450,000 |
| Unsecured line of credit |
106,500 |
162,500 |
| Accounts payable |
25,547 |
22,691 |
| Accrued interest payable |
10,754 |
9,974 |
| Accrued expenses and other liabilities |
31,703 |
33,887 |
| Security deposits |
18,531 |
19,146 |
| Total liabilities |
2,522,125 |
2,863,225 |
| Common stockholders' equity |
1,607,585 |
1,320,968 |
| Noncontrolling interest |
291,175 |
267,299 |
| Total equity |
1,898,760 |
1,588,267 |
| Total liabilities and equity |
$ 4,420,885 |
$ 4,451,492 |
| Total shares/units outstanding: |
||
| Common stock |
56,888.3 |
51,508.1 |
| Operating partnership units |
10,345.1 |
10,455.6 |
| 67,233.4 |
61,963.7 |
|
SOURCE Home Properties, Inc.
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