Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
COMMISSION FILE NUMBER: 1-13136
HOME PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MARYLAND
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16-1455126 |
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(State of incorporation)
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(I.R.S. Employer Identification No.) |
850 Clinton Square, Rochester, New York 14604
(Address of principal executive offices)(Zip Code)
Registrants telephone number, including area code: (585) 546-4900
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered |
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Common Stock, $.01 par value
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New York Stock Exchange |
Securities registered pursuant to section 12(g) of the Act: None
Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes þ No o
Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Act. Yes o No þ
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
((§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,
non-accelerated filer or a smaller reporting company. See definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
The aggregate market value of the 36,759,112 shares of common stock held by non-affiliates was
$1,656,733,178 based on the closing sale price of $45.07 per share on the New York Stock Exchange
on June 30, 2010.
As of February 18, 2011, there were 37,977,700 shares of common stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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Document
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Part Into Which Incorporated |
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Proxy Statement for the Annual Meeting of Stockholders to be held on May 3, 2011
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Part III |
HOME PROPERTIES, INC.
TABLE OF CONTENTS
2
PART I
Forward-Looking Statements
This Form 10-K contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Our actual results
could differ materially from those set forth in each forward-looking statement. Certain factors
that might cause such a difference are discussed in this report, including in the section entitled
Forward-Looking Statements on Page 56 of this Form 10-K.
The Company
Home Properties, Inc. (Home Properties or the Company) is a self-administered and self-managed
real estate investment trust (REIT) that owns, operates, acquires, develops and rehabilitates
apartment communities. The Companys properties are regionally focused, primarily in selected
Northeast and Mid-Atlantic markets of the United States. The Company was formed in November 1993
to continue and expand the operations of Home Leasing Corporation (Home Leasing). The Company
completed an initial public offering of 5,408,000 shares of common stock (the IPO) on August 4,
1994.
The Company conducts its business through Home Properties, L.P. (the Operating Partnership), a
New York limited partnership and a management company Home Properties Resident Services, Inc.
(HPRS), which is a Maryland corporation. At December 31, 2010, the Company held 77.1% (74.7% at
December 31, 2009) of the limited partnership units in the Operating Partnership (UPREIT Units).
Home Properties, through its affiliates described above, as of December 31, 2010, owned and
operated 116 communities with 38,861 apartment units (the Owned Properties).
The Owned Properties are concentrated in the following market areas:
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Communities |
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Apartments |
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Market Area |
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Owned |
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Owned |
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Suburban Washington, D.C. |
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25 |
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10,393 |
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Baltimore, MD |
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24 |
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9,440 |
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Suburban New York City |
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29 |
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7,225 |
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Philadelphia, PA |
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19 |
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5,603 |
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Boston, MA |
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9 |
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2,382 |
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Chicago, IL |
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6 |
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2,362 |
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Southeast Florida |
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2 |
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836 |
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Portland, ME |
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2 |
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620 |
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Totals |
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116 |
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38,861 |
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The Companys mission is to maximize long-term shareholder value by acquiring, repositioning,
developing and managing market-rate apartment communities while enhancing the quality of life for
its residents and providing employees with opportunities for growth and accomplishment. Our vision
is to be a prominent owner and manager of market-rate apartment communities, located in selected
high barrier, high growth, East Coast markets. The areas we have targeted for growth are the
suburbs of Baltimore, Boston, New York City, Philadelphia and Washington, D.C. We expect to
maintain or grow portfolios in markets that profitably support our mission as economic conditions
permit.
3
The Company (continued)
The Companys long-term business strategies include:
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aggressively managing and improving its communities to achieve increased net operating
income; |
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acquiring additional apartment communities with attractive returns at prices that
provide a positive spread over the Companys long-term cost of capital; |
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developing new apartment communities on raw land, on land adjacent to existing owned
communities, and where there are density opportunities, to replace existing garden
apartments with mid- or high-rise structures; |
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disposing of properties that have reached their potential, are less efficient to
operate, or are located in markets where growth has slowed to a pace below the markets
targeted for acquisition; and |
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maintaining a strong and flexible capital structure with cost-effective access to the
capital markets. |
Structure
The Company was formed in November 1993 as a Maryland corporation and is the general partner of the
Operating Partnership. On December 31, 2010, it held a 77.1% partnership interest in the Operating
Partnership comprised of: 1) a 1.0% interest as sole general partner; and 2) a 76.1% limited
partner interest through its wholly owned subsidiary, Home Properties I, LLC, which owns 100% of
Home Properties Trust, which is the limited partner. The holders of the remaining 22.9% of the
UPREIT Units are certain individuals and entities who received UPREIT Units as consideration for
their interests in entities owning apartment communities purchased by the Operating Partnership,
including certain officers and Directors of the Company.
The Operating Partnership is a New York limited partnership formed in December 1993. Holders of
UPREIT Units in the Operating Partnership may redeem an UPREIT Unit for one share of the Companys
common stock or cash equal to the fair market value at the time of the redemption, at the option of
the Company. Management expects that it will continue to utilize UPREIT Units as a form of
consideration for a portion of its acquisition properties when it is economical to do so.
HPRS is wholly owned by the Operating Partnership, and as a result, the accompanying consolidated
financial statements include the accounts of both companies. HPRS is a taxable REIT subsidiary
under the Tax Relief Extension Act of 1999.
In September 1997, Home Properties Trust (QRS) was formed as a Maryland real estate trust and as
a qualified REIT subsidiary. The QRS is wholly owned by Home Properties I, LLC which is owned 100%
by the Company. The QRS is a limited partner of the Operating Partnership and holds all of the
Companys interest in the Operating Partnership, except for the 1% held directly by the Company as
sole general partner.
The Company currently has approximately 1,100 employees and its executive offices are located at
850 Clinton Square, Rochester, New York 14604. Its telephone number is (585) 546-4900.
4
Operating Strategies
The Company will continue to focus on enhancing long-term investment returns by:
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developing new apartments and acquiring apartment communities and repositioning those
apartment communities for long-term growth at prices that provide a positive spread over
the Companys long-term cost of capital; |
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recycling assets by disposing of properties in low growth markets and those that have
reached their potential or are less efficient to operate due to size or remote location; |
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balancing its decentralized property management philosophy with the efficiencies of
centralized support functions and accountability including rent optimization and volume
purchasing; |
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enhancing the quality of living for the Companys residents by improving the service and
physical amenities available at each community every year; |
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adopting new technology so that the time and cost spent on administration can be
minimized while the time spent attracting and serving residents can be maximized; |
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continuing to utilize its written Pledge of customer satisfaction that is the
foundation on which the Company has built its brand recognition; and |
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focusing on reducing expenses while constantly improving the level of service to
residents. |
The Company has a strategy of acquiring and repositioning mature C to B- apartment properties.
Since its 1994 IPO, the Company has acquired and repositioned 206 communities, containing more than
57,000 units. The rehabilitation and revitalization process targets a minimum 10% return on
repositioning investments. It is expected that capital expenditures on repositioning investments
will increase from 2010 levels, and return to the Companys historic levels as potential residents
may prefer an upgraded apartment at a higher monthly rent in this recovering economic environment.
Extensive experience and expertise in repositioning has helped the Company build significant
internal design and construction management skills. The complete repositioning of a community can
take place over a five to seven year period. The comprehensive process typically begins with
improvements in landscaping, signage and common areas. Exterior improvements increase curb appeal
and marketability of the property. Deferred maintenance is corrected, which can include new HVAC
systems, roofs, balconies and windows. At many properties, community centers and swimming pools
are added or upgraded. Apartment interiors are renovated when residents move out, with the most
significant investments made in upgrading kitchens and baths. Complete remodeling of dated
kitchens and bathrooms typically includes new appliances, flooring, counters, cabinets, lighting,
tile, fixtures, sinks, bathtubs and toilets. It may include the removal of kitchen walls to open
up the living area. Where feasible, in-unit washers and dryers are added. Repositioning efforts
upgrade properties that were C to B- level when acquired to the B to B+ level, which, over time,
significantly increases the propertys rental income, net operating income and market value.
5
Acquisition, Development and Sale Strategies
The Companys strategy is to grow primarily through acquisitions in the suburbs of major
metropolitan markets that have significant barriers to new construction, limited new apartment
supply, easy access to the Companys headquarters and enough apartments available for acquisition
to achieve a critical mass. Targeted markets also possess other characteristics, including
acquisition opportunities below replacement costs, a mature housing stock, high average
single-family home prices, a favorable supply/demand relationship, stable or moderate job growth,
reduced vulnerability to economic downturns and large prime renter populations including
immigrants, young adults in their twenties and early thirties, and seniors over age 55. The
Company currently expects that its growth will be focused primarily within suburban sub-markets of
selected metropolitan areas within the Northeast and Mid-Atlantic regions of the United States
where it has already established a presence. The largest metropolitan areas the Company will focus
on include Baltimore, Boston, New York City, Philadelphia and Washington, D.C. The Company may
expand into new markets that possess the characteristics described above although it has no current
plans to do so. Continued geographic specialization is expected to have a greater impact on
operating efficiencies versus widespread accumulation of properties. The Company will continue to
pursue the acquisition of individual properties as well as multi-property portfolios. It may also
consider strategic investments in other apartment companies, as well as strategic alliances, such
as joint ventures.
During 2010, the Company acquired nine communities with a total of 2,614 units for an aggregate
consideration of $339 million, or an average of approximately $129,734 per apartment unit. The
weighted average expected first year capitalization rate for the acquired communities was 6.1%.
Capitalization rate (cap rate) is defined as the rate of interest used to convert the first year
expected net operating income (NOI) less a 3.0% management fee into a single present value. NOI
is defined by the Company as rental income and property other income less operating and maintenance
expenses. Five acquisitions were in suburbs of Baltimore; two were in suburban Washington, D.C.;
and one each in the Chicago and Long Island regions.
The Company believes that it will have the opportunity to make acquisitions during 2011 and has
projected $200 million to $350 million in purchases for the year.
The Company has the ability to develop new market-rate communities. It plans to engage in
development activity only in markets in which it is currently doing business in order to add net
asset value and supplement future earnings and growth. It expects to develop new apartment
communities on raw land and on land adjacent to existing Owned Properties, as well as to increase
the density of units at some communities currently owned. The Company plans two or more
construction starts in the year, with approximately $60 million in spending.
During 2010, the Company did not sell any communities. The Company has not specifically identified
additional communities for sale in 2011 but will continue to evaluate the sale of its communities.
The Company expects to dispose of at least $50 million of properties for the year. Typically, a
property will be targeted for sale if management is of the opinion that it has reached its
potential or if it is located in a slower growth market or is less efficient to operate.
6
Financing and Capital Strategies
The Company intends to continue to adhere to the following financing policies:
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maintaining a ratio of debt-to-total market capitalization (total debt of the Company as
a percentage of the value (using the Companys internally calculated Net Asset Value (NAV
per share) of outstanding diluted common stock, the UPREIT Units, plus total debt) of
approximately 55% or less; |
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utilizing primarily fixed rate debt; |
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varying debt maturities to avoid significant exposure to interest rate changes upon
refinancing; and |
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maintaining a line of credit so that it can respond quickly to acquisition
opportunities. |
On December 31, 2010, the Companys debt was approximately $2.6 billion and the debt-to-total
market capitalization ratio was 48.9% based on the year-end closing price of the Companys common
stock of $55.49. The weighted average interest rate on the Companys mortgage debt as of December
31, 2010 was 5.15% and the weighted average maturity was approximately six and one-half years.
Debt maturities are staggered, ranging from March 2011, through June 2034. As of December 31,
2010, the Company had an unsecured line of credit facility from M&T Bank (acting as lead bank) of
$175 million with $56.5 million outstanding on the line of credit. This line of credit was amended
and extended in February 2011 as described below.
In response to improvements in the credit market, in 2010 and the first quarter of 2011, the
Company pursued certain initiatives as follows:
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During 2010, the Company increased the level of the value of unencumbered properties in
relationship to the total property portfolio from 20% to 22%. This higher level adds
flexibility, allowing the Company to place secured financing on unencumbered assets if
desired or increase unsecured borrowing. |
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The Company benefits from its multifamily focus as the Government Sponsored Enterprises
(GSEs) Fannie Mae and Freddie Mac are still very active lending to apartment owners. The
Company refinanced debt maturing in 2011 early, reducing the level of secured loans
maturing in 2011 from $299 million to $45 million. In total, $427 million of debt was
either refinanced or paid off in 2010. The weighted average rate of interest on the old
debt was 5.99%. These loans were replaced with $628 million of new debt at an average
weighted interest rate of 4.68%. |
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The Company completed an At-The-Market (ATM) equity offering program through which it
sold 3.2 million shares of common stock, generating gross proceeds of $150 million. |
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The Company initiated a second ATM equity offering program through which it may sell up
to 3.6 million shares of common stock. |
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On February 10, 2011, the Company renegotiated and extended for one additional year the
$175 million line of credit facility which now matures August 31, 2012. Pricing was less
expensive, and moved from interest rates ranging from 2.50% to 3.25% over the one-month
LIBOR and a LIBOR floor of 1.50% to interest rates ranging from 1.90% to 2.63% over the
one-month LIBOR without a LIBOR floor. In addition, as a result of the renegotiation, the
capitalization rate used for valuing assets was reduced as was the unused facility fee. |
For 2011, plans include increasing the level of the value of unencumbered properties to over 22% of
the portfolio, maintaining the debt-to-total market capitalization ratio at a level equal to or
slightly more than the level at December 31, 2010 and issuing the shares authorized under the ATM
program at levels above NAV.
The Company anticipates that it will have to finance some of the $140 million senior convertible
debt that has a put option in November 2011. The Company will finance any puts with proceeds from
the line of credit, additional secured or unsecured financings and/or proceeds from the sale of
stock under the ATM program.
7
Financing and Capital Strategies (continued)
Management expects to continue to fund a portion of its continued growth by taking advantage of its
UPREIT structure and using UPREIT Units as currency in acquisition transactions. During 2010, the
Company issued $4.8 million worth of UPREIT Units as partial consideration for one acquired
property. During 2008 and 2009, no UPREIT Units were used as consideration for acquired
properties. It is difficult to predict the level of demand from sellers for this type of
transaction. In periods when the Companys stock price is trading at a discount to estimated NAV,
it is unlikely that management would engage in UPREIT transactions.
In 1997, the Companys Board of Directors (the Board) approved a stock repurchase program under
which the Company can repurchase shares of its outstanding common stock and UPREIT Units. Shares
or units may be repurchased through the open market or in privately-negotiated transactions. The
Companys strategy is to opportunistically repurchase shares at a discount to its underlying NAV,
thereby continuing to build value for long-term shareholders. At December 31, 2010, there was
approval remaining to purchase 2,291,160 shares. The 2011 guidance assumes no additional share
repurchases.
During periods when the Companys shares are trading at a premium to its estimate of NAV, it is
unlikely that management would engage in share repurchases. In such circumstances, it is more
likely that management would pursue issuing equity in order to raise capital to be used to pay down
existing indebtedness. This should be neutral to both earnings per share and NAV, increase the
level of unencumbered assets and better position the Company to fund future acquisition and
development pipeline needs.
Competition
The Companys properties are primarily located in developed areas where there are other multifamily
properties which directly compete for residents. There is also competition from single family
homes and condominiums for sale or rent. The competitive environment may have a detrimental effect
on the Companys ability to lease apartments at existing and at newly developed properties, as well
as on rental rates.
In addition, the Company competes with other real estate investors in seeking property for
acquisition and development. These competitors include pension and investment funds, insurance
companies, private investors, local owners and developers, and other apartment REITs. This
competition could increase prices for properties that the Company would like to purchase and impact
the Companys ability to achieve its long-term growth targets.
The Company believes, however, that it is well-positioned to compete effectively for both residents
and properties as a result of its:
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focus on service and resident satisfaction, as evidenced by both The Home Properties
Pledge, which provides a money-back service guarantee and lease flexibility, and by its
resident turnover ratio which is consistently below the industry average; |
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ability to issue UPREIT Units in purchase transactions, which provides sellers with the
opportunity to defer taxes; and |
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unique repositioning strategy that differentiates the Company from its competitors. |
8
Market Environment
The markets in which Home Properties operates could be characterized long term as stable, with
moderate levels of job growth. During 2010 and expected to continue through 2011, many regions of
the United States are experiencing varying degrees of economic recovery resulting in improving job
growth for both the country as a whole and the Companys markets.
For 2008, job losses became the norm with the start of the recession throughout the country. The
Companys markets still compared favorably for 2009 with job losses of 2.1% compared to 3.6% for
the country. The Companys markets experienced similar results as the country as a whole in 2010
with job growth of 0.8%. In addition, the unemployment rate for the Companys markets of 7.4%
continues to compare favorably to the country average of 9.1%. The Northern VA/DC market stands
out for the Company as it experienced job growth of 1.9% for 2010, with one of the lowest
unemployment rates of 5.7% at December 31, 2010. This market represents 26.7% of the total
apartment unit count and produces 30.3% of the property NOI. These two favorable comparisons help
explain why the Companys markets helped the Company outperform all of its public company
multifamily peers for the second year in a row on a measurement of same store NOI in both 2009 and
2010. The information on the Market Demographics and Multifamily Supply and Demand tables on
Pages 10 and 11 were compiled by the Company from the sources indicated on the tables. The methods
used include estimates and, while the Company feels that the estimates are reasonable, there can be
no assurance that the estimates are accurate. There can also be no assurance that the historical
information included on the tables will be consistent with future trends.
New construction in the Companys markets is low relative to the existing multifamily housing stock
and compared to other regions of the country. In 2010, Home Properties markets represented 28.0%
of the total estimated existing U.S. multifamily housing stock, but only 18.2% of the countrys
estimated new supply of multifamily housing units.
An analysis of multifamily supply compared to multifamily demand can indicate whether a particular
market is tightening, softening or in equilibrium. The fourth to last column in the Multifamily
Supply and Demand table on Page 11 reflects current estimated net new multifamily supply as a
percentage of new multifamily demand for the Companys markets and the United States. For both the
Companys markets and the country as a whole, net new supply is very low compared to expected new
demand. For the country, net new supply represents only 9.7% of net new demand, creating an
environment where both pricing and/or occupancy could improve. The relationship in the Companys
markets is even better, where net new supply after obsolescence is expected to be negative compared
to an increasing demand for rental housing.
9
Market Demographics
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2010 |
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Multifamily |
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2010 |
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Units as a % |
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2010 |
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% of |
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2010 |
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2010 |
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2010 vs. 2009 |
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December |
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Median |
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of Total |
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Multifamily |
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Owned |
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Number of |
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Job |
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Job Growth |
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Unemployment |
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Home |
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Housing Units |
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Housing |
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MSA Market Area |
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Units |
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Households |
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Growth |
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% Change |
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Rate |
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Value |
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Stock (4) |
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Stock (5) |
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Northern VA/DC |
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26.7 |
% |
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2,044,883 |
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57,500 |
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1.9 |
% |
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5.7 |
% |
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$ |
361,220 |
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28.6 |
% |
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621,357 |
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Baltimore, MD |
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24.3 |
% |
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1,026,868 |
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14,500 |
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1.1 |
% |
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7.5 |
% |
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262,634 |
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19.6 |
% |
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216,844 |
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Suburban New York City (1) |
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18.6 |
% |
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6,904,091 |
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(2,300 |
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(0.0 |
%) |
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8.2 |
% |
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393,394 |
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37.4 |
% |
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2,778,771 |
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Eastern PA (2) |
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14.4 |
% |
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2,561,956 |
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3,600 |
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0.1 |
% |
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8.6 |
% |
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206,245 |
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14.7 |
% |
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403,809 |
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Boston, MA |
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6.1 |
% |
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1,746,622 |
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32,600 |
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1.4 |
% |
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7.1 |
% |
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342,416 |
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22.7 |
% |
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417,879 |
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Chicago, IL |
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6.1 |
% |
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3,467,425 |
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(40,500 |
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(1.0 |
%) |
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8.7 |
% |
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223,716 |
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24.1 |
% |
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903,271 |
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Southeast Florida (3) |
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2.2 |
% |
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2,058,462 |
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4,800 |
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0.2 |
% |
|
|
11.8 |
% |
|
|
211,781 |
|
|
|
38.6 |
% |
|
|
924,075 |
|
Portland, ME |
|
|
1.6 |
% |
|
|
211,692 |
|
|
|
(500 |
) |
|
|
(0.3 |
%) |
|
|
5.9 |
% |
|
|
212,039 |
|
|
|
11.3 |
% |
|
|
28,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Properties Markets |
|
|
100.0 |
% |
|
|
20,021,999 |
|
|
|
69,700 |
|
|
|
0.8 |
% |
|
|
7.4 |
% |
|
$ |
305,804 |
|
|
|
29.0 |
% |
|
|
6,294,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
|
|
|
|
116,136,617 |
|
|
|
1,066,000 |
|
|
|
0.8 |
% |
|
|
9.1 |
% |
|
$ |
170,676 |
|
|
|
17.3 |
% |
|
|
22,441,452 |
|
|
|
|
(1) |
|
Suburban New York City is defined for this report as New York-Northern New
Jersey-Long Island, NY-NJ-PA MSA. |
|
(2) |
|
Eastern Pennsylvania is defined for this report as Philadelphia-Camden-Wilmington,
PA-NJ-DE-MD MSA & Allentown-Bethlehem-Easton PA-NJ MSA. |
|
(3) |
|
Southeast Florida is defined for this report as Miami-Fort Lauderdale-Miami Beach,
FL MSA. |
|
(4) |
|
Based on Claritas 2010 estimates calculated from the 2000 U.S. Census figures. |
|
(5) |
|
2010 Multifamily Housing Stock is from Claritas estimates of five or more units
based on the 2000 U.S. Census. |
Sources: Bureau of Labor Statistics (BLS); Claritas, Inc.; US Census Bureau Manufacturing &
Construction Div.
Data collected is data available as of February 2, 2011 and in some cases may be preliminary.
BLS is the principal fact-finding agency for the Federal Government in the broad field of labor
economics and statistics.
Claritas, Inc. is a leading provider of precision marketing solutions and related
products/services.
U.S. Census Bureaus parent Federal agency is the U.S. Dept. of Commerce, which promotes American
business and trade.
10
Multifamily Supply and Demand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
|
Estimated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
|
Net New |
|
|
Net New |
|
|
|
|
|
|
|
|
|
|
Estimated |
|
|
|
|
|
|
Estimated |
|
|
2010 |
|
|
Multifamily |
|
|
Multifamily |
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
Estimated |
|
|
2010 |
|
|
New |
|
|
Supply as a |
|
|
Supply as a |
|
|
|
|
|
Expected |
|
|
|
New |
|
|
2010 |
|
|
Net New |
|
|
Multifamily |
|
|
% of New |
|
|
% of |
|
|
Expected |
|
|
Excess |
|
|
|
Supply of |
|
|
Multifamily |
|
|
Multifamily |
|
|
Household |
|
|
Multifamily |
|
|
Multifamily |
|
|
Excess |
|
|
Revenue |
|
MSA Market Area |
|
Multifamily (6) |
|
|
Obsolescence (7) |
|
|
Supply (8) |
|
|
Demand (9) |
|
|
Demand |
|
|
Stock |
|
|
Demand (10) |
|
|
Growth (11) |
|
Northern VA/DC |
|
|
3,268 |
|
|
|
3,107 |
|
|
|
161 |
|
|
|
10,969 |
|
|
|
1.5 |
% |
|
|
0.0 |
% |
|
|
10,808 |
|
|
|
1.7 |
% |
Baltimore, MD |
|
|
1,951 |
|
|
|
1,084 |
|
|
|
867 |
|
|
|
1,896 |
|
|
|
45.7 |
% |
|
|
0.4 |
% |
|
|
1,029 |
|
|
|
0.5 |
% |
Suburban New York City (1) |
|
|
8,769 |
|
|
|
13,894 |
|
|
|
(5,125 |
) |
|
|
(574 |
) |
|
|
892.9 |
% |
|
|
(0.2 |
%) |
|
|
4,551 |
|
|
|
0.2 |
% |
Eastern PA (2) |
|
|
1,394 |
|
|
|
2,019 |
|
|
|
(625 |
) |
|
|
353 |
|
|
|
(177.1 |
%) |
|
|
(0.2 |
%) |
|
|
978 |
|
|
|
0.2 |
% |
Boston, MA |
|
|
2,254 |
|
|
|
2,089 |
|
|
|
165 |
|
|
|
4,936 |
|
|
|
3.3 |
% |
|
|
0.0 |
% |
|
|
4,771 |
|
|
|
1.1 |
% |
Chicago, IL |
|
|
2,566 |
|
|
|
4,516 |
|
|
|
(1,950 |
) |
|
|
(6,510 |
) |
|
|
30.0 |
% |
|
|
(0.2 |
%) |
|
|
(4,560 |
) |
|
|
(0.5 |
%) |
Southeast Florida (3) |
|
|
2,399 |
|
|
|
4,620 |
|
|
|
(2,221 |
) |
|
|
1,236 |
|
|
|
(179.7 |
%) |
|
|
(0.2 |
%) |
|
|
3,457 |
|
|
|
0.4 |
% |
Portland, ME |
|
|
10 |
|
|
|
143 |
|
|
|
(133 |
) |
|
|
(38 |
) |
|
|
350.0 |
% |
|
|
(0.5 |
%) |
|
|
95 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Properties Markets |
|
|
22,611 |
|
|
|
31,472 |
|
|
|
(8,861 |
) |
|
|
12,268 |
|
|
|
(72.2 |
%) |
|
|
(0.1 |
%) |
|
|
21,129 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
124,097 |
|
|
|
112,207 |
|
|
|
11,890 |
|
|
|
123,007 |
|
|
|
9.7 |
% |
|
|
0.1 |
% |
|
|
111,117 |
|
|
|
0.5 |
% |
|
|
|
(1)-(5) |
|
see footnotes prior page |
|
(6) |
|
Estimated 2010 New Supply of Multifamily = Multifamily permits (2010 figures U.S.
Census Bureau, Mfg. & Constr. Div., 5+ permits only) adjusted by the average % of permits
resulting in a construction start (estimated at 95%). |
|
(7) |
|
Estimated 2010 Multifamily Obsolescence = Estimated 2010 Multifamily Housing Stock
multiplied by the estimated % of obsolescence (0.5%). |
|
(8) |
|
Estimated 2010 Net New Multifamily Supply = Estimated
2010 New Supply of Multifamily
Estimated 2010 Multifamily Obsolescence. |
|
(9) |
|
Estimated 2010 New Multifamily Household
Demand = 2010 job growth (Nonfarm, not
seasonally adjusted payroll employment figures) (12/31/2009-12/31/2010) multiplied by the
expected % of new household formations resulting from new jobs (66.7%) and the % of
multifamily households in each market (based on Claritas estimates). |
|
(10) |
|
Expected Excess Demand = Estimated
2010 New Multifamily Household Demand
Estimated 2010 Net New Multifamily Supply. |
|
(11) |
|
Expected Excess Revenue Growth = Expected Excess Demand divided by 2010 Multifamily
Housing Stock. This percentage is expected to reflect the relative impact that changes in the
supply and demand for multifamily housing units will have on occupancy rates and/or rental
rates in each market, beyond the impact caused by broader economic factors, such as inflation
and interest rates. |
11
Environmental Matters
As a current or prior owner, operator and developer of real estate, the Company is subject to
various federal, state and local environmental laws, regulations and ordinances and also could be
liable to third parties as a result of environmental contamination or noncompliance at its
properties. See the discussion under the caption, We may incur costs due to environmental
contamination or non-compliance in Item 1A, Risk Factors, for information concerning the potential
effect of environmental regulations on the Companys operations.
Available Information
The Companys annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and other reports required by Sections 13(a) and 15(d) of the Securities Exchange Act of 1934,
as amended (collectively, the Reports), are electronically filed with the Securities and Exchange
Commission (SEC). The public may read and copy any materials the Company files with the SEC at
the SECs Public Reference Room at 100 F Street NE, Washington, DC 20549-2521. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC
maintains a website at www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC, which are available
without charge.
Company Website
The Company maintains an Internet website at www.homeproperties.com. The Company provides
free-of-charge access to its Reports filed with the SEC, and any amendments thereto, through this
website. These Reports are available as soon as reasonably practicable after the Reports are filed
electronically with the SEC and are found under Investors/SEC Filings. In addition, paper copies
of the Reports filed with the SEC may be obtained at no charge by contacting the Corporate
Secretary, Home Properties, Inc., 850 Clinton Square, Rochester, New York 14604.
Current copies of the Companys Code of Business Conduct and Ethics, Code of Ethics for Senior
Financial Officers, Corporate Governance Guidelines and Charters for the Audit, Compensation,
Corporate Governance/Nominating and Real Estate Investment Committees of the Board are also
available on the Companys website under the heading Investors/Corporate Overview/Governance
Documents Highlights. Copies of these documents are also available at no charge upon request
addressed to the Corporate Secretary at Home Properties, Inc., 850 Clinton Square, Rochester, New
York 14604.
The reference to our website does not incorporate by reference the information contained in the
website and such information should not be considered a part of this report.
12
As used in this section, references to we or us or our refer to the Company, the Operating
Partnership, and HPRS, taken as a whole.
Our business is subject to uncertainties and risks. Please carefully consider the risk factors
described below, which apply to Home Properties, the Operating Partnership, and HPRS, in addition
to other risks and factors set forth elsewhere in this Form 10-K. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may also impair our
business or prospects. The risk factors we describe contain or refer to certain forward-looking
statements. You should review the explanation of the limitations of forward-looking statements
contained in the section entitled Forward-Looking Statements on Page 56 of this Form 10-K.
Real Estate Investment Risks
We are subject to risks that are part of owning residential real estate.
Real property investments are subject to varying degrees of risk. If our communities do not
generate revenues sufficient to meet operating expenses, debt service and capital expenditures, our
cash flow and ability to make distributions to our stockholders will be adversely affected. A
multifamily apartment communitys revenues and value may be adversely affected by general economic
conditions (including unemployment); local economic conditions; local real estate considerations
(such as oversupply of or reduced demand for apartments); the perception by prospective residents
of the convenience and attractiveness of the communities or neighborhoods in which they are located
and the quality of local schools and other amenities; and increased operating costs (including real
estate taxes and utilities). Certain significant fixed expenses are generally not reduced when
circumstances cause a reduction in income from a community.
We depend on rental income for cash flow to pay expenses and make distributions.
We are dependent on rental income from our multifamily properties to pay operating expenses, debt
service and capital expenditures, and in order to generate cash to enable us to make distributions
to our stockholders. If we are unable to attract and retain residents or if our residents are
unable, due to an adverse change in the economic condition of the region or otherwise, to pay their
rental obligations, our ability to make expected distributions will be adversely affected. In
addition, the weather and other factors outside of our control can result in an increase in the
operating expenses for which we are responsible.
Attractive acquisitions may not be available and acquisitions we may be able to make may fail to
meet expectations.
We plan to continue to selectively acquire apartment communities that meet our investment criteria.
We expect that other real estate investors, including insurance companies, pension funds, other
REITs and other well-capitalized investors will compete with us to acquire existing properties and
to develop new properties. This competition could increase prices for properties of the type we
would likely pursue and adversely affect our growth and profitability. If we are able to make
acquisitions, there are risks that those acquisitions will fail to meet our expectations. Our
estimates of future income, expenses and the costs of improvements or redevelopment that are
necessary to allow us to operate an acquired property as originally intended may prove to be
inaccurate.
Real estate investments are relatively illiquid, and we may not be able to respond to changing
conditions quickly.
Real estate investments are relatively illiquid and, therefore, we have limited ability to adjust
our portfolio quickly in response to changes in economic or other conditions. In addition, the
prohibition in the Internal Revenue Code (the Code) on REITs holding property for sale and
related regulations may affect our ability to sell properties without adversely affecting
distributions to stockholders. A number of our properties were acquired using UPREIT Units and
nineteen of those properties are subject to certain agreements which may restrict our ability to
sell such properties in transactions that would create current taxable income to the former owners.
13
Real Estate Investment Risks (continued)
Competition could limit our ability to lease apartments or increase or maintain rents.
Our apartment communities compete with other housing alternatives to attract residents, including
other rental apartments, condominiums and single-family homes that are available for rent, as well
as new and existing condominiums and single-family homes for sale. Competitive residential housing
in a particular area could adversely affect our ability to lease apartment units and to increase or
maintain rental rates. The recent challenges in the credit and housing markets have increased
housing inventory that may compete with our properties.
Repositioning and development risks could affect our profitability.
A key component of our strategy is to acquire properties and to reposition them for long-term
growth. In addition, we have developed and are in the process of developing new apartment
communities. We plan to continue to selectively expand our development activities. Development
projects generally require various governmental and other approvals, which have no assurance of
being received. Our repositioning and development activities generally entail certain risks,
including the following:
|
|
funds may be expended and managements time devoted to projects that may not be completed
due to a variety of factors, including without limitation, the inability to obtain necessary
zoning or other approvals; |
|
|
construction costs of a project may exceed original estimates, possibly making the project
economically unfeasible or the economic return on a repositioned property less than
anticipated; |
|
|
projects may be delayed due to delays in obtaining necessary zoning and other approvals,
adverse weather conditions, labor shortages, or other unforeseen complications; |
|
|
occupancy rates and rents at a completed development project or at a repositioned property
may be less than anticipated; and |
|
|
the operating expenses at a completed development may be higher than anticipated. |
These risks may reduce the funds available for distribution to our stockholders. Further, the
repositioning and development of properties is also subject to the general risks associated with
real estate investments.
Short-term leases expose us to the effects of declining market conditions.
Virtually all of the leases for our properties are short-term leases (generally, one year or less).
Typically, our residents can leave after the end of a one-year lease term. As a result, our
rental revenues are impacted by declines in market conditions more quickly than if our leases were
for longer terms.
A significant uninsured property or liability loss could adversely affect us in a material way.
The Company carries comprehensive liability, fire, extended and rental loss insurance for each of
our properties. There are however certain types of extraordinary losses, such as losses for
certain natural catastrophes, for which the Company may not have insurance coverage. If an
uninsured loss occurred, we could lose our investment in and cash flow from, the affected property,
and could be required to repay any indebtedness secured by that property and related taxes and
other charges.
14
Real Estate Investment Risks (continued)
Insurance costs and policy deductibles expose us to unpredictable expenses which may be material.
The Companys general liability, property and workers compensation policies provide for
deductibles and self-insured retention amounts. These deductibles and self-insured retention
amounts expose the Company to potential uninsured losses. Management believes that this exposure
is justified by savings in insurance premium amounts and, in some cases, was necessary in order for
the Company to secure coverage. Depending on the level of claims experienced, insurance coverage
may become difficult to obtain at the current premium and expense levels.
Changes in applicable laws, or noncompliance with applicable laws, could adversely affect our
operations or expose us to liability.
We must operate our properties in compliance with numerous federal, state and local laws and
regulations, including landlord tenant laws and other laws generally applicable to business
operations. Noncompliance with laws could expose us to liability.
Compliance with changes in: (i) laws increasing the potential liability for environmental
conditions existing on properties or the restrictions on discharges or other conditions; (ii) rent
control or rent stabilization laws; or (iii) other governmental rules and regulations or
enforcement policies affecting the use and operation of our communities, including changes to
building codes and fire and life-safety codes, may result in lower revenue growth or significant
unanticipated expenditures.
We may incur costs and increased expenses to repair property damage resulting from inclement
weather.
In every market except Florida, we are exposed to risks associated with inclement winter weather,
including increased costs for the removal of snow and ice. In addition, in Southeast Florida, we
have exposure to severe storms which could also increase the need for maintenance and repair of our
communities in that region.
We may incur costs due to environmental contamination or non-compliance.
Under various federal, state and local environmental laws, regulations and ordinances, we may be
required, regardless of knowledge or responsibility, to investigate and remediate the effects of
hazardous or toxic substances at our properties and may be held liable under these laws or common
law to a governmental entity or to third parties for property, personal injury or natural resources
damages and for investigation and remediation costs incurred as a result of the contamination.
These damages and costs may be substantial. The presence of such substances, or the failure to
properly remediate the contamination, may adversely affect our ability to borrow against, sell or
rent the affected property.
The development, construction and operation of our communities are subject to regulations and
permitting under various federal, state and local laws, regulations and ordinances, which regulate
matters including wetlands protection, storm water runoff and wastewater discharge. Noncompliance
with such laws and regulations may subject us to fines and penalties. We do not currently
anticipate that we will incur any material liabilities as a result of noncompliance with these
laws.
Certain federal, state and local laws, regulations and ordinances govern the removal, encapsulation
or disturbance of asbestos containing materials (ACMs) when such materials are in poor condition
or in the event of renovation or demolition of a building. These laws and the common law may
impose liability for release of ACMs and may allow third parties to seek recovery from owners or
operators of real properties for personal injury associated with exposure to ACMs. ACMs are
present at only several of our communities. We implement an operations and maintenance program at
each of the communities at which ACMs are detected. We do not currently anticipate that we will
incur any material liabilities as a result of the presence of ACMs at our communities.
15
Real Estate Investment Risks (continued)
We are aware that some of our communities have or may have lead paint and have implemented an
operations and maintenance program at each of those communities to contain, remove or test for lead
paint to limit the exposure of our residents. We do not currently anticipate that we will incur
any material liabilities as a result of the presence of lead paint at our communities.
All of the Owned Properties and all of the communities that we are currently developing have been
subjected to at least a Phase I or similar environmental assessment, which generally does not
involve invasive techniques such as soil or ground water sampling. These assessments, together
with subsurface assessments conducted on some of our properties, have not revealed, and we are not
otherwise aware of, any environmental conditions that we believe would have a material adverse
effect on our business, assets, financial condition or results of operation. There is no assurance
that Phase I assessments would reveal all environmental liabilities. In addition, environmental
conditions not known to the Company may exist now or in the future which could result in liability
to the Company for remediation or fines, either under existing laws and regulations or future
changes to such requirements.
Mold growth may occur when excessive moisture accumulates in buildings or on building materials,
particularly if the moisture problem remains undiscovered or is not addressed over a period of
time. Although the occurrence of mold at multifamily and other structures, and the need to
remediate such mold, is not a new phenomenon, there has been increased awareness in recent years
that certain molds may in some instances lead to adverse health effects, including allergic or
other reactions. There have been only limited cases of mold identified to us. We do not currently
anticipate that we will incur any material liabilities relating to mold.
Additionally, we occasionally have been involved in managing, leasing and operating various
properties for third parties. Consequently, we may be considered to have been an operator of such
properties and, therefore, potentially liable for removal or remediation costs or other potential
costs which could relate to hazardous or toxic substances. We are not aware of any material
environmental liabilities with respect to properties managed by us for such third parties.
We may incur increased energy and other costs resulting from the climate change regulations.
The current concerns about climate change have resulted in various treaties, laws and regulations
which are intended to limit carbon emissions. The Company believes these laws being enacted or
proposed may cause energy and waste removal costs at our properties to increase, but we do not
expect the direct impact of these increases to be material to our results of operations. Increased
costs relating to energy either would be the responsibility of our residents directly or in large
part may be passed through by us to our residents through the utility recovery programs. We may be
able to pass increased waste removal costs on to our residents in the form of increased rental
rates. If this is not possible, it is still not expected that these additional costs would affect
the Companys financial performance in any material way.
Financing and compliance requirements could limit our income and the ability to raise rents.
As a requirement relating to some of our financing, or, in some instances, relating to zoning or
other municipal approvals, we have committed to make some of the apartments in a community
available to households whose income does not exceed certain thresholds and/or to limit rent
increases. As of December 31, 2010, approximately 10% of our apartment units were under some form
of such limitations. These commitments typically expire after a period of time, and may limit our
ability to raise rents aggressively and, in consequence, can also limit increases in the value of
the communities subject to these restrictions.
16
Real Estate Financing Risks
We are subject to general risks related to debt.
We are subject to the customary risks associated with debt financing. For example, if a property
is mortgaged to secure payment of indebtedness and we are unable to meet its debt service
obligations, the property could be foreclosed upon. This could adversely affect our cash flow and,
consequently, the amount available for distributions to stockholders.
We may not be able to obtain refinancing at favorable rates.
Because a significant amount of our financing is not fully self-amortizing, we anticipate that only
a portion of the principal of our indebtedness will be repaid prior to maturity. So, we will need
to refinance debt. Accordingly, there is a risk that we will not be successful in refinancing
existing indebtedness or that the terms of such refinancing will not be as favorable as the terms
of the existing indebtedness. We aim to stagger our debt maturities with the goal of minimizing
the amount of debt which must be refinanced in any year.
As of December 31, 2010, we had approximately $2.4 billion of mortgage debt, a significant portion
of which is subject to balloon payments. We do not expect to have cash flows from operations to
make all of these balloon payments. The mortgage debt matures as follows:
|
|
|
|
|
2011 |
|
$ |
45 million |
|
2012 |
|
|
125 million |
|
2013 |
|
|
193 million |
|
2014 |
|
|
103 million |
|
2015 |
|
|
264 million |
|
Thereafter |
|
|
1,694 million |
|
Financing may not be available and issuing equity could dilute our stockholders interests.
Our ability to execute our business strategy depends on our access to an appropriate blend of debt
financing, including unsecured lines of credit and other forms of secured and unsecured debt, and
equity financing, including common and preferred equity. Debt or equity financing may not be
available in sufficient amounts, or on favorable terms or at all. If we issue additional equity
securities to finance developments and acquisitions instead of incurring debt, the interests of our
existing stockholders could be diluted.
Potential reduction or elimination of the role that Fannie Mae and Freddie Mac play in the
multifamily financing sector may negatively impact the multifamily sector and our ability to obtain
financing.
We have benefited from our ability to borrow from Fannie Mae and Freddie Mac (the GSEs). The
United States Treasury and the Department of Housing and Urban Development recently issued a report
calling for the winding down of the role that the GSEs play in the mortgage market. The report
does not identify a specific proposal for dealing with the GSEs multifamily programs. We expect
that the options laid out in the report for winding down the GSEs will be the subject of extensive
discussions and deliberations and it is not now possible to predict what impact the conclusions
reached may have on financing for the multifamily sector and thus on our business. If the GSEs
were to exit the multifamily mortgage market, it could negatively impact our ability to obtain
financing at favorable rates. Management believes, based on the positive performance of the
multifamily sector and its low mortgage default rate, that other sources of financing would enter
the market such as pension funds and insurance companies.
17
Real Estate Financing Risks (continued)
The Company in part relies on its line of credit to meet its short-term liquidity requirements.
As of December 31, 2010, the Company had an unsecured line of credit agreement with M&T Bank, as
administrative agent and lead bank, of $175 million which was set to expire August 31, 2011, with
an optional one-year extension. On February 10, 2011, the Company amended and extended this line
of credit agreement. The amended line of credit agreement expires August 31, 2012, not including a
one-year extension, at the Companys option. The Company had $56.5 million outstanding under the
credit facility on December 31, 2010.
The credit agreement relating to the line of credit requires the Company to maintain certain
financial covenants, ratios and measurements. Maintaining compliance with these covenants could
limit our flexibility. In addition, a default in these requirements, if uncured, could result in a
termination of the line of credit and a requirement that we repay outstanding amounts, which could
adversely affect our liquidity and increase our financing costs.
If noteholders exercise their repurchase right, we may not be able to access the capital necessary
to repurchase the notes on attractive terms.
In 2006, the Company issued $200 million of exchangeable notes with a coupon rate of 4.125%. The
outstanding principal balance of the notes is $140 million. Holders of the notes may require the
Company to repurchase the notes on November 1, 2011. Based on the fact that the current stock
price for the Companys common stock is well below the exchange rate on the notes, we anticipate
that the holders will exercise their repurchase rights. We plan to access the capital needed to
pay off the noteholders from a number of possible sources including: using unencumbered assets to
raise secured debt proceeds; increasing the Companys current line of credit; and issuing equity
under the ATM program. There can be no assurance that additional secured financing will be
available at attractive terms or that we will be able to increase the line of credit or sell equity
at attractive pricing. In the alternative, we might be forced to sell some of our properties at
otherwise unacceptable prices or to issue equity at prices that would dilute the interests of our
current stockholders.
Rising interest rates could adversely affect operations and cash flow.
As of December 31, 2010, approximately 90% of our debt was at fixed rates. This limits our
exposure to changes in interest rates. Prolonged interest rate increases, however, could
negatively affect our ability to make acquisitions, to dispose of properties at favorable prices,
to develop properties and to refinance existing borrowings at acceptable rates.
There is no legal limit on the amount of debt we can incur.
The Board has adopted a policy of limiting our indebtedness to approximately 55% of our total
market capitalization (with the equity component of total market capitalization based on the per
share NAV presented to our Board at its most recent Board meeting), but our organizational
documents do not contain any limitation on the amount or percentage of indebtedness we may incur.
Accordingly, the Board could alter or eliminate its current policy on borrowing. If this policy
were changed, we could become more highly leveraged, resulting in an increase in debt service that
could adversely affect our ability to make expected distributions to stockholders and increase the
risk of default on our indebtedness. Our NAV fluctuates based on a number of factors. Our line of
credit agreement limits the amount of indebtedness we may incur.
18
Federal Income Tax Risks
There is no assurance that we will continue to qualify as a REIT.
We believe that we have been organized and have operated in such manner so as to qualify as a REIT
under the Internal Revenue Service Code, commencing with our taxable year ended December 31, 1994.
A REIT generally is not taxed at the corporate level on income it currently distributes to its
shareholders as long as it distributes currently at least 90% of its taxable income (excluding net
capital gains). No assurance can be provided, however, that we have qualified or will continue to
qualify as a REIT or that new legislation, Treasury Regulations, administrative interpretations or
court decisions will not significantly change the tax laws with respect to our qualification as a
REIT or the federal income tax consequences of such qualification.
We are required to make certain distributions to qualify as a REIT, and there is no assurance that
we will have the funds necessary to make the distributions.
In order to continue to qualify as a REIT, we currently are required each year to distribute to our
stockholders at least 90% of our taxable income (excluding net capital gains). In addition, we
will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain
distributions made by us with respect to the calendar year are less than the sum of 85% of our
ordinary income, 95% of our capital gain net income for that year, and any undistributed taxable
income from prior periods. We intend to make distributions to our stockholders to comply with the
90% distribution requirement and to avoid the nondeductible excise tax and will rely for this
purpose on distributions from the Operating Partnership. However, differences in timing between
taxable income and cash available for distribution could require us to borrow funds or to issue
additional equity to enable us to meet the 90% distribution requirement (and, therefore, to
maintain our REIT qualification) and to avoid the nondeductible excise tax. The Operating
Partnership is required to pay (or reimburse us, as its general partner, for) certain taxes and
other liabilities and expenses that we incur, including any taxes that we must pay in the event we
were to fail to qualify as a REIT. In addition, because we are unable to retain earnings
(resulting from REIT distribution requirements), we will generally be required to refinance debt
that matures with additional debt or equity. There can be no assurance that any of these sources
of funds, if available at all, would be available to meet our distribution and tax obligations.
Our failure to qualify as a REIT would have adverse consequences.
If we fail to qualify as a REIT, we will be subject to federal income tax (including any applicable
alternative minimum tax) on our taxable income at regular corporate rates. In addition, unless
entitled to relief under certain statutory provisions, we will be disqualified from treatment as a
REIT for the four taxable years following the year during which REIT qualification is lost. The
additional tax burden on us would significantly reduce the cash available for distribution by us to
our stockholders. Our failure to qualify as a REIT could reduce materially the value of our common
stock and would cause all our distributions to be taxable as ordinary income to the extent of our
current and accumulated earnings and profits (although, subject to certain limitations under the
Code, corporate distributees may be eligible for the dividends received deduction with respect to
these distributions).
The Operating Partnership intends to qualify as a partnership but there is no guaranty that it will
qualify.
We believe that the Operating Partnership qualifies as a partnership for federal income tax
purposes. No assurance can be provided, however, that the Internal Revenue Service (the IRS)
will not challenge its status as a partnership for federal income tax purposes, or that a court
would not sustain such a challenge. If the IRS were to be successful in treating the Operating
Partnership as an entity that is taxable as a corporation, we would cease to qualify as a REIT
because the value of our ownership interest in the Operating Partnership would exceed 5% of our
assets and because we would be considered to hold more than 10% of the voting securities of another
corporation. Also, the imposition of a corporate tax on the Operating Partnership would reduce
significantly the amount of cash available for distribution to its limited partners. Finally, the
classification of the Operating Partnership as a corporation would cause its limited partners to
recognize gain (upon the event that causes the Operating Partnership to be classified as a
corporation) at least equal to their negative capital accounts (and possibly more, depending upon
the circumstances).
19
Other Risks
The ability of our stockholders to effect a change of control is limited by certain provisions of
our Articles of Incorporation as well as by Maryland law and our executive retention plan.
Our Articles Incorporation, as amended (the Articles of Incorporation), authorize the Board to
issue up to a total of 80 million shares of common stock, 10 million shares of excess stock and 10
million shares of preferred stock and to establish the rights and preferences of any shares issued.
Further, under the Articles of Incorporation, the stockholders do not have cumulative voting
rights.
In order for us to maintain our qualification as a REIT, not more than 50% in value of our
outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities) at any time during the last half of its taxable year. We
have limited ownership of the issued and outstanding shares of common stock by any single
stockholder to 8.0% of the aggregate value of our outstanding shares.
The percentage ownership limit described above, the issuance of preferred stock in the future and
the absence of cumulative voting rights could have the effect of: (i) delaying or preventing a
change of control of us even if a change in control were in the stockholders interest; (ii)
deterring tender offers for our common stock that may be beneficial to the stockholders; or (iii)
limiting the opportunity for stockholders to receive a premium for their common stock that might
otherwise exist if an investor attempted to assemble a block of our common stock in excess of the
percentage ownership limit or otherwise to effect a change of control of us.
As a Maryland corporation, we are subject to the provisions of the Maryland General Corporation
Law. Maryland law imposes restrictions on some business combinations and requires compliance with
statutory procedures before some mergers and acquisitions may occur, which may delay or prevent
offers to acquire us or increase the difficulty of completing any offers, even if they are in our
stockholders best interests. In addition, other provisions of the Maryland General Corporation
Law permit the Board of Directors to make elections and to take actions without stockholder
approval (such as classifying our Board such that the entire Board is not up for re-election
annually) that, if made or taken, could have the effect of discouraging or delaying a change in
control.
Also, to assure that our management has appropriate incentives to focus on our business and
properties in the face of a change of control situation, we have adopted an executive retention
plan which provides some key employees with salary, bonus and some benefits continuation in the
event of a change of control.
Potential conflicts of interest could affect some Directors decisions.
Unlike persons acquiring common stock, certain of our Directors, who constitute less than a
majority of the Board, own a significant portion of their interest in us through UPREIT Units. As
a result of their status as holders of UPREIT Units, those Directors and other limited partners may
have interests that conflict with stockholders with respect to business decisions affecting us and
the Operating Partnership. In particular, those Directors may suffer different or more adverse tax
consequences than us upon the sale or refinancing of some of the properties as a result of
unrealized gain attributable to those properties. Thus, those Directors and the stockholders may
have different objectives regarding the appropriate pricing and timing of any sale or refinancing
of properties. In addition, those Directors, as limited partners of the Operating Partnership,
have the right to approve certain fundamental transactions such as the sale of all or substantially
all of the assets of the Operating Partnership, merger or consolidation or dissolution of the
Operating Partnership and certain amendments to the Operating Partnership Agreement.
The future sale of shares under our At-The-Market offering may negatively impact our stock price.
In December 2009, the Company filed a Prospectus Supplement pursuant to a previously filed
registration statement. Pursuant to the Prospectus Supplement, the Company was authorized to sell
up to 3.7 million common shares from time to time in at the market offerings or negotiated
transactions (not to exceed $150 million of gross proceeds). By June, 2010, all of the shares
available under this offering had been sold. In September 2010, the Company filed an additional
Prospectus Supplement pursuant to which it may sell up to 3.6 million additional common shares.
Prior to December 31, 2010, the Company has not issued any shares under this second offering.
Sales of substantial amounts of shares of common stock in the public market or the perception that
such sales might occur could adversely affect the market price of the common stock.
20
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Item 1B. |
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Unresolved Staff Comments |
None.
As of December 31, 2010, the Owned Properties consisted of 116 multifamily residential communities
containing 38,861 apartment units. In 2010, the Company acquired nine communities with a total of
2,614 units in eight transactions for total consideration of $339.1 million.
The Owned Properties are generally located in established markets in suburban neighborhoods and are
well maintained and well leased. Average physical occupancy at the Owned Properties was 94.7% for
2010. Physical occupancy is defined as total possible rental income, net of vacancy; 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. Economic occupancy is defined
as total possible rental income, net of vacancy and bad debt expense as a percentage of total
possible rental income. The Owned Properties are typically two- and three-story garden style
apartment buildings in landscaped settings and a majority are of brick or other masonry
construction. The Company believes that its strategic focus on appealing to middle income
residents and the quality of the services it provides to such residents results in lower resident
turnover. Average turnover at the Owned Properties was approximately 38% for 2010, which is
significantly below the national average of approximately 54% for garden style apartments.
Resident leases are generally for a one year term. Security deposits equal to one months rent or
less are generally required.
Certain of the Owned Properties collateralize mortgage loans. See Schedule III contained herein
(Pages 90 to 92).
The table on the following pages illustrates certain of the important characteristics of the Owned
Properties as of December 31, 2010.
21
Communities Wholly Owned by Home Properties
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(2) |
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(3) |
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(3) |
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2010 |
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2010 |
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2009 |
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2010 |
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2009 |
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# |
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Age |
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Average |
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% |
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Average |
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Average |
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Avg Mo |
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Avg Mo |
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12/31/2010 |
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Of |
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In |
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Year |
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Apt Size |
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Resident |
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% |
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% |
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Rent Rate |
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Rent Rate |
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Total Cost |
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Regional Area |
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Apts |
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Years |
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Acq/Dev |
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(Sq Ft) |
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Turnover |
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Occupancy |
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Occupancy |
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per Apt |
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per Apt |
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(000) |
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Core Communities (1) |
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FL Southeast |
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The Hamptons |
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668 |
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21 |
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2004 |
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1,052 |
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51 |
% |
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|
93 |
% |
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|
94 |
% |
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$ |
982 |
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$ |
1,007 |
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$ |
70,694 |
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FL Southeast |
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Vinings at Hampton Village |
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168 |
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21 |
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2004 |
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1,207 |
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46 |
% |
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94 |
% |
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|
96 |
% |
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1,110 |
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1,115 |
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18,183 |
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IL Chicago |
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Blackhawk Apartments |
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371 |
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49 |
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2000 |
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793 |
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42 |
% |
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97 |
% |
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96 |
% |
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|
840 |
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872 |
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25,410 |
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IL Chicago |
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Courtyards Village |
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224 |
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39 |
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2001 |
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674 |
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46 |
% |
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98 |
% |
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97 |
% |
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809 |
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826 |
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18,204 |
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IL Chicago |
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Cypress Place |
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192 |
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40 |
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2000 |
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852 |
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36 |
% |
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98 |
% |
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97 |
% |
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907 |
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938 |
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15,500 |
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IL Chicago |
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The Colony |
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783 |
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37 |
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1999 |
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704 |
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45 |
% |
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96 |
% |
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96 |
% |
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855 |
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882 |
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57,747 |
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IL Chicago |
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The New Colonies |
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672 |
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36 |
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1998 |
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657 |
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56 |
% |
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96 |
% |
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96 |
% |
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724 |
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726 |
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37,172 |
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MA Boston |
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Gardencrest Apartments |
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696 |
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62 |
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2002 |
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847 |
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33 |
% |
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96 |
% |
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95 |
% |
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1,507 |
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1,507 |
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114,776 |
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MA Boston |
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Highland House |
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172 |
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41 |
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2006 |
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733 |
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37 |
% |
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97 |
% |
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96 |
% |
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1,136 |
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1,145 |
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20,351 |
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MA Boston |
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Liberty Place |
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107 |
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22 |
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2006 |
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994 |
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32 |
% |
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|
97 |
% |
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97 |
% |
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1,405 |
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1,408 |
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17,515 |
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MA Boston |
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Stone Ends Apartments |
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|
280 |
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31 |
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2003 |
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815 |
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33 |
% |
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|
94 |
% |
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|
97 |
% |
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1,215 |
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1,223 |
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40,169 |
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MA Boston |
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The Heights at Marlborough |
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|
348 |
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37 |
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2006 |
|
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|
876 |
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47 |
% |
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|
96 |
% |
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|
95 |
% |
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|
1,151 |
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1,166 |
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55,900 |
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MA Boston |
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The Meadows at Marlborough |
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|
264 |
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38 |
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2006 |
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|
|
855 |
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|
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42 |
% |
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|
96 |
% |
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|
96 |
% |
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|
1,108 |
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1,131 |
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38,811 |
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MA Boston |
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The Townhomes of Beverly |
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|
204 |
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40 |
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2007 |
|
|
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1,103 |
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|
|
37 |
% |
|
|
98 |
% |
|
|
96 |
% |
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|
1,424 |
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|
1,437 |
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40,485 |
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MA Boston |
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The Village at Marshfield |
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|
276 |
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38 |
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2004 |
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|
|
735 |
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|
40 |
% |
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|
97 |
% |
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|
96 |
% |
|
|
1,113 |
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|
|
1,131 |
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|
|
38,001 |
|
MA Boston |
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Westwoods |
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|
35 |
|
|
|
20 |
|
|
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2007 |
|
|
|
904 |
|
|
|
43 |
% |
|
|
97 |
% |
|
|
93 |
% |
|
|
1,182 |
|
|
|
1,242 |
|
|
|
4,417 |
|
MD Baltimore |
|
Bonnie Ridge Apartments |
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|
960 |
|
|
|
44 |
|
|
|
1999 |
|
|
|
998 |
|
|
|
37 |
% |
|
|
95 |
% |
|
|
92 |
% |
|
|
1,059 |
|
|
|
1,079 |
|
|
|
86,313 |
|
MD Baltimore |
|
Canterbury Apartments |
|
|
618 |
|
|
|
32 |
|
|
|
1999 |
|
|
|
934 |
|
|
|
43 |
% |
|
|
95 |
% |
|
|
94 |
% |
|
|
946 |
|
|
|
943 |
|
|
|
41,366 |
|
MD Baltimore |
|
Country Village Apartments |
|
|
344 |
|
|
|
39 |
|
|
|
1998 |
|
|
|
776 |
|
|
|
49 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
926 |
|
|
|
903 |
|
|
|
25,199 |
|
MD Baltimore |
|
Dunfield Townhouses |
|
|
312 |
|
|
|
23 |
|
|
|
2007 |
|
|
|
916 |
|
|
|
48 |
% |
|
|
94 |
% |
|
|
96 |
% |
|
|
1,120 |
|
|
|
1,086 |
|
|
|
36,763 |
|
MD Baltimore |
|
Falcon Crest Townhomes |
|
|
396 |
|
|
|
41 |
|
|
|
1999 |
|
|
|
993 |
|
|
|
41 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
980 |
|
|
|
974 |
|
|
|
25,330 |
|
MD Baltimore |
|
Fox Hall Apartments |
|
|
720 |
|
|
|
34 |
|
|
|
2007 |
|
|
|
946 |
|
|
|
44 |
% |
|
|
92 |
% |
|
|
92 |
% |
|
|
827 |
|
|
|
821 |
|
|
|
71,899 |
|
MD Baltimore |
|
Gateway Village Apartments |
|
|
132 |
|
|
|
21 |
|
|
|
1999 |
|
|
|
963 |
|
|
|
33 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,298 |
|
|
|
1,277 |
|
|
|
11,354 |
|
MD Baltimore |
|
Heritage Woods Apartments |
|
|
164 |
|
|
|
37 |
|
|
|
2006 |
|
|
|
965 |
|
|
|
46 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,061 |
|
|
|
1,028 |
|
|
|
17,583 |
|
MD Baltimore |
|
Mill Towne Village |
|
|
384 |
|
|
|
37 |
|
|
|
2001 |
|
|
|
812 |
|
|
|
41 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
878 |
|
|
|
868 |
|
|
|
31,739 |
|
MD Baltimore |
|
Morningside Heights Apartments |
|
|
1,050 |
|
|
|
45 |
|
|
|
1998 |
|
|
|
864 |
|
|
|
41 |
% |
|
|
92 |
% |
|
|
93 |
% |
|
|
862 |
|
|
|
868 |
|
|
|
68,876 |
|
MD Baltimore |
|
Owings Run Apartments |
|
|
504 |
|
|
|
15 |
|
|
|
1999 |
|
|
|
1,136 |
|
|
|
41 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,200 |
|
|
|
1,184 |
|
|
|
48,396 |
|
MD Baltimore |
|
Ridgeview at Wakefield Valley |
|
|
204 |
|
|
|
22 |
|
|
|
2005 |
|
|
|
916 |
|
|
|
49 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,162 |
|
|
|
1,161 |
|
|
|
24,234 |
|
MD Baltimore |
|
Saddle Brooke |
|
|
468 |
|
|
|
37 |
|
|
|
2008 |
|
|
|
889 |
|
|
|
45 |
% |
|
|
93 |
% |
|
|
91 |
% |
|
|
995 |
|
|
|
1,042 |
|
|
|
55,932 |
|
MD Baltimore |
|
Selford Townhomes |
|
|
102 |
|
|
|
23 |
|
|
|
1999 |
|
|
|
987 |
|
|
|
42 |
% |
|
|
94 |
% |
|
|
92 |
% |
|
|
1,306 |
|
|
|
1,291 |
|
|
|
8,815 |
|
MD Baltimore |
|
The Coves at Chesapeake |
|
|
469 |
|
|
|
28 |
|
|
|
2006 |
|
|
|
986 |
|
|
|
39 |
% |
|
|
92 |
% |
|
|
93 |
% |
|
|
1,199 |
|
|
|
1,186 |
|
|
|
73,772 |
|
MD Baltimore |
|
Timbercroft Townhomes & Apts |
|
|
284 |
|
|
|
38 |
|
|
|
1999 |
|
|
|
998 |
|
|
|
9 |
% |
|
|
100 |
% |
|
|
99 |
% |
|
|
916 |
|
|
|
884 |
|
|
|
15,383 |
|
MD Baltimore |
|
Top Field |
|
|
156 |
|
|
|
37 |
|
|
|
2006 |
|
|
|
1,149 |
|
|
|
26 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
1,194 |
|
|
|
1,181 |
|
|
|
22,025 |
|
MD Baltimore |
|
Village Square Townhomes & Apts. |
|
|
370 |
|
|
|
42 |
|
|
|
1999 |
|
|
|
948 |
|
|
|
40 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
1,126 |
|
|
|
1,132 |
|
|
|
27,040 |
|
MD Baltimore |
|
Woodholme Manor Apartments |
|
|
177 |
|
|
|
41 |
|
|
|
2001 |
|
|
|
817 |
|
|
|
21 |
% |
|
|
94 |
% |
|
|
96 |
% |
|
|
871 |
|
|
|
858 |
|
|
|
11,652 |
|
22
Communities Wholly Owned by Home Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
|
(3) |
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
# |
|
|
Age |
|
|
|
|
|
|
Average |
|
|
% |
|
|
Average |
|
|
Average |
|
|
Avg Mo |
|
|
Avg Mo |
|
|
12/31/2010 |
|
|
|
|
|
Of |
|
|
In |
|
|
Year |
|
|
Apt Size |
|
|
Resident |
|
|
% |
|
|
% |
|
|
Rent Rate |
|
|
Rent Rate |
|
|
Total Cost |
|
Regional Area |
|
|
|
Apts |
|
|
Years |
|
|
Acq/Dev |
|
|
(Sq Ft) |
|
|
Turnover |
|
|
Occupancy |
|
|
Occupancy |
|
|
per Apt |
|
|
per Apt |
|
|
(000) |
|
ME Portland |
|
Liberty Commons |
|
|
120 |
|
|
|
4 |
|
|
|
2006 |
|
|
|
1,064 |
|
|
|
51 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,198 |
|
|
|
1,187 |
|
|
|
14,803 |
|
ME Portland |
|
Redbank Village Apartments |
|
|
500 |
|
|
|
66 |
|
|
|
1998 |
|
|
|
735 |
|
|
|
52 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
863 |
|
|
|
861 |
|
|
|
29,218 |
|
NJ Northern |
|
Barrington Gardens |
|
|
148 |
|
|
|
37 |
|
|
|
2005 |
|
|
|
922 |
|
|
|
40 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,140 |
|
|
|
1,115 |
|
|
|
13,413 |
|
NJ Northern |
|
Chatham Hill Apartments |
|
|
308 |
|
|
|
43 |
|
|
|
2004 |
|
|
|
944 |
|
|
|
30 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
1,686 |
|
|
|
1,708 |
|
|
|
63,606 |
|
NJ Northern |
|
East Hill Gardens |
|
|
33 |
|
|
|
52 |
|
|
|
1998 |
|
|
|
654 |
|
|
|
30 |
% |
|
|
96 |
% |
|
|
94 |
% |
|
|
1,519 |
|
|
|
1,481 |
|
|
|
3,417 |
|
NJ Northern |
|
Hackensack Gardens |
|
|
198 |
|
|
|
62 |
|
|
|
2005 |
|
|
|
636 |
|
|
|
35 |
% |
|
|
94 |
% |
|
|
92 |
% |
|
|
1,078 |
|
|
|
1,058 |
|
|
|
19,554 |
|
NJ Northern |
|
Jacob Ford Village |
|
|
270 |
|
|
|
62 |
|
|
|
2007 |
|
|
|
842 |
|
|
|
26 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
1,177 |
|
|
|
1,139 |
|
|
|
33,770 |
|
NJ Northern |
|
Lakeview Apartments |
|
|
106 |
|
|
|
61 |
|
|
|
1998 |
|
|
|
492 |
|
|
|
47 |
% |
|
|
96 |
% |
|
|
94 |
% |
|
|
1,358 |
|
|
|
1,354 |
|
|
|
9,621 |
|
NJ Northern |
|
Northwood Apartments |
|
|
134 |
|
|
|
45 |
|
|
|
2004 |
|
|
|
937 |
|
|
|
29 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,296 |
|
|
|
1,309 |
|
|
|
19,483 |
|
NJ Northern |
|
Oak Manor Apartments |
|
|
77 |
|
|
|
54 |
|
|
|
1998 |
|
|
|
918 |
|
|
|
39 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,751 |
|
|
|
1,763 |
|
|
|
8,594 |
|
NJ Northern |
|
Pleasant View Gardens |
|
|
1,142 |
|
|
|
42 |
|
|
|
1998 |
|
|
|
746 |
|
|
|
38 |
% |
|
|
96 |
% |
|
|
94 |
% |
|
|
1,121 |
|
|
|
1,132 |
|
|
|
86,445 |
|
NJ Northern |
|
Pleasure Bay Apartments |
|
|
270 |
|
|
|
39 |
|
|
|
1998 |
|
|
|
685 |
|
|
|
41 |
% |
|
|
95 |
% |
|
|
94 |
% |
|
|
1,013 |
|
|
|
1,038 |
|
|
|
17,725 |
|
NJ Northern |
|
Royal Gardens Apartments |
|
|
550 |
|
|
|
42 |
|
|
|
1997 |
|
|
|
874 |
|
|
|
34 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,220 |
|
|
|
1,217 |
|
|
|
38,400 |
|
NJ Northern |
|
Wayne Village |
|
|
275 |
|
|
|
45 |
|
|
|
1998 |
|
|
|
760 |
|
|
|
26 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
1,378 |
|
|
|
1,385 |
|
|
|
24,971 |
|
NJ Northern |
|
Windsor Realty Company |
|
|
67 |
|
|
|
57 |
|
|
|
1998 |
|
|
|
628 |
|
|
|
42 |
% |
|
|
96 |
% |
|
|
93 |
% |
|
|
1,199 |
|
|
|
1,182 |
|
|
|
6,318 |
|
NY Long Island |
|
Bayview & Colonial |
|
|
160 |
|
|
|
43 |
|
|
|
2000 |
|
|
|
884 |
|
|
|
32 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,218 |
|
|
|
1,215 |
|
|
|
15,892 |
|
NY Long Island |
|
Cambridge Village Associates |
|
|
82 |
|
|
|
43 |
|
|
|
2002 |
|
|
|
747 |
|
|
|
22 |
% |
|
|
98 |
% |
|
|
98 |
% |
|
|
1,697 |
|
|
|
1,667 |
|
|
|
8,611 |
|
NY Long Island |
|
Devonshire Hills |
|
|
297 |
|
|
|
42 |
|
|
|
2001 |
|
|
|
803 |
|
|
|
40 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,693 |
|
|
|
1,679 |
|
|
|
59,061 |
|
NY Long Island |
|
Hawthorne Court |
|
|
434 |
|
|
|
42 |
|
|
|
2002 |
|
|
|
678 |
|
|
|
34 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,391 |
|
|
|
1,369 |
|
|
|
52,994 |
|
NY Long Island |
|
Heritage Square |
|
|
80 |
|
|
|
61 |
|
|
|
2002 |
|
|
|
718 |
|
|
|
38 |
% |
|
|
98 |
% |
|
|
96 |
% |
|
|
1,699 |
|
|
|
1,682 |
|
|
|
10,115 |
|
NY Long Island |
|
Holiday Square |
|
|
144 |
|
|
|
31 |
|
|
|
2002 |
|
|
|
570 |
|
|
|
18 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,191 |
|
|
|
1,178 |
|
|
|
12,620 |
|
NY Long Island |
|
Lake Grove Apartments |
|
|
368 |
|
|
|
40 |
|
|
|
1997 |
|
|
|
836 |
|
|
|
44 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,385 |
|
|
|
1,377 |
|
|
|
37,906 |
|
NY Long Island |
|
Mid-Island Apartments |
|
|
232 |
|
|
|
45 |
|
|
|
1997 |
|
|
|
546 |
|
|
|
27 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,348 |
|
|
|
1,320 |
|
|
|
18,984 |
|
NY Long Island |
|
Sayville Commons |
|
|
342 |
|
|
|
9 |
|
|
|
2005 |
|
|
|
1,106 |
|
|
|
18 |
% |
|
|
94 |
% |
|
|
96 |
% |
|
|
1,558 |
|
|
|
1,538 |
|
|
|
66,304 |
|
NY Long Island |
|
South Bay Manor |
|
|
61 |
|
|
|
50 |
|
|
|
2000 |
|
|
|
849 |
|
|
|
53 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,631 |
|
|
|
1,618 |
|
|
|
8,581 |
|
NY Long Island |
|
Southern Meadows |
|
|
452 |
|
|
|
39 |
|
|
|
2001 |
|
|
|
845 |
|
|
|
31 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,367 |
|
|
|
1,367 |
|
|
|
54,619 |
|
NY Long Island |
|
Stratford Greens Associates |
|
|
359 |
|
|
|
36 |
|
|
|
2002 |
|
|
|
725 |
|
|
|
40 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
1,422 |
|
|
|
1,428 |
|
|
|
59,910 |
|
NY Long Island |
|
Westwood Village Apartments |
|
|
242 |
|
|
|
41 |
|
|
|
2002 |
|
|
|
829 |
|
|
|
35 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
2,289 |
|
|
|
2,321 |
|
|
|
43,924 |
|
NY Long Island |
|
Woodmont Village Apartments |
|
|
97 |
|
|
|
42 |
|
|
|
2002 |
|
|
|
704 |
|
|
|
31 |
% |
|
|
97 |
% |
|
|
96 |
% |
|
|
1,291 |
|
|
|
1,282 |
|
|
|
12,126 |
|
NY Long Island |
|
Yorkshire Village Apartments |
|
|
40 |
|
|
|
41 |
|
|
|
2002 |
|
|
|
779 |
|
|
|
38 |
% |
|
|
98 |
% |
|
|
97 |
% |
|
|
1,770 |
|
|
|
1,751 |
|
|
|
4,836 |
|
PA Philadelphia |
|
Castle Club Apartments |
|
|
158 |
|
|
|
43 |
|
|
|
2000 |
|
|
|
878 |
|
|
|
36 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
954 |
|
|
|
951 |
|
|
|
16,354 |
|
PA Philadelphia |
|
Chesterfield Apartments |
|
|
247 |
|
|
|
37 |
|
|
|
1997 |
|
|
|
812 |
|
|
|
34 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
891 |
|
|
|
905 |
|
|
|
18,936 |
|
PA Philadelphia |
|
Curren Terrace |
|
|
318 |
|
|
|
39 |
|
|
|
1997 |
|
|
|
782 |
|
|
|
39 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
846 |
|
|
|
879 |
|
|
|
22,111 |
|
PA Philadelphia |
|
Glen Brook Apartments |
|
|
174 |
|
|
|
47 |
|
|
|
1999 |
|
|
|
707 |
|
|
|
44 |
% |
|
|
95 |
% |
|
|
91 |
% |
|
|
809 |
|
|
|
823 |
|
|
|
11,091 |
|
PA Philadelphia |
|
Glen Manor Apartments |
|
|
174 |
|
|
|
34 |
|
|
|
1997 |
|
|
|
667 |
|
|
|
39 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
787 |
|
|
|
802 |
|
|
|
9,521 |
|
PA Philadelphia |
|
Golf Club Apartments |
|
|
399 |
|
|
|
41 |
|
|
|
2000 |
|
|
|
857 |
|
|
|
44 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
1,048 |
|
|
|
1,068 |
|
|
|
41,386 |
|
23
Communities Wholly Owned by Home Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
|
(3) |
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
# |
|
|
Age |
|
|
|
|
|
|
Average |
|
|
% |
|
|
Average |
|
|
Average |
|
|
Avg Mo |
|
|
Avg Mo |
|
|
12/31/2010 |
|
|
|
|
|
Of |
|
|
In |
|
|
Year |
|
|
Apt Size |
|
|
Resident |
|
|
% |
|
|
% |
|
|
Rent Rate |
|
|
Rent Rate |
|
|
Total Cost |
|
Regional Area |
|
|
|
Apts |
|
|
Years |
|
|
Acq/Dev |
|
|
(Sq Ft) |
|
|
Turnover |
|
|
Occupancy |
|
|
Occupancy |
|
|
per Apt |
|
|
per Apt |
|
|
(000) |
|
PA Philadelphia |
|
Hill Brook Place Apartments |
|
|
274 |
|
|
|
42 |
|
|
|
1999 |
|
|
|
699 |
|
|
|
31 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
861 |
|
|
|
854 |
|
|
|
19,887 |
|
PA Philadelphia |
|
Home Properties of Bryn Mawr |
|
|
316 |
|
|
|
59 |
|
|
|
2000 |
|
|
|
822 |
|
|
|
66 |
% |
|
|
90 |
% |
|
|
91 |
% |
|
|
1,162 |
|
|
|
1,121 |
|
|
|
36,917 |
|
PA Philadelphia |
|
Home Properties of Devon |
|
|
631 |
|
|
|
47 |
|
|
|
2000 |
|
|
|
917 |
|
|
|
44 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
1,084 |
|
|
|
1,093 |
|
|
|
72,781 |
|
PA Philadelphia |
|
New Orleans Park |
|
|
442 |
|
|
|
39 |
|
|
|
1997 |
|
|
|
685 |
|
|
|
43 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
844 |
|
|
|
862 |
|
|
|
29,394 |
|
PA Philadelphia |
|
Racquet Club East Apartments |
|
|
466 |
|
|
|
39 |
|
|
|
1998 |
|
|
|
911 |
|
|
|
35 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,027 |
|
|
|
1,028 |
|
|
|
38,947 |
|
PA Philadelphia |
|
Racquet Club South |
|
|
103 |
|
|
|
41 |
|
|
|
1999 |
|
|
|
816 |
|
|
|
50 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
878 |
|
|
|
890 |
|
|
|
7,057 |
|
PA Philadelphia |
|
Ridley Brook Apartments |
|
|
244 |
|
|
|
48 |
|
|
|
1999 |
|
|
|
925 |
|
|
|
30 |
% |
|
|
94 |
% |
|
|
95 |
% |
|
|
903 |
|
|
|
917 |
|
|
|
15,482 |
|
PA Philadelphia |
|
Sherry Lake Apartments |
|
|
298 |
|
|
|
45 |
|
|
|
1998 |
|
|
|
812 |
|
|
|
37 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
1,150 |
|
|
|
1,171 |
|
|
|
30,783 |
|
PA Philadelphia |
|
The Brooke at Peachtree Village |
|
|
146 |
|
|
|
24 |
|
|
|
2005 |
|
|
|
1,261 |
|
|
|
25 |
% |
|
|
96 |
% |
|
|
97 |
% |
|
|
1,118 |
|
|
|
1,108 |
|
|
|
19,887 |
|
PA Philadelphia |
|
The Landings |
|
|
384 |
|
|
|
37 |
|
|
|
1996 |
|
|
|
912 |
|
|
|
39 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
963 |
|
|
|
981 |
|
|
|
32,144 |
|
PA Philadelphia |
|
Trexler Park Apartments |
|
|
250 |
|
|
|
36 |
|
|
|
2000 |
|
|
|
921 |
|
|
|
38 |
% |
|
|
94 |
% |
|
|
93 |
% |
|
|
1,033 |
|
|
|
1,048 |
|
|
|
25,267 |
|
PA Philadelphia |
|
Trexler Park West |
|
|
216 |
|
|
|
2 |
|
|
|
2008 |
|
|
|
1,049 |
|
|
|
50 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
1,239 |
|
|
|
1,235 |
|
|
|
25,844 |
|
PA Philadelphia |
|
William Henry Apartments |
|
|
363 |
|
|
|
39 |
|
|
|
2000 |
|
|
|
938 |
|
|
|
45 |
% |
|
|
94 |
% |
|
|
93 |
% |
|
|
1,059 |
|
|
|
1,105 |
|
|
|
43,566 |
|
VA Suburban DC |
|
Braddock Lee Apartments |
|
|
255 |
|
|
|
55 |
|
|
|
1998 |
|
|
|
757 |
|
|
|
26 |
% |
|
|
98 |
% |
|
|
97 |
% |
|
|
1,281 |
|
|
|
1,273 |
|
|
|
21,863 |
|
VA Suburban DC |
|
Cider Mill |
|
|
864 |
|
|
|
32 |
|
|
|
2002 |
|
|
|
834 |
|
|
|
35 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,103 |
|
|
|
1,102 |
|
|
|
100,012 |
|
VA Suburban DC |
|
Cinnamon Run |
|
|
511 |
|
|
|
50 |
|
|
|
2005 |
|
|
|
1,006 |
|
|
|
28 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,211 |
|
|
|
1,194 |
|
|
|
76,152 |
|
VA Suburban DC |
|
East Meadow Apartments |
|
|
150 |
|
|
|
39 |
|
|
|
2000 |
|
|
|
1,034 |
|
|
|
34 |
% |
|
|
98 |
% |
|
|
98 |
% |
|
|
1,287 |
|
|
|
1,282 |
|
|
|
17,040 |
|
VA Suburban DC |
|
Elmwood Terrace |
|
|
504 |
|
|
|
37 |
|
|
|
2000 |
|
|
|
946 |
|
|
|
47 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
901 |
|
|
|
917 |
|
|
|
33,439 |
|
VA Suburban DC |
|
Falkland Chase Apartments |
|
|
450 |
|
|
|
73 |
|
|
|
2003 |
|
|
|
759 |
|
|
|
34 |
% |
|
|
95 |
% |
|
|
94 |
% |
|
|
1,351 |
|
|
|
1,349 |
|
|
|
67,740 |
|
VA Suburban DC |
|
Mount Vernon Square |
|
|
1,387 |
|
|
|
36 |
|
|
|
2006 |
|
|
|
868 |
|
|
|
38 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
1,195 |
|
|
|
1,196 |
|
|
|
155,021 |
|
VA Suburban DC |
|
Orleans Village |
|
|
851 |
|
|
|
42 |
|
|
|
2000 |
|
|
|
1,015 |
|
|
|
35 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
|
1,315 |
|
|
|
1,321 |
|
|
|
101,208 |
|
VA Suburban DC |
|
Park Shirlington Apartments |
|
|
294 |
|
|
|
55 |
|
|
|
1998 |
|
|
|
858 |
|
|
|
31 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
1,290 |
|
|
|
1,290 |
|
|
|
24,845 |
|
VA Suburban DC |
|
Peppertree Farm |
|
|
879 |
|
|
|
56 |
|
|
|
2005 |
|
|
|
1,051 |
|
|
|
31 |
% |
|
|
93 |
% |
|
|
93 |
% |
|
|
1,185 |
|
|
|
1,174 |
|
|
|
114,671 |
|
VA Suburban DC |
|
Seminary Hill Apartments |
|
|
296 |
|
|
|
50 |
|
|
|
1999 |
|
|
|
888 |
|
|
|
38 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,253 |
|
|
|
1,249 |
|
|
|
24,620 |
|
VA Suburban DC |
|
Seminary Towers Apartments |
|
|
541 |
|
|
|
46 |
|
|
|
1999 |
|
|
|
879 |
|
|
|
33 |
% |
|
|
96 |
% |
|
|
95 |
% |
|
|
1,296 |
|
|
|
1,295 |
|
|
|
47,658 |
|
VA Suburban DC |
|
Tamarron Apartments |
|
|
132 |
|
|
|
23 |
|
|
|
1999 |
|
|
|
1,075 |
|
|
|
39 |
% |
|
|
96 |
% |
|
|
97 |
% |
|
|
1,455 |
|
|
|
1,444 |
|
|
|
13,712 |
|
VA Suburban DC |
|
The Apartments at Wellington Trace |
|
|
240 |
|
|
|
8 |
|
|
|
2004 |
|
|
|
1,106 |
|
|
|
62 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,270 |
|
|
|
1,269 |
|
|
|
31,631 |
|
VA Suburban DC |
|
The Manor Apartments (MD) |
|
|
435 |
|
|
|
41 |
|
|
|
2001 |
|
|
|
1,004 |
|
|
|
32 |
% |
|
|
95 |
% |
|
|
96 |
% |
|
|
1,251 |
|
|
|
1,211 |
|
|
|
49,842 |
|
VA Suburban DC |
|
The Manor Apartments (VA) |
|
|
198 |
|
|
|
36 |
|
|
|
1999 |
|
|
|
845 |
|
|
|
50 |
% |
|
|
96 |
% |
|
|
96 |
% |
|
|
998 |
|
|
|
1,029 |
|
|
|
13,173 |
|
VA Suburban DC |
|
The Sycamores |
|
|
185 |
|
|
|
32 |
|
|
|
2002 |
|
|
|
876 |
|
|
|
38 |
% |
|
|
98 |
% |
|
|
97 |
% |
|
|
1,312 |
|
|
|
1,341 |
|
|
|
24,728 |
|
VA Suburban DC |
|
Virginia Village |
|
|
344 |
|
|
|
43 |
|
|
|
2001 |
|
|
|
1,010 |
|
|
|
34 |
% |
|
|
99 |
% |
|
|
98 |
% |
|
|
1,261 |
|
|
|
1,259 |
|
|
|
41,029 |
|
VA Suburban DC |
|
West Springfield Terrace |
|
|
244 |
|
|
|
32 |
|
|
|
2002 |
|
|
|
1,019 |
|
|
|
40 |
% |
|
|
97 |
% |
|
|
97 |
% |
|
|
1,396 |
|
|
|
1,413 |
|
|
|
39,492 |
|
VA Suburban DC |
|
Westchester West |
|
|
345 |
|
|
|
38 |
|
|
|
2008 |
|
|
|
1,005 |
|
|
|
36 |
% |
|
|
93 |
% |
|
|
92 |
% |
|
|
1,268 |
|
|
|
1,278 |
|
|
|
51,286 |
|
VA Suburban DC |
|
Woodleaf Apartments |
|
|
228 |
|
|
|
25 |
|
|
|
2004 |
|
|
|
709 |
|
|
|
36 |
% |
|
|
94 |
% |
|
|
94 |
% |
|
|
1,197 |
|
|
|
1,181 |
|
|
|
24,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Total/Weighted Avg |
|
|
35,798 |
|
|
|
39 |
|
|
|
|
|
|
|
877 |
|
|
|
39 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
$ |
1,136 |
|
|
$ |
1,138 |
|
|
$ |
3,763,919 |
|
24
Communities Wholly Owned by Home Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
|
(3) |
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
# |
|
|
Age |
|
|
|
|
|
|
Average |
|
|
% |
|
|
Average |
|
|
Average |
|
|
Avg Mo |
|
|
Avg Mo |
|
|
12/31/2010 |
|
|
|
|
|
Of |
|
|
In |
|
|
Year |
|
|
Apt Size |
|
|
Resident |
|
|
% |
|
|
% |
|
|
Rent Rate |
|
|
Rent Rate |
|
|
Total Cost |
|
Regional Area |
|
|
|
Apts |
|
|
Years |
|
|
Acq/Dev |
|
|
(Sq Ft) |
|
|
Turnover |
|
|
Occupancy |
|
|
Occupancy |
|
|
per Apt |
|
|
per Apt |
|
|
(000) |
|
|
|
2010 Acquisition Communities (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IL Chicago |
|
Lakeview Townhomes |
|
|
120 |
|
|
|
14 |
|
|
|
2010 |
|
|
|
1,050 |
|
|
|
56 |
% |
|
|
91 |
% |
|
|
n/a |
|
|
$ |
1,131 |
|
|
|
n/a |
|
|
$ |
14,465 |
|
MD Baltimore |
|
Annapolis Roads |
|
|
282 |
|
|
|
35 |
|
|
|
2010 |
|
|
|
978 |
|
|
|
52 |
% |
|
|
91 |
% |
|
|
n/a |
|
|
|
1,177 |
|
|
|
n/a |
|
|
|
32,977 |
|
MD Baltimore |
|
Charleston Place |
|
|
858 |
|
|
|
39 |
|
|
|
2010 |
|
|
|
816 |
|
|
|
32 |
% |
|
|
95 |
% |
|
|
n/a |
|
|
|
1,061 |
|
|
|
n/a |
|
|
|
107,671 |
|
MD Baltimore |
|
Middlebrooke Apartments |
|
|
208 |
|
|
|
36 |
|
|
|
2010 |
|
|
|
838 |
|
|
|
41 |
% |
|
|
91 |
% |
|
|
n/a |
|
|
|
860 |
|
|
|
n/a |
|
|
|
18,237 |
|
MD Baltimore |
|
The Greens at Columbia |
|
|
168 |
|
|
|
24 |
|
|
|
2010 |
|
|
|
969 |
|
|
|
34 |
% |
|
|
96 |
% |
|
|
n/a |
|
|
|
1,293 |
|
|
|
n/a |
|
|
|
26,116 |
|
MD Baltimore |
|
Westbrooke Apartments |
|
|
110 |
|
|
|
49 |
|
|
|
2010 |
|
|
|
651 |
|
|
|
43 |
% |
|
|
91 |
% |
|
|
n/a |
|
|
|
769 |
|
|
|
n/a |
|
|
|
6,678 |
|
NY Long Island |
|
Crescent Club Apartments |
|
|
257 |
|
|
|
37 |
|
|
|
2010 |
|
|
|
873 |
|
|
|
18 |
% |
|
|
94 |
% |
|
|
n/a |
|
|
|
1,221 |
|
|
|
n/a |
|
|
|
31,295 |
|
VA Suburban DC |
|
The Courts at Fair Oaks |
|
|
364 |
|
|
|
20 |
|
|
|
2010 |
|
|
|
798 |
|
|
|
34 |
% |
|
|
94 |
% |
|
|
n/a |
|
|
|
1,371 |
|
|
|
n/a |
|
|
|
73,651 |
|
VA Suburban DC |
|
Village at Potomac Falls |
|
|
247 |
|
|
|
11 |
|
|
|
2010 |
|
|
|
940 |
|
|
|
40 |
% |
|
|
96 |
% |
|
|
n/a |
|
|
|
1,260 |
|
|
|
n/a |
|
|
|
38,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Construction Communities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VA Suburban DC |
|
1200 East West (5) |
|
|
247 |
|
|
|
|
|
|
|
2010 |
|
|
|
821 |
|
|
|
3 |
% |
|
|
56 |
% |
|
|
n/a |
|
|
|
1,805 |
|
|
|
n/a |
|
|
|
82,976 |
|
VA Suburban DC |
|
Courts at Huntington Station (6) |
|
|
202 |
|
|
|
|
|
|
|
2010 |
|
|
|
1,038 |
|
|
|
3 |
% |
|
|
58 |
% |
|
|
n/a |
|
|
|
2,033 |
|
|
|
n/a |
|
|
|
28,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Total/Weighted Avg |
|
|
3,063 |
|
|
|
24 |
|
|
|
|
|
|
|
872 |
|
|
|
31 |
% |
|
|
82 |
% |
|
|
n/a |
|
|
$ |
1,273 |
|
|
|
n/a |
|
|
$ |
460,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned Portfolio Total/Weighted Avg |
|
|
38,861 |
|
|
|
38 |
|
|
|
|
|
|
|
876 |
|
|
|
38 |
% |
|
|
95 |
% |
|
|
95 |
% |
|
$ |
1,139 |
|
|
$ |
1,138 |
|
|
$ |
4,224,640 |
|
|
|
|
(1) |
|
Core Communities represents the 35,798 apartment units owned consistently throughout 2010
and 2009. |
|
(2) |
|
Resident Turnover reflects, on an annual basis, the number of moveouts, divided by the
total number of apartment units. |
|
(3) |
|
Average % Occupancy is the average physical occupancy for the years ended December 31, 2010
and 2009. |
|
(4) |
|
For communities acquired during 2010, Average % Occupancy is the average physical occupancy
from the date of acquisition. |
|
(5) |
|
1200 East West construction was completed during 2010 and all apartment units placed into
service as of December 31, 2010. |
|
(6) |
|
Courts at Huntington Station was under construction at December 31, 2010. Total cost
represents apartment units placed into service as of December 31, 2010. |
25
Property Development
The Company has the ability to develop new market-rate communities. It plans to engage in
development activity only in markets in which it is currently doing business in order to add net
asset value and supplement future earnings and growth. It expects to develop new apartment
communities on raw land and on land adjacent to existing Owned Properties, as well as to increase
the density of units at some communities currently owned.
1200 East West Highway in Silver Spring, Maryland, is a 14-story high rise with 247 apartments and
10,600 square feet of retail or nonresidential space that was completed and placed into service in
several phases during 2010 at a total cost of $83 million. Initial occupancy commenced in March
2010 and stabilization (greater than 95% physical occupancy) was achieved as of December 2010.
The Courts at Huntington Station, just south of Old Town Alexandria in Fairfax County, Virginia has
been under construction since mid-2008 through 2010. It is a podium design, with 421 units,
adjacent to the Huntington Metro rail station and consists of four, four-story buildings.
Construction on the first phase (202 units) was completed and placed into service during the second
quarter of 2010, with initial occupancy occurring in April, 2010. The lease-up period is projected
to last eleven months. Construction on the second phase (219 units) has commenced and is scheduled
to be complete in the second quarter of 2011, reaching stabilization approximately one year later.
Total costs are estimated at $127 million, with $84 million of construction in progress for this
development at December 31, 2010.
The Company had two projects in the pre-construction phase during 2010:
|
|
Cobblestone Square, a 314-unit garden style apartment community development, is located in
Fredericksburg, Virginia. Construction for rehabilitation on the existing depot building was
started in January, 2011 with construction on the whole site expected in the first quarter of
2011. The total projected cost of the development is $49 million. The pre-construction
costs, consisting mostly of land value, were $15 million at December 31, 2010. |
|
|
Ripley Street, a 379-unit high rise development, is located in Silver Spring, Maryland.
Construction is expected to start in the second half of 2011, with a total projected cost of
$111 million. The pre-construction costs for this project, consisting mostly of land value,
were $21 million at December 31, 2010. |
The Company had one project in the pre-redevelopment phase during 2010:
|
|
Falkland Chase, located in Silver Spring, Maryland, currently has 450 garden apartments
constructed between 1936 and 1939. The Company is planning on redeveloping the North parcel,
which will be renamed Falkland North. The Company is making progress on the design and
obtaining the necessary approvals to redevelop this parcel into approximately 1,100 units.
Construction is expected to start at the earliest during late 2012 or early 2013, with a total
projected cost of $315 million. As this is a large project, the Company may decide to pursue
a joint venture partner. The costs associated with this project were $3 million and are
included in other assets at December 31, 2010. |
The Company had one project under contract during 2010:
|
|
The Courts at Spring Mill Station, located in Conshohocken, Pennsylvania, is land on which
the Company is seeking entitlements to develop a combination donut/podium style project with
approximately 385 units. The contract for the land acquisition is $11 million. Construction
is expected to begin in the first half of 2012. The pre-acquisition costs, consisting of a
$1.0 million deposit and $0.1 million entitlement costs, are included in other assets at
December 31, 2010. |
Property Management
As of December 31, 2010, the Company did not have any properties under property management
contracts. During 2010, the Company purchased Annapolis Roads Apartments, the one property that
was subject to a property management contract as of December 31, 2009. The Company may pursue the
management of additional properties not owned by the Company, but will only do so when such
additional properties can be effectively and efficiently managed in conjunction with other
properties owned or managed by Home Properties, or where the Company views the properties as
potential acquisitions in desirable markets.
26
Supplemental Property Information
At December 31, 2010, none of our properties have an individual net book value equal to or greater
than 10% of the total assets of the Company or would have accounted for 10% or more of the
Companys aggregate gross revenues for 2010. There is no resident who has one or more leases
which, in the aggregate, account for more than 10% of the aggregate gross revenues for the year
ended December 31, 2010.
|
|
|
Item 3. |
|
Legal Proceedings |
The Company is subject to a variety of legal actions for personal injury or property damage arising
in the ordinary course of its business, most of which are covered by insurance. Various claims of
employment and resident discrimination are also periodically brought. While the resolution of
these matters cannot be predicted with certainty, management believes that the final outcome of
such legal proceedings and claims will not have a material adverse effect on the Companys
liquidity, financial position or results of operations.
|
|
|
Item 4. |
|
Executive Officers |
The following table sets forth, as of February 18, 2011, the nine executive officers of the
Company, together with their respective ages, positions and offices.
|
|
|
|
|
Name |
|
Age |
|
Position |
Edward J. Pettinella |
|
59 |
|
President and Chief Executive Officer of Home Properties |
David P. Gardner |
|
55 |
|
Executive Vice President and Chief Financial Officer of Home Properties |
Ann M. McCormick |
|
54 |
|
Executive Vice President, General Counsel and Secretary of Home Properties |
Lisa M. Critchley |
|
49 |
|
Senior Vice President, Human Resources of Home Properties |
Scott A. Doyle |
|
49 |
|
Senior Vice President, Strategic Property Management of Home Properties |
Donald R. Hague |
|
59 |
|
Senior Vice President, Development of Home Properties |
Robert J. Luken |
|
46 |
|
Senior Vice President, Chief Accounting Officer and Treasurer of Home Properties |
Bernard J. Quinn |
|
54 |
|
Senior Vice President, Property Management Operations of Home Properties |
John E. Smith |
|
60 |
|
Senior Vice President and Chief Investment Officer of Home Properties |
Edward J. Pettinella has served as President and Chief Executive Officer of the Company since
January 1, 2004. He is also a Director. He joined the Company in 2001 as an Executive Vice
President and Director. From 1997 until February 2001, Mr. Pettinella served as President, Charter
One Bank of New York and Executive Vice President of Charter One Financial, Inc. From 1980 through
1997, Mr. Pettinella served in several managerial capacities for Rochester Community Savings Bank,
Rochester, NY, including the positions of Chief Operating Officer and Chief Financial Officer. Mr.
Pettinella serves on the Board of Directors of Rochester Business Alliance, The Lifetime Healthcare
Companies, National Multi Housing Council and Syracuse University School of Business and is a
member of the Board of Governors of the National Association of Real Estate Investment Trusts. He
is also a member of Urban Land Institute. Mr. Pettinella is a graduate of the State University at
Geneseo and holds an MBA Degree in finance from Syracuse University.
David P. Gardner has served as Executive Vice President since 2004 and a Vice President and Chief
Financial Officer of the Company since its inception. Mr. Gardner joined Home Leasing in 1984 as
Vice President and Controller. In 1989, he was named Treasurer of Home Leasing and Chief Financial
Officer in December 1993. From 1977 until joining Home Leasing, Mr. Gardner was an accountant at
Cortland L. Brovitz & Co. Mr. Gardner is a graduate of the Rochester Institute of Technology.
27
Ann M. McCormick has served as Executive Vice President since 2004 and a Vice President, General
Counsel and Secretary of the Company since its inception. Mrs. McCormick joined Home Leasing in
1987 and was named Vice President, Secretary and General Counsel in 1991. Prior to joining Home
Leasing, she was an associate with the law firm of Nixon Peabody LLP. Mrs. McCormick is a graduate
of Colgate University and holds a Juris Doctor from Cornell University.
Lisa M. Critchley has served as Senior Vice President since joining the Company in June 2007.
Prior to joining the Company, she was employed by ALSTOM Signaling, Inc. as Director of Human
Resources since 2004. She was an Assistant Dean at the William E. Simon School of Business
Administration from 1999 until 2004. Mrs. Critchley is a graduate of St. John Fisher College and
holds an MBA from the E. Phillip Saunders College of Business of the Rochester Institute of
Technology. She also is certified as a Senior Professional in Human Resources (SPHR).
Scott A. Doyle has served as Senior Vice President since 2000, and, from 1997 until 2000, was a
Vice President of the Company. He joined Home Properties in 1996 as a Regional Property Manager.
Mr. Doyle is a Certified Property Manager (CPM) as designated by the Institute of Real Estate
Management. Prior to joining Home Properties, he worked with CMH Properties, Inc., Rivercrest
Realty Associates and Arcadia Management Company. He is a graduate of State University at
Plattsburgh, New York.
Donald R. Hague has served as Senior Vice President since January 1, 2008. He joined the Company
in 2006 as a Vice President. From 2000 until 2006, Mr. Hague was a Vice President of KSI Services,
Inc. Prior to that, he worked with The Evans Company and was a partner in a land development and
homebuilding company. He is a graduate of Davidson College and holds an MBA from The George
Washington University.
Robert J. Luken has served as Senior Vice President since 2004, and as Chief Accounting Officer
since January, 2005. He has been the Companys Treasurer since 2000 and became a Vice President in
1997. He joined the Company in 1996, serving as its Controller. Prior to joining the Company, he
was the Controller of Bell Corp. and an Audit Supervisor for PricewaterhouseCoopers LLP. Mr. Luken
is a graduate of St. John Fisher College and holds an MBA from the William E. Simon Graduate School
of Business Administration of the University of Rochester. He is a Certified Public Accountant.
He is on the Board of Directors of The Bell Company, LLC.
Bernard J. Quinn has served as Senior Vice President since November of 2009 and Vice President
since May of 2000. Prior to joining Home Properties, Mr. Quinn was a Regional Property Manager for
Millcreek Realty Co. Home Properties purchased Millcreeks Philadelphia apartment portfolio in
1997. Mr. Quinn is a graduate of Villanova University.
John E. Smith has served as Chief Investment Officer of the Company since January, 2006, and as
Senior Vice President since 2001. From 1998 until 2001, he was a Vice President of the Company.
Prior to joining the Company in 1997, Mr. Smith was general manager for Direct Response Marketing,
Inc. and Executive Vice President for The Equity Network, Inc. Mr. Smith was Director of
Investment Properties at Hunt Commercial Real Estate for 20 years. He has been a Certified
Commercial Investment Member (CCIM) since 1982, a New York State Certified Instructor and has
taught accredited commercial real estate courses in four states.
28
PART II
|
|
|
Item 5. |
|
Market for the Registrants Common Stock and Related Stockholder Matters and Issuer Purchases of Equity Securities |
Market Information, Holders and Dividends
The common stock has been traded on the New York Stock Exchange (NYSE) under the symbol HME
since July 28, 1994. The following table sets forth for the previous two years the quarterly high
and low sales prices per share reported on the NYSE, as well as all dividends paid with respect to
the common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
High |
|
|
Low |
|
|
Dividends |
|
First Quarter |
|
$ |
48.64 |
|
|
$ |
43.09 |
|
|
$ |
0.58 |
|
Second Quarter |
|
$ |
51.46 |
|
|
$ |
44.03 |
|
|
$ |
0.58 |
|
Third Quarter |
|
$ |
53.74 |
|
|
$ |
42.56 |
|
|
$ |
0.58 |
|
Fourth Quarter |
|
$ |
56.93 |
|
|
$ |
51.42 |
|
|
$ |
0.58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
41.16 |
|
|
$ |
23.35 |
|
|
$ |
0.67 |
|
Second Quarter |
|
$ |
39.95 |
|
|
$ |
29.71 |
|
|
$ |
0.67 |
|
Third Quarter |
|
$ |
44.89 |
|
|
$ |
29.86 |
|
|
$ |
0.67 |
|
Fourth Quarter |
|
$ |
49.23 |
|
|
$ |
37.55 |
|
|
$ |
0.67 |
|
As of February 18, 2011, the Company had approximately 3,369 shareholders of record;
37,977,700 common shares (plus 11,282,882 UPREIT Units convertible into 11,282,882 common shares)
were outstanding, and the closing price was $56.06. It is the Companys policy to pay dividends.
The Company has historically paid dividends on a quarterly basis in the months of February or
March, May, August and November.
On February 12, 2011, the Board declared a dividend of $0.62 per share for the quarter ended
December 31, 2010. The dividend is payable March 4, 2011 to shareholders of record on February 28,
2011.
29
Performance Graph
The following graph compares the cumulative return on the Companys common stock during the five
year period ended December 31, 2010 to the cumulative return of the NAREIT All Equity REIT Index
(NAREIT Equity) and the Standard and Poors 500 Index (S&P 500) for the same period.
Management believes that the NAREIT Equity is an appropriate industry index and the S&P 500 is a
broad equity market index for purposes of this graph. The total return on the Companys common
stock assumes that dividends were reinvested quarterly at the same price as provided under the
Companys Dividend Reinvestment and Direct Stock Purchase Plan. All comparisons are based on a
$100 investment on December 31, 2005. Data for the NAREIT Equity and S&P 500 were provided to the
Company by NAREIT. Stockholders should note that past performance does not predict future results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2005 |
|
|
12/31/2006 |
|
|
12/31/2007 |
|
|
12/31/2008 |
|
|
12/31/2009 |
|
|
12/31/2010 |
|
▲ HME |
|
$ |
100.00 |
|
|
$ |
152.40 |
|
|
$ |
121.30 |
|
|
$ |
116.23 |
|
|
$ |
147.74 |
|
|
$ |
180.04 |
|
■ NAREIT Equity |
|
$ |
100.00 |
|
|
$ |
135.06 |
|
|
$ |
113.87 |
|
|
$ |
70.91 |
|
|
$ |
90.76 |
|
|
$ |
116.12 |
|
● S&P 500 |
|
$ |
100.00 |
|
|
$ |
115.79 |
|
|
$ |
122.16 |
|
|
$ |
76.96 |
|
|
$ |
97.33 |
|
|
$ |
111.99 |
|
Certain of our filings with the SEC may incorporate information by reference future filings,
including this Form 10-K. Unless we specifically state otherwise, this Performance Graph shall not
be deemed to be incorporated by reference and shall not constitute soliciting material or otherwise
be considered filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.
30
Issuer Purchases of Equity Securities
In 1997, the Board approved a stock repurchase program under which the Company may repurchase
shares of its outstanding common stock and UPREIT Units (Company Program). The shares/units may
be repurchased through open market or privately negotiated transactions at the discretion of
Company management. The Boards action did not establish a specific target stock price or a
specific timetable for share repurchase. At December 31, 2010, the Company had authorization to
repurchase 2,291,160 shares of common stock and UPREIT Units under the Company Program.
In addition, participants in the Companys Stock Benefit Plans can use common stock of the Company
that they already own to pay all or a portion of the exercise price payable to the Company upon the
exercise of an option. In such event, the common stock used to pay the exercise price is returned
to authorized but unissued status, and for purposes of this table is deemed to have been
repurchased by the Company, but does not represent repurchases under the Company Program.
The following table summarizes the total number of shares (units) repurchased by the Company during
the quarter ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
shares/units |
|
|
|
Total |
|
|
Average |
|
|
available under |
|
|
|
shares/units |
|
|
price per |
|
|
the Company |
|
Period |
|
purchased (1) |
|
|
share/unit |
|
|
Program(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance October 1, 2010: |
|
|
|
|
|
|
|
|
|
|
2,291,160 |
|
October, 2010 |
|
|
|
|
|
|
|
|
|
|
2,291,160 |
|
November, 2010 |
|
|
1,803 |
|
|
$ |
55.87 |
|
|
|
2,291,160 |
|
December, 2010 |
|
|
|
|
|
|
|
|
|
|
2,291,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2010: |
|
|
1,803 |
|
|
$ |
55.87 |
|
|
|
2,291,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
During the quarter ended December 31, 2010, and as permitted by the Companys Stock
Benefit Plans, 1,803 shares of common stock already owned by option holders were used by those
holders to pay the exercise price associated with their option exercise. These shares were
returned to the status of authorized but unissued shares. |
|
(2) |
|
During the quarter ended December 31, 2010, there were no shares (units) repurchased
and no Board approved increases under the Company Program. |
31
|
|
|
Item 6. |
|
Selected Financial and Operating Information |
The following table sets forth selected financial and operating data on a historical basis for the
Company and should be read in conjunction with the financial statements appearing elsewhere in this
Form 10-K (amounts in thousands, except share, per share and unit data).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
473,833 |
|
|
$ |
457,690 |
|
|
$ |
447,877 |
|
|
$ |
430,185 |
|
|
$ |
374,314 |
|
Other income (1) |
|
|
42,746 |
|
|
|
41,486 |
|
|
|
41,890 |
|
|
|
38,438 |
|
|
|
30,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
516,579 |
|
|
|
499,176 |
|
|
|
489,767 |
|
|
|
468,623 |
|
|
|
404,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance |
|
|
211,038 |
|
|
|
207,293 |
|
|
|
203,571 |
|
|
|
192,927 |
|
|
|
168,594 |
|
General and administrative |
|
|
25,138 |
|
|
|
24,476 |
|
|
|
25,489 |
|
|
|
23,412 |
|
|
|
21,693 |
|
Interest |
|
|
124,126 |
|
|
|
121,765 |
|
|
|
118,263 |
|
|
|
116,476 |
|
|
|
99,656 |
|
Depreciation and amortization |
|
|
126,668 |
|
|
|
118,573 |
|
|
|
110,194 |
|
|
|
102,521 |
|
|
|
85,485 |
|
Other expenses (2) |
|
|
2,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
489,841 |
|
|
|
472,107 |
|
|
|
457,517 |
|
|
|
435,336 |
|
|
|
375,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before gain on early
extinguishment of debt |
|
|
26,738 |
|
|
|
27,069 |
|
|
|
32,250 |
|
|
|
33,287 |
|
|
|
29,047 |
|
Gain on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
11,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
26,738 |
|
|
|
27,069 |
|
|
|
43,554 |
|
|
|
33,287 |
|
|
|
29,047 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
|
(407 |
) |
|
|
(4,305 |
) |
|
|
(1,909 |
) |
|
|
7,096 |
|
|
|
13,804 |
|
Gain (loss) on disposition of property |
|
|
(13 |
) |
|
|
24,314 |
|
|
|
51,560 |
|
|
|
42,126 |
|
|
|
110,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
(420 |
) |
|
|
20,009 |
|
|
|
49,651 |
|
|
|
49,222 |
|
|
|
124,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
26,318 |
|
|
|
47,078 |
|
|
|
93,205 |
|
|
|
82,509 |
|
|
|
153,365 |
|
Net income attributable to noncontrolling interest |
|
|
(6,237 |
) |
|
|
(12,659 |
) |
|
|
(27,124 |
) |
|
|
(22,712 |
) |
|
|
(43,199 |
) |
Preferred dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,290 |
) |
|
|
(5,400 |
) |
Preferred stock issuance costs write-off |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,902 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
$ |
20,081 |
|
|
$ |
34,419 |
|
|
$ |
66,081 |
|
|
$ |
56,605 |
|
|
$ |
104,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.56 |
|
|
$ |
0.60 |
|
|
$ |
0.97 |
|
|
$ |
0.65 |
|
|
$ |
0.51 |
|
Discontinued operations |
|
|
(0.01 |
) |
|
|
0.44 |
|
|
|
1.10 |
|
|
|
1.06 |
|
|
|
2.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
$ |
0.55 |
|
|
$ |
1.04 |
|
|
$ |
2.07 |
|
|
$ |
1.71 |
|
|
$ |
3.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.55 |
|
|
$ |
0.60 |
|
|
$ |
0.95 |
|
|
$ |
0.63 |
|
|
$ |
0.50 |
|
Discontinued operations |
|
|
(0.01 |
) |
|
|
0.44 |
|
|
|
1.09 |
|
|
|
1.04 |
|
|
|
2.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
$ |
0.54 |
|
|
$ |
1.04 |
|
|
$ |
2.04 |
|
|
$ |
1.67 |
|
|
$ |
3.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share |
|
$ |
2.32 |
|
|
$ |
2.68 |
|
|
$ |
2.65 |
|
|
$ |
2.61 |
|
|
$ |
2.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, before accumulated depreciation |
|
$ |
4,377,730 |
|
|
$ |
3,915,979 |
|
|
$ |
3,872,390 |
|
|
$ |
3,680,155 |
|
|
$ |
3,451,762 |
|
Total assets |
|
|
3,634,703 |
|
|
|
3,268,034 |
|
|
|
3,317,094 |
|
|
|
3,216,199 |
|
|
|
3,240,135 |
|
Total debt |
|
|
2,618,932 |
|
|
|
2,302,281 |
|
|
|
2,317,500 |
|
|
|
2,178,305 |
|
|
|
2,110,820 |
|
Cumulative redeemable preferred stock (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
Common stockholders equity |
|
|
720,893 |
|
|
|
661,112 |
|
|
|
650,778 |
|
|
|
675,683 |
|
|
|
765,051 |
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
160,019 |
|
|
$ |
149,624 |
|
|
$ |
160,081 |
|
|
$ |
162,558 |
|
|
$ |
162,996 |
|
Net cash provided by (used in) investing activities |
|
|
(334,539 |
) |
|
|
(47,565 |
) |
|
|
(80,584 |
) |
|
|
(87,553 |
) |
|
|
159,653 |
|
Net cash provided by (used in) financing activities |
|
|
176,493 |
|
|
|
(99,817 |
) |
|
|
(79,039 |
) |
|
|
(187,108 |
) |
|
|
(209,828 |
) |
Funds From Operations Diluted, as adjusted by
the Company (4) |
|
|
151,134 |
|
|
|
146,171 |
|
|
|
157,318 |
|
|
|
148,617 |
|
|
|
146,641 |
|
Weighted average number of shares/units outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Basic |
|
|
36,682,191 |
|
|
|
33,040,839 |
|
|
|
31,991,817 |
|
|
|
33,130,067 |
|
|
|
32,697,794 |
|
Shares Diluted |
|
|
37,169,886 |
|
|
|
33,172,116 |
|
|
|
32,332,688 |
|
|
|
33,794,526 |
|
|
|
33,337,557 |
|
Shares/units Basic |
|
|
48,201,751 |
|
|
|
45,274,376 |
|
|
|
45,200,405 |
|
|
|
46,520,695 |
|
|
|
47,262,678 |
|
Shares/units Diluted |
|
|
48,689,446 |
|
|
|
45,405,653 |
|
|
|
45,541,276 |
|
|
|
47,185,154 |
|
|
|
47,902,441 |
|
Total communities owned at end of year |
|
|
116 |
|
|
|
105 |
|
|
|
110 |
|
|
|
123 |
|
|
|
123 |
|
Total apartment units owned at end of year |
|
|
38,861 |
|
|
|
35,797 |
|
|
|
37,130 |
|
|
|
37,496 |
|
|
|
36,954 |
|
|
|
|
(1) |
|
Other income includes property other income, interest income and other income. |
|
(2) |
|
Other expenses are comprised of acquisition related costs for closed deals that
until 2009 were capitalized under authoritative guidance. |
32
|
|
|
(3) |
|
Cumulative redeemable preferred stock was redeemable solely at the option of the
Company. |
|
(4) |
|
Pursuant to the revised definition of Funds From Operations (FFO) adopted 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 sales of
property, noncontrolling interest, extraordinary items and cumulative effect of change in
accounting principle plus depreciation from real property including adjustments for
unconsolidated partnerships and joint ventures less dividends from non-convertible preferred
shares. 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. |
|
|
|
In addition to presenting FFO in accordance with the NAREIT definition, we also disclose FFO
after a specific and defined supplemental adjustment to exclude losses from early extinguishments
of debt associated with the sales of real estate (FFO as adjusted). The adjustment to exclude
losses from early extinguishments of debt results when the sale of real estate encumbered by debt
requires us to pay the extinguishment costs prior to the debts stated maturity and to write-off
unamortized loan costs at the date of the extinguishment. Such costs are excluded from the gains
on sales of real estate reported in accordance with GAAP. However, we view the losses from early
extinguishments of debt associated with the sales of real estate as an incremental cost of the
sale transactions because we extinguished the debt in connection with the consummation of the
sale transactions and we had no intent to extinguish the debt absent such transactions. We
believe that this supplemental adjustment more appropriately reflects the results of our
operations exclusive of the impact of our sale transactions. |
|
|
|
Although our FFO as adjusted clearly differs from NAREITs definition of FFO, and may not be
comparable to that of other REITs and real estate companies, we believe it provides a meaningful
supplemental measure of our operating performance because we believe that, by excluding the
effects of the losses from early extinguishments of debt associated with the sales of real
estate, management and investors are presented with an indicator of our operating performance
that more closely achieves the objectives of the real estate industry in presenting FFO. |
|
|
|
Neither FFO, nor FFO as adjusted, should be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of our performance. Neither FFO, nor FFO
as adjusted, represents cash generated from operating activities determined in accordance with
GAAP, and neither is a measure of liquidity or an indicator of our ability to make cash
distributions. We believe that to further understand our performance, FFO, and FFO as adjusted,
should be compared with our reported net income and considered in addition to cash flows in
accordance with GAAP, as presented in our consolidated financial statements. |
|
|
|
FFO, and FFO as adjusted, fall within the definition of non-GAAP financial measure set forth in
Item 10(e) of Regulation S-K and as a result the Company is required to include in this report a
statement disclosing the reasons why management believes that presentation of this measure
provides useful information to investors. Management believes that in order to facilitate a
clear understanding of the combined historical operating results of the Company, FFO, and FFO as
adjusted, should be considered in conjunction with net income as presented in the consolidated
financial statements included elsewhere herein. Management believes that by excluding gains or
losses related to dispositions of property and excluding real estate depreciation (which can vary
among owners of similar assets in similar condition based on historical cost accounting and
useful life estimates), FFO, and FFO as adjusted, can help one compare the operating performance
of a companys real estate between periods or as compared to different companies. In addition,
FFO as adjusted ties the losses on early extinguishment of debt to the real estate which was sold
triggering the extinguishment. The Company also uses these measures to compare its performance
to that of its peer group. |
33
|
|
|
(4) |
|
(continued) |
|
|
|
The following table sets forth the calculation of FFO, and
FFO as adjusted, for the previous five years, beginning
with net income attributable to common stockholders from
the Companys audited financial statements prepared in
accordance with GAAP (in thousands, except per share/unit
data): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Net income attributable to common stockholders |
|
$ |
20,081 |
|
|
$ |
34,419 |
|
|
$ |
66,081 |
|
|
$ |
56,605 |
|
|
$ |
104,766 |
|
Real property depreciation and amortization |
|
|
124,803 |
|
|
|
118,480 |
|
|
|
114,260 |
|
|
|
110,536 |
|
|
|
99,420 |
|
Noncontrolling interest |
|
|
6,237 |
|
|
|
12,659 |
|
|
|
27,124 |
|
|
|
22,712 |
|
|
|
43,199 |
|
Loss (gain) on disposition of property |
|
|
13 |
|
|
|
(24,314 |
) |
|
|
(51,560 |
) |
|
|
(42,126 |
) |
|
|
(110,514 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO Basic and Diluted, as defined by NAREIT |
|
|
151,134 |
|
|
|
141,244 |
|
|
|
155,905 |
|
|
|
147,727 |
|
|
|
136,871 |
|
Loss from early extinguishment of debt in
connection with sale of real estate |
|
|
|
|
|
|
4,927 |
|
|
|
1,413 |
|
|
|
890 |
|
|
|
9,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO Basic and Diluted, as adjusted by the
Company |
|
$ |
151,134 |
|
|
$ |
146,171 |
|
|
$ |
157,318 |
|
|
$ |
148,617 |
|
|
$ |
146,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares/units
outstanding(a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
48,201.8 |
|
|
|
45,274.4 |
|
|
|
45,200.4 |
|
|
|
46,520.7 |
|
|
|
47,262.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
48,689.4 |
|
|
|
45,405.7 |
|
|
|
45,541.3 |
|
|
|
47,185.2 |
|
|
|
47,902.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO Diluted, as adjusted by the Company
per share/unit |
|
$ |
3.10 |
|
|
$ |
3.22 |
|
|
$ |
3.45 |
|
|
$ |
3.15 |
|
|
$ |
3.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Basic includes common stock outstanding plus UPREIT Units which can be converted
into shares of common stock. Diluted includes additional common stock equivalents. |
All REITs may not be using the same definition for FFO. Accordingly, the above presentation may
not be comparable to other similarly titled measures of FFO of other REITs.
34
|
|
|
Item 7. |
|
Managements Discussion and Analysis of Financial Condition and Results of
Operations |
Overview
Managements Discussion and Analysis of Financial Condition and Results of Operations is intended
to facilitate an understanding of the Companys business and results of operations. It should be
read in conjunction with the Consolidated Financial Statements, the accompanying Notes to
Consolidated Financial Statements and the selected financial data included elsewhere in this Form
10-K. This Form 10-K, including the following discussion, contains forward-looking statements
regarding future events or trends as described more fully under Forward-Looking Statements on
Page 56. Actual results could differ materially from those projected in such statements as a
result of the risk factors described in Item 1A, Risk Factors, of this Form 10-K.
The Company is engaged in the ownership, management, acquisition, rehabilitation and development of
residential apartment communities primarily in selected Northeast and Mid-Atlantic markets of the
United States. As of December 31, 2010, the Company owned and operated 116 apartment communities
with 38,861 apartments.
Executive Summary
The Company operated during 2010 in a recovering economic environment. The Companys markets and
the country as a whole experienced job growth of 0.8%. This followed two years in a row in 2008
and 2009 with job losses for the Companys markets of 1.2% and 2.1%, respectively. In comparison,
the country as a whole had 2.1% and 3.6% job losses for the same periods. For historical
reference, from 2004 through 2007, both the Companys markets and the country as a whole
experienced positive job growth; 1.0%, 1.1%, 1.2% and 1.0% for the Company, and 1.7%, 1.5%, 1.7%
and 0.9% for the country, respectively. An increase in job growth leads to household formations,
which creates an increase in demand for rental housing. In addition, during 2006 and continuing
through all of 2010, the rising home mortgage interest rates and subsequent sub-prime lending
crisis issues made it more difficult for residents who may have considered purchasing a home.
After years of home ownership being the number one reason our residents gave for moving out of our
apartment communities, it dropped to number two in 2007, number three in both 2008 and 2009, and
number four in 2010. In the three-year period from 2004 to 2006, home purchases represented, on
average, over 19% of our move-outs. In 2007 and 2008, we experienced the first significant drop in
years, with move out for home purchase declining to 15.5% and 12.0%, respectively. During 2008 and
right through 2010, we have seen stabilization of this measurement, with the percentage staying at
the same 12.0% level in 2008 and 2009, dropping down slightly to 11.0% in 2010. As there is
usually a lag between job loss and its effect on household formation, the decline in jobs in 2008
did not create a measurable decreased demand for our apartments until very late in 2008. This
reduced demand put pressure on our ability in 2009 to raise rents and maintain occupancy. With job
growth starting in 2010, we experienced slightly negative growth in rental income for the first two
quarters, but saw improvement with the third quarter at positive 0.4% and the fourth quarter
producing positive 1.5% rental income growth over the 2009 fourth quarter.
During late 2007, the Company started converting to a new property management operating system
(MRI) that wasnt fully rolled out until late spring 2008. The Company implemented a Lease Rent
Options (LRO) program that no longer used concessions to set market rents. Under the new program
rents are set to market daily, based on apartment availability, local supply of and demand for
units, and pricing. Rent concessions are still used, but sparingly, in specific locations for
specific units.
The Company owned 105 communities with 35,798 apartment units throughout 2009 and 2010 where
comparable operating results are available for the years presented (the 2010 Core Properties).
Occupancies at the 2010 Core Properties increased slightly, by 40 basis points, from 94.8% to
95.2%. Including bad debt in the calculation to arrive at economic occupancy, this metric
increased to 93.9% for 2010 from 93.6% in 2009. The level of bad debt was only slightly higher at
133 basis points in 2010 compared to 127 basis points in 2009. For 2011, we are projecting bad
debt to be 121 basis points of rent potential.
35
Executive Summary (continued)
The Company uses a measurement referred to as Available to Rent, or ATR. This is a leading
indicator of future occupancy rates and refers to units which will be available for rent, based
upon leases signed or termination notices received relating to future move in/move out dates. As
of the end of January, 2011, our ATR was 5.6%, compared to the same time period a year ago when ATR
was 5.9%. This suggests that occupancy could improve slightly as we expect to have fewer units
available to rent in the near future. For 2011, we are projecting physical occupancy to be 10
basis points greater than 2010.
Total Core Properties rental revenue growth for 2010 was projected to be negative 0.1%, consisting
of a decrease of 0.1% in rental rate growth with economic occupancy to remain flat. Actual results
were negative 0.2% in rental rate growth and 0.3% increase in economic occupancy, resulting in 0.1%
total rental revenue growth, or 20 basis points higher than guidance.
The guidance for 2011 Core Properties (apartment units owned throughout 2010 and 2011, the 2011
Core Properties) revenue growth is 3.4%. Rental rates are projected to increase 3.4%, including
above-average rental increases at certain communities resulting from continued efforts to upgrade
the properties. Economic occupancies are expected to improve 0.2% for the year, such that rental
revenues are projected to increase 3.6%. Property other income is expected to stay flat year over
year, decreasing the 3.6% rental revenue increase to 3.4% total revenue growth. Expenses for 2011
Core Properties are projected to increase 2.4%.
These revenue and expense projections result in 2011 Core Properties NOI growth of 4.0% at the
mid-point of 2011 guidance. Markets where the Company expects NOI results above the average
include: Florida 5.3%; Washington, D.C. 5.0%: Philadelphia 5.0%; and Baltimore 4.4%. Markets with
below average expectations include: Maine 3.8%; Chicago 3.4%; New York City Metro area 3.3%; and
Boston -0.2%. Certain historical demographic information for these markets may be found in the
tables on Pages 10 and 11 of this report.
Of the two items comprising NOI, revenue and operating expenses, the revenue component is likely to
be more volatile. It is difficult to predict how robust the recovery will be, including factors
such as job growth and housing demand. A worsening economic environment is not expected. The
Company has given FFO guidance for 2011 with a range of $3.30 to $3.46 per share.
The Company has anticipated acquisitions of $275 million in its budget for 2011. The Company is
committed to a disciplined approach to acquisitions, but with stabilizing cap rates and a renewed
confidence in underwriting significantly NOI growth for the years of 2011 through at least 2013,
coupled with stabilization in the credit market, we believe that this is a time to make aggressive
acquisitions.
During 2011, the Company will target leverage at approximately 49% of debt-to-total market
capitalization (calculated using the stock price to estimate equity value) in order to meet the
goals described above. This level is substantially the same as the end of 2010.
36
Results of Operations (dollars in thousands, except unit and per unit data)
Comparison of year ended December 31, 2010 to year ended December 31, 2009.
The Company owned 105 communities with 35,798 apartment units throughout 2009 and 2010 where
comparable operating results are available for the years presented (the 2010 Core Properties).
For the year ended December 31, 2010, the 2010 Core Properties showed an increase in total revenues
of 0.3% and a net operating income increase of 1.7% over the 2009 period. Property level operating
expenses decreased 1.7%. Average physical occupancy for the 2010 Core Properties was 95.2%, up
from 94.8% in 2009, with average monthly rental rates of $1,136 per apartment unit, a decrease of
0.2% over the 2009 period.
A summary of the 2010 Core Properties NOI is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
Rent |
|
$ |
457,991 |
|
|
$ |
457,555 |
|
|
$ |
436 |
|
|
|
0.1 |
% |
Utility recovery revenue |
|
|
20,584 |
|
|
|
19,767 |
|
|
|
817 |
|
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent including recoveries |
|
|
478,575 |
|
|
|
477,322 |
|
|
|
1,253 |
|
|
|
0.3 |
% |
Other income |
|
|
21,218 |
|
|
|
20,928 |
|
|
|
290 |
|
|
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
499,793 |
|
|
|
498,250 |
|
|
|
1,543 |
|
|
|
0.3 |
% |
Operating and maintenance |
|
|
(203,784 |
) |
|
|
(207,279 |
) |
|
|
3,495 |
|
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
|
$ |
296,009 |
|
|
$ |
290,971 |
|
|
$ |
5,038 |
|
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (NOI) may fall within the definition of non-GAAP financial measure set
forth in Item 10(e) of Regulation S-K and, as a result, the Company may be required to include in
this report a statement disclosing the reasons why management believes that presentation of this
measure provides useful information to investors. The Company believes that NOI is helpful to
investors as a supplemental measure of the operating performance of a real estate company because
it is a direct measure of the actual operating results of the Companys apartment communities. In
addition, the apartment communities are valued and sold in the market by using a multiple of NOI.
The Company also uses this measure to compare its performance to that of its peer group. For a
reconciliation of NOI to income from continuing operations, please refer to Note 12 to Consolidated
Financial Statements, under Part IV, Item 15 of this Form 10-K.
During 2010, the Company acquired nine apartment communities with 2,614 units and placed into
service another 449 units at two development communities (the 2010 Acquisition Communities). The
inclusion of these acquired and developed communities generally accounted for the significant
changes in operating results for the year ended December 31, 2010.
A summary of the NOI from continuing operations for the Company as a whole is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ Change |
|
|
% Change |
|
Rent |
|
$ |
473,833 |
|
|
$ |
457,690 |
|
|
$ |
16,143 |
|
|
|
3.5 |
% |
Utility recovery revenue |
|
|
20,762 |
|
|
|
19,767 |
|
|
|
995 |
|
|
|
5.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent including recoveries |
|
|
494,595 |
|
|
|
477,457 |
|
|
|
17,138 |
|
|
|
3.6 |
% |
Other income |
|
|
21,878 |
|
|
|
20,960 |
|
|
|
918 |
|
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
516,473 |
|
|
|
498,417 |
|
|
|
18,056 |
|
|
|
3.6 |
% |
Operating and maintenance |
|
|
(211,038 |
) |
|
|
(207,293 |
) |
|
|
(3,745 |
) |
|
|
(1.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
|
$ |
305,435 |
|
|
$ |
291,124 |
|
|
$ |
14,311 |
|
|
|
4.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
37
Results of Operations (continued)
During 2010, the Company sold its general partnership interest in one investment where the Company
was the managing general partner that had been determined to be a Variable Interest Entity (VIE)
as defined by authoritative guidance. During 2009, the Company disposed of five properties in
three transactions with a total of 1,333 units, which had partial results for 2009 (the 2009
Disposed Communities). The results of these disposed properties and general partnership interest
have been reflected in discontinued operations and are not included in the tables above.
For the year ended December 31, 2010, income from continuing operations decreased by $331 when
compared to the year ended December 31, 2009. The decrease was primarily attributable to the
following factors: an increase in rental income of $16,143, and an increase in property other
income of $1,913. These changes were more than offset by a decrease in other income of $621, a
decrease in interest income of $32, an increase in operating and maintenance expense of $3,745, an
increase in general and administrative expense of $662, an increase in interest expense of $2,361,
an increase in depreciation and amortization of $8,095 and the addition in 2010 of other expenses
of $2,871 which represent property acquisition costs. Each of the items are described in more
detail below.
Of the $16,143 increase in rental income, $15,707 is attributable to the 2010 Acquisition
Communities. The balance, an increase of $436, relates to a 0.1% increase from the 2010 Core
Properties as the result of a 0.3% increase in economic occupancy from 93.6% to 93.9% partially
offset by a 0.2% decrease in weighted average rental rates from $1,137 to $1,136 per apartment
unit. Utility recovery revenue increased by $995, comprised of an increase attributable to the
2010 Acquisition Communities of $178, and an $817 increase to the 2010 Core Properties which is
partially driven by a comparable increase in water and sewer expense.
The remaining property other income, which consists primarily of income from operation of laundry
facilities, late charges, administrative fees, garage and carport rentals, revenue from corporate
apartments, cable revenue, pet charges, and miscellaneous charges to residents, increased in 2010
by $918. Of this increase, $628 is attributable to the 2010 Acquisition Communities and $290 is
attributable to the 2010 Core Properties resulting primarily from increases in renter insurance
door fees and pet charges.
Other income, which primarily reflects management and other real estate service fees recognized by
the Company, decreased by $621. This is primarily due to a decrease in post closing consultation
fees recognized between periods in connection with property dispositions, as the 2009 Disposed
Communities resulted in fees recognized in 2009. As there were no 2010 dispositions, there were no
post-close consulting fees. In addition, the 2010 Acquisition Communities included one property
that was previously subject to a management fee contract for all of 2009 and part of 2010 until
acquisition.
Of the $3,745 increase in operating and maintenance expenses, $7,240 is attributable to the 2010
Acquisition Communities. The balance for the 2010 Core Properties, a $3,495 decrease in operating
expenses or 1.7%, is primarily a result of decreases in natural gas heating costs, repairs &
maintenance, property insurance and electricity. These decreases were partially offset by
increases in snow removal costs, personnel expense and water & sewer costs.
38
Results of Operations (continued)
The breakdown of operating and maintenance costs for the 2010 Core Properties by line item is
listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
$ Variance |
|
|
% Variance |
|
Electricity |
|
$ |
8,184 |
|
|
$ |
8,858 |
|
|
$ |
674 |
|
|
|
7.6 |
% |
Gas |
|
|
16,529 |
|
|
|
18,767 |
|
|
|
2,238 |
|
|
|
11.9 |
% |
Water & sewer |
|
|
15,623 |
|
|
|
14,586 |
|
|
|
(1,037 |
) |
|
|
(7.1 |
%) |
Repairs & maintenance |
|
|
29,447 |
|
|
|
30,371 |
|
|
|
924 |
|
|
|
3.0 |
% |
Personnel expense |
|
|
47,451 |
|
|
|
46,436 |
|
|
|
(1,015 |
) |
|
|
(2.2 |
%) |
Advertising |
|
|
4,083 |
|
|
|
4,321 |
|
|
|
238 |
|
|
|
5.5 |
% |
Legal & professional |
|
|
1,585 |
|
|
|
1,602 |
|
|
|
17 |
|
|
|
1.1 |
% |
Office & telephone |
|
|
5,737 |
|
|
|
5,748 |
|
|
|
11 |
|
|
|
0.2 |
% |
Property insurance |
|
|
6,736 |
|
|
|
10,020 |
|
|
|
3,284 |
|
|
|
32.8 |
% |
Real estate taxes |
|
|
48,038 |
|
|
|
47,291 |
|
|
|
(747 |
) |
|
|
(1.6 |
%) |
Snow |
|
|
2,271 |
|
|
|
1,222 |
|
|
|
(1,049 |
) |
|
|
(85.8 |
%) |
Trash |
|
|
3,316 |
|
|
|
3,454 |
|
|
|
138 |
|
|
|
4.0 |
% |
Property management G&A |
|
|
14,784 |
|
|
|
14,603 |
|
|
|
(181 |
) |
|
|
(1.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
203,784 |
|
|
$ |
207,279 |
|
|
$ |
3,495 |
|
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Electricity costs were down $674, or 7.6% from a year ago primarily as a result of several energy
conservation efforts including a compact fluorescent bulb replacement program that was rolled out
in the third quarter of 2009. In addition, suppliers were changed in the Boston and Long Island
regions in 2010 resulting in savings, along with receiving one time rebates of $229 in the
Baltimore and Washington D.C. regions.
Natural gas heating costs were down $2,238, or 11.9% from a year ago due to a combination of lower
commodity rates offset by increased consumption resulting from a slightly colder 2010 than 2009.
For 2010, the Companys natural gas weighted average cost, including transportation of $3.00 per
decatherm, was $9.37 per decatherm, compared to $10.88 per decatherm for the 2009 period, a 13.9%
decrease.
As of the middle of February, 2011, the Company has fixed-price contracts covering approximately
99% of its natural gas exposure for the balance of the 2010/2011 heating season. Risk is further
diversified by staggering contract term expirations. For the balance of the 2010/2011 heating
season, the Company estimates the average price per decatherm will be approximately $6.10,
excluding transportation, which has historically approximated $3.00 per decatherm. For the
2011/2012 heating season, the Company has fixed-priced contracts covering approximately 82% of its
natural gas exposure for an estimated weighted average cost for fixed and floating rate contracts
of $5.70 per decatherm, excluding transportation.
Water & sewer costs were up $1,037, or 7.1%, from a year ago and are attributable to general rate
increases being assessed by local municipalities and a 1.7% increase in usage. The water & sewer
recovery program enabled the Company to recapture much of these rate and consumption increases from
our residents.
Repairs & maintenance expenses were down $924, or 3.0% from a year ago. Insurance claim recoveries
were $782 in 2010 compared to $938 in 2009. Without the impact of the insurance recoveries, the
recurring repairs & maintenance expenses decreased $1,080, or 3.4%, which reflects cost savings
realized through the rebidding of selected service contracts resulting in reduced rates in this
more competitive economic environment and the favorable impact of lower resident turnover of 38.6%
in 2010 as compared to 40.1% in 2009, which resulted in less spending on apartment turnover costs.
The Company has provided guidance for 2011 which anticipates a 5.9% increase in repairs and
maintenance.
Personnel expenses increased $1,015, or 2.2%, primarily due to the annual wage increase of 2.4% and
higher incentive compensation for property management personnel driven by the strong year over year
NOI growth. These increases were partially offset by $566 lower health insurance and workers
compensation costs in 2010 due to the settlement of a significant number of open workers
compensation claims during 2010 and the positive impacts of Company initiatives for emphasizing
safety in the workplace.
39
Results of Operations (continued)
Advertising expenses were down $238, or 5.5%, in 2010 and is reflective of the resident marketing
program which places less emphasis and spending on print media and more focus on referrals and
internet-based methods which have resulted in a 1% increase in traffic in 2010 as compared to 2009.
Property insurance costs decreased by $3,284, or 32.8%, primarily from $2,787 lower property and
general liability losses in 2010 as compared to 2009 due in part to the timing of the property
aggregate retention funding, which occurred in December 2009 for the 2009/2010 insurance policy
year as a result of two major fire losses, plus the favorable impact in 2010 of property level
safety and loss prevention measures. In addition, there were favorable impacts realized in both
periods as a result of required prior period reserve decreases, which were $1,289 and $253 in 2010
and 2009, respectively. These reserve decreases are a direct result of the Company focus on
settling older claims where the number of open claims has dropped 35% and 36% in 2010 and 2009,
respectively. The lower number of open claims had a favorable impact on the estimated required
reserves in both 2010 and 2009. The 2009 period also realized the benefit of $503 in subrogation
counterclaims settled for prior year property and general liability losses.
Real estate taxes were up $747, or 1.6%. A mitigating factor was $912 in refunds received in 2010
from successful tax assessment appeals compared to $1,318 in the 2009 period. Without the impact
of refunds, recurring taxes were up $341, or 0.7% which reflects the benefits of successful
assessment challenges in 2010.
Snow removal costs were up $1,049, or 85.8%, as most of our Mid-Atlantic region properties suffered
from record storms in the first quarter 2010.
Property management general & administrative costs increased $181, or 1.2%, which reflects annual
wage increases of 2.4% that were partially offset by staff reductions as a result of efficiencies
enabled through key application software investments.
The operating expense ratio (the ratio of operating and maintenance expense compared to rental and
property other income) for the 2010 Core Properties was 40.8% and 41.6% for 2010 and 2009,
respectively. The 0.8% favorable improvement in 2010 is due in part to deliberate cost savings and
safety initiatives implemented at the communities, and a decrease in natural gas commodity costs.
In general, the Companys operating expense ratio is higher than that experienced in other parts of
the country due to relatively high real estate taxes and heating costs in its markets.
General and administrative expenses (G&A) increased in 2010 by $662 or 2.7%, from $24,476 in 2009
to $25,138 in 2010. G&A as a percentage of total revenues (including discontinued operations) was
4.9% for 2010 as compared to 4.8% for 2009. The incentive bonus is up $598, or 29.8%, as compared
to 2009, reflecting the Companys favorable operating performance versus its peers. Stock based
compensation expenses were up $507 in 2010 as compared to 2009, primarily due to the impact of
employees nearing retirement age vesting over one less year in 2010 as compared to 2009. These
increases were partially offset by the 2009 period containing nonrecurring severance costs in the
amount of $735.
Interest expense increased by $2,361 in 2010 primarily as a result of interest expense on the new
debt of the 2010 Acquisition Communities and higher interest on the line of credit due to a higher
average balance outstanding in 2010.
Depreciation and amortization expense increased $8,095 due to the incremental depreciation on the
capital expenditures for additions and improvements to the Core Properties of $94,135 and $73,171
in 2010 and 2009, respectively, as well as a partial year of depreciation expense for the 2010
Acquisition Communities.
Other expenses of $2,871 are the transaction costs from the 2010 Acquisition Communities that were
expensed according to authoritative guidance. These costs, which are primarily transfer taxes and
title fees, represent 0.85% of the total purchase price of the 2010 Acquisition Communities. Prior
to 2009, the authoritative guidance required these costs to be capitalized as part of the
acquisition of properties. There were no costs incurred during 2009 as the company did not acquire
any properties.
40
Results of Operations (continued)
Included in discontinued operations for 2010 are the operating results of the VIE. Included in
discontinued operations for 2009 are the operating results of the 2009 Disposed Communities and the
VIE. For purposes of the discontinued operations presentation, the Company includes interest
expense and losses from early extinguishment of debt associated with specific mortgage indebtedness
of the properties that are sold or held for sale.
Included in the $13 loss on disposition of property reported for 2010 are residual items relating
to the 2009 Disposed Communities. Included in the $24,314 gain on disposition of property reported
for 2009 is the sale of five apartment communities.
Net income decreased $20,760 in 2010 primarily due to there being no gains on disposition of
property offset by $3,898 lower loss from discontinued operations in 2010 compared to 2009.
Comparison of year ended December 31, 2009 to year ended December 31, 2008.
The Company owned 102 communities with 34,768 apartment units throughout 2008 and 2009 where
comparable operating results are available for the years presented (the 2009 Core Properties).
For the year ended December 31, 2009, the 2009 Core Properties showed a decrease in total revenues
of 0.1% and no change in net operating income compared to the 2008 period. Property level
operating expenses decreased 0.2%. Average physical occupancy for the 2009 Core Properties
decreased from 95.0% to 94.9%, with average monthly rental rates increasing 0.1% to $1,137 per
apartment unit.
A summary of the 2009 Core Properties NOI is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
$ Change |
|
|
% Change |
|
Rent |
|
$ |
444,623 |
|
|
$ |
444,264 |
|
|
$ |
359 |
|
|
|
0.1 |
% |
Utility recovery revenue |
|
|
19,425 |
|
|
|
20,088 |
|
|
|
(663 |
) |
|
|
(3.3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent including recoveries |
|
|
464,048 |
|
|
|
464,352 |
|
|
|
(304 |
) |
|
|
(0.1 |
%) |
Other income |
|
|
20,444 |
|
|
|
20,558 |
|
|
|
(114 |
) |
|
|
(0.6 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
484,492 |
|
|
|
484,910 |
|
|
|
(418 |
) |
|
|
(0.1 |
%) |
Operating and maintenance |
|
|
(201,702 |
) |
|
|
(202,128 |
) |
|
|
426 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
|
$ |
282,790 |
|
|
$ |
282,782 |
|
|
$ |
8 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2008, the Company acquired and developed a total of 861 apartment units in three communities
(the 2008 Acquisition Communities). The inclusion of these acquired and developed communities
generally accounted for the significant changes in operating results for the year ended December
31, 2009.
A summary of the NOI from continuing operations for the Company as a whole is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
$ Change |
|
|
% Change |
|
Rent |
|
$ |
457,690 |
|
|
$ |
447,877 |
|
|
$ |
9,813 |
|
|
|
2.2 |
% |
Utility recovery revenue |
|
|
19,767 |
|
|
|
20,147 |
|
|
|
(380 |
) |
|
|
(1.9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent including recoveries |
|
|
477,457 |
|
|
|
468,024 |
|
|
|
9,433 |
|
|
|
2.0 |
% |
Other income |
|
|
20,960 |
|
|
|
21,177 |
|
|
|
(217 |
) |
|
|
(1.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
498,417 |
|
|
|
489,201 |
|
|
|
9,216 |
|
|
|
1.9 |
% |
Operating and maintenance |
|
|
(207,293 |
) |
|
|
(203,571 |
) |
|
|
(3,722 |
) |
|
|
(1.8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
|
$ |
291,124 |
|
|
$ |
285,630 |
|
|
$ |
5,494 |
|
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
41
Results of Operations (continued)
During 2010, the Company sold its general partnership interest in the VIE. During 2009, the
Company disposed of five properties in three transactions with a total of 1,333 units, which had
partial results for 2009 and full year results for 2008 (the 2009 Disposed Communities). During
2008, the Company disposed of fifteen properties in six transactions with a total of 1,227 units,
which had partial results for 2008 (the 2008 Disposed Communities). The results of these
disposed properties and general partnership interest have been reflected in discontinued operations
and are not included in the tables above.
For the year ended December 31, 2009, income from continuing operations decreased by $16,485 when
compared to the year ended December 31, 2008. The decrease was primarily attributable to the
following factors: an increase in rental income of $9,813, an increase in other income of $299,
and a decrease in general and administrative expense of $1,013. These changes were more than
offset by a decrease in property other income of $597, a decrease in interest income of $106, an
increase in operating and maintenance expense of $3,722, an increase in interest expense of $3,502
and an increase in depreciation and amortization of $8,379. In addition, the 2008 results included
a nonrecurring gain on early extinguishment of debt of $11,304. Each of the items are described in
more detail below.
Of the $9,813 increase in rental income, $9,454 is attributable to the 2008 Acquisition
Communities. The balance, an increase of $359, relates to a 0.1% increase from the 2009 Core
Properties due primarily to an increase of 0.1% in weighted average rental rates, accompanied by no
change in economic occupancy which was 93.7% for both periods. Utility recovery revenue decreased
by $380, comprised of an increase attributable to the 2008 Acquisition Communities of $283, offset
by a $663 decrease to the Core Properties. The lower utility recovery revenue in 2009 is due
primarily to warmer than normal temperatures in 2009 compared to cooler temperatures in the spring
of 2008, leading to decreased energy consumption and lower heat billed through to residents.
The remaining property other income, which consists primarily of income from operation of laundry
facilities, late charges, administrative fees, garage and carport rentals, revenue from corporate
apartments, cable revenue, pet charges, and miscellaneous charges to residents, decreased in 2009
by $217. Of this decrease, $103 is attributable to the 2008 Acquisition Communities, which
realized $473 of nonrecurring commercial revenues in 2008; and $114 is attributable to the 2009
Core Properties, which realized $367 in nonrecurring other income in 2008, partially offset by
higher laundry and pet fees in the 2009 period.
Interest income decreased $106 due to a lower level of invested excess cash on hand and lower
interest rates as compared to the prior year.
Other income, which primarily reflects management and other real estate service fees recognized by
the Company, increased by $299. This is primarily due to an increase in post closing consultation
fees recognized between periods in connection with property dispositions, as the fourth quarter
2008 dispositions resulted in first quarter 2009 fees, in addition to the first quarter 2009
dispositions resulting in fees recognized in 2009.
Of the $3,722 increase in operating and maintenance expenses, $4,148 is attributable to the 2008
Acquisition Communities. The balance for the 2009 Core Properties, a $426 decrease in operating
expenses or 0.2%, is primarily a result of increases in personnel expense, real estate taxes and
snow removal costs. These increases were more than offset by reductions in property insurance, gas
heating costs and property management G&A.
42
Results of Operations (continued)
The breakdown of operating and maintenance costs for the 2009 Core Properties by line item is
listed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
$ Variance |
|
|
% Variance |
|
Electricity |
|
$ |
8,698 |
|
|
$ |
8,402 |
|
|
$ |
(296 |
) |
|
|
(3.5 |
%) |
Gas |
|
|
18,356 |
|
|
|
19,290 |
|
|
|
934 |
|
|
|
4.8 |
% |
Water & sewer |
|
|
14,076 |
|
|
|
13,562 |
|
|
|
(514 |
) |
|
|
(3.8 |
%) |
Repairs & maintenance |
|
|
29,449 |
|
|
|
29,540 |
|
|
|
91 |
|
|
|
0.3 |
% |
Personnel expense |
|
|
45,172 |
|
|
|
43,903 |
|
|
|
(1,269 |
) |
|
|
(2.9 |
%) |
Advertising |
|
|
4,100 |
|
|
|
4,341 |
|
|
|
241 |
|
|
|
5.6 |
% |
Legal & professional |
|
|
1,561 |
|
|
|
1,786 |
|
|
|
225 |
|
|
|
12.6 |
% |
Office & telephone |
|
|
5,599 |
|
|
|
5,853 |
|
|
|
254 |
|
|
|
4.3 |
% |
Property insurance |
|
|
9,681 |
|
|
|
12,060 |
|
|
|
2,379 |
|
|
|
19.7 |
% |
Real estate taxes |
|
|
46,255 |
|
|
|
44,444 |
|
|
|
(1,811 |
) |
|
|
(4.1 |
%) |
Snow |
|
|
1,181 |
|
|
|
696 |
|
|
|
(485 |
) |
|
|
(69.7 |
%) |
Trash |
|
|
3,378 |
|
|
|
3,264 |
|
|
|
(114 |
) |
|
|
(3.5 |
%) |
Property management G&A |
|
|
14,196 |
|
|
|
14,987 |
|
|
|
791 |
|
|
|
5.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
201,702 |
|
|
$ |
202,128 |
|
|
$ |
426 |
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas heating costs were down $934, or 4.8%, from a year ago, due mostly to decreases in
natural gas pricing as a direct result of the Companys natural gas purchasing program. For 2009,
our natural gas weighted average cost, including transportation of $3.00 per decatherm, was $10.88
per decatherm compared to $11.38 for the 2008 period, a 4.4% decrease. In addition to the savings
on the commodity cost we also experienced a slight decrease in consumption during 2009 due to the
impact of conservation measures and slightly warmer temperatures.
Water & sewer costs were up $514, or 3.8%, from a year ago and is attributable to general cost
increases being assessed by local municipalities; however, the water & sewer recovery program
enables the Company to recapture much of these cost increases from our residents.
Repairs & maintenance expenses were down $91, or 0.3%, primarily due to the 2009 period including
$77 more in recoveries from insurance claims. Without the impacts of these insurance recoveries,
the recurring repairs & maintenance expenses decreased $14, which reflects the diligent efforts of
property management to control costs through the renegotiation of service contracts permitted by
the competitive economic environment.
Personnel expenses were up $1,269 or 2.9%, over 2008. Cost increases were partially offset by a
$305 decrease in health and workers compensation reserves between periods. In 2009, reserves were
lowered by $324 as compared to 2008, where we were able to lower these reserves by $19. The change
in the reserves between periods reflects the variable nature of health and workers compensation
claims, the settlement of nearly 25% of the open prior year claims during 2009 and the positive
impacts of Company initiatives for emphasizing safety in the workplace which were launched in
mid-2009. The balance of the increase in personnel costs after the favorable reserve changes was
$1,574, or 3.6%, which includes a 2.6% salary and wage increase between periods.
Advertising expenses were down $241, or 5.6%, in 2009 and is reflective of the resident marketing
program which places less emphasis and spending on print media and more focus on referrals and
internet-based methods which have resulted in a 1% increase in traffic in 2009 as compared to 2008.
Legal & professional expenses were down $225, or 12.6%, primarily due to 2008 including a
nonrecurring specific reserve for pending litigation.
43
Results of Operations (continued)
Property insurance costs decreased $2,379, or 19.7%, due in part to a favorable change of $1,191 in
the self-insurance reserves. In 2009, we realized a reduction of $369 compared to an increase of
$822 in 2008. The favorable reduction is attributable to the resolution of over 50% of the prior
years open general liability and property loss claims during 2009 at amounts less than previously
estimated, along with the actuarially favorable impact of having fewer open claims. The decrease
before reserve adjustments of $1,188, or 9.9%, is partially the result of settling $483 of
subrogation claims in 2009 and increased emphasis on preventing losses at the communities through
safety training programs and the installation of in-unit fire extinguishers for every apartment and
townhome.
Real estate taxes were up $1,811, or 4.1%. A mitigating factor was $1,318 in refunds received in
2009 from successful tax assessment appeals compared to $590 in the 2008 period. Without the
impact of refunds, recurring taxes were up $2,539, or 5.7%, reflecting increased assessments and
typical rate increases in our markets.
Snow removal costs were up $485, or 69.7%. The year 2009 produced above normal snowfalls compared
to below normal snowfalls in 2008. Trash removal costs were up $114, or 3.5%, driven by higher
costs, including fuel surcharges, being passed through to the Company by trash haulers.
Property management general & administrative costs decreased $791, or 5.3%, primarily due to staff
reductions as a result of efficiencies enabled through key application software investments and
lower performance-based compensation.
The operating expense ratio (the ratio of operating and maintenance expense compared to rental and
property other income) for the 2009 Core Properties was 41.6% and 41.7% for 2009 and 2008,
respectively. The consistent performance despite a tough operating climate is the result of
increases in rental rates achieved through ongoing efforts to upgrade and reposition properties for
maximum potential, deliberate cost savings implemented at the communities, and Company-wide
programs designed to reduce or maintain spending levels. In general, the Companys operating
expense ratio is higher than that experienced in other parts of the country due to relatively high
real estate taxes and heating costs in its markets.
General and administrative expenses (G&A) decreased in 2009 by $1,013 or 4.0%, from $25,489 in
2008 to $24,476 in 2009. G&A as a percentage of total revenues (including discontinued operations)
were 4.8% for 2009 as compared to 5.0% for 2008. The incentive bonus is down $2,015, or 50.1%, as
compared to 2008, which reflects the decrease in the Companys operating performance as compared to
the prior year. Stock based compensation expenses were up $1,296 in 2009 as compared to 2008, due
in part to the change in estimated forfeitures from the 2004 grant year and the impact of the
prescribed accounting rule changes in vesting period determination for retirement eligibility that
took effect in 2006. In addition, the Company recorded $582 in nonrecurring severance costs in the
2009 period. A decrease of $130, or 11.1%, was realized in the external costs incurred for
auditing, tax and consultation expense.
Interest expense increased by $3,502 in 2009 primarily as a result of interest expense on the new
debt of the 2008 Acquisition Communities, partially offset by lower interest on the Senior Notes as
a result of the $60,000 principal amount extinguishment in the fourth quarter 2008.
Depreciation and amortization expense increased $8,379 due to the incremental depreciation on the
capital expenditures for additions and improvements to the Core Properties of $69,541 and $100,751
in 2009 and 2008, respectively, as well as a full year of depreciation expense for the 2008
Acquisition Communities.
During October and November 2008, the Company repurchased and retired $60,000 principal amount
(with a carrying value of $57,367) of its exchangeable senior notes for $45,360, in several
privately-negotiated transactions resulting in a gain on early extinguishment of debt of $11,304,
after the write off of $703 unamortized debt issuance costs.
44
Results of Operations (continued)
Included in discontinued operations for 2009 are the operating results of the VIE and the 2009
Disposed Communities. Included in discontinued operations for 2008 are the operating results of
the VIE and the 2009 and 2008 Disposed Communities. For purposes of the discontinued operations
presentation, the Company includes interest expense and losses from early extinguishment of debt
associated with specific mortgage indebtedness of the properties that are sold or held for sale.
Included in the $24,314 gain on disposition of property reported for 2009 is the sale of five
apartment communities. Included in the $51,560 gain on disposition of property reported for 2008
is the sale of fifteen apartment communities.
Net income decreased $46,127 in 2009 primarily due to there being no gain on early extinguishment
of debt, a decrease in gain on disposition of property of $27,246 and $2,396 higher losses from
discontinued operations in 2009 compared to 2008.
Liquidity and Capital Resources
General
The Companys principal liquidity demands are expected to be distributions to the common
stockholders and holders of UPREIT Units, capital improvements and repairs and maintenance for its
properties, acquisition and development of additional properties and debt repayments, including any
exchangeable senior notes that may be put to the Company. The Company may also acquire equity
ownership in other public or private companies that own and manage portfolios of apartment
communities.
The Company intends to meet its short-term liquidity requirements through net cash flows provided
by operating activities and its existing bank line of credit, described below. The Company
considers its ability to generate cash to be adequate to meet all operating requirements, including
availability to pay dividends to its stockholders and make distributions to its Unit holders in
accordance with the provisions of the Internal Revenue Code, as amended, applicable to REITs.
In 2000, the Company obtained an investment grade rating from Fitch, Inc. The rating in effect at
December 31, 2010 (no change from initial rating) is a corporate credit rating of BBB (Triple-B).
For 2011, plans include increasing the level of the value of unencumbered properties to over 22% of
the portfolio, maintaining the debt-to-total market capitalization ratio at a level equal to or
slightly more than the level at December 31, 2010 and issuing the shares authorized under the ATM
program at levels above NAV.
Cash Flow Summary
The Companys net cash flow from operating activities was $160 million in 2010 compared to $150
million in 2009. The $10 million increase was primarily a result of $14 million higher NOI in 2010
partially offset by $5 million higher funding of escrows included in cash held in escrows primarily
attributable to the 2010 Acquisition Communities.
Cash used in investing activities was $335 million during 2010 compared to $48 million in 2009.
The $287 million increase in investing between periods is primarily due to the $186 million used
for acquisition communities in 2010 as compared to no acquisitions in 2009. The 2009 period
received the benefit of $106 million proceeds from the sale of properties, while the 2010 period
realized no property sales. Cash outflows for capital improvements were $98 million in 2010
compared to $79 million in 2009. The investments in both periods reflects managements strategy to
continually reposition and perform selective rehabilitation in markets that are able to support
rent increases, with the 2010 increase reflective of the demand in the market for upgraded
apartments. Cash outflows for additions to construction in progress were $46 million in 2010 as
compared to $74 million in 2009. The lower spending on development in 2010 reflects the completion
of one major project during 2010 compared to the active construction of two communities in 2009.
45
Liquidity and Capital Resources (continued)
Net cash provided by financing activities totaled $176 million in 2010. Cash flows from the sale of
common stock under the ATM offering of $108 million, net proceeds from mortgage financing of $172
million, proceeds from stock option exercises of $11 million and net borrowing under our line of
credit of $3 million were partially offset by distributions paid to stockholders and UPREIT
Unitholders of $112 million and payments of $6 million for mortgage borrowing costs.
Net cash used in financing activities totaled $100 million for 2009, primarily as a result of the
sale of common stock under the ATM offering of $39 million, net proceeds from mortgage financing of
$2 million and proceeds from stock option exercises of $5 million being more than offset by
distributions paid to stockholders and UPREIT Unitholders of $122 million, net payments under our
line of credit of $17 million and payments of $7 million for mortgage borrowing costs.
Line of Credit
As of December 31, 2010, the Company had a $175 million unsecured line of credit agreement with M&T
Bank, as administrative agent and lead bank, which was set to expire August 31, 2011, with a
one-year extension, at the Companys option. The Company had $56.5 million outstanding under the
credit facility on December 31, 2010. The line of credit agreement provides the ability to issue
up to $20 million in letters of credit. While the issuance of letters of credit does not increase
the borrowings outstanding under the line of credit, it does reduce the amount available. At
December 31, 2010, the Company had outstanding letters of credit of $4.5 million. As of December
31, 2010, the amount available on the credit facility was $114 million. Borrowings under the line
of credit bore interest at rates that ranged from 2.50% to 3.25% over the one-month LIBOR rate,
increasing at higher levels of outstanding indebtedness, with a LIBOR floor of 1.50%. The
one-month LIBOR was 0.26% at December 31, 2010, resulting in an effective rate of 4.50% for the
Company.
On February 10, 2011, the Company amended and extended the $175 million unsecured line of credit
agreement. The amended line of credit agreement expires August 31, 2012, and has a one-year
extension, at the Companys option. Borrowings under the amended line of credit bear interest at
rates ranging from 1.90% to 2.63% over the one-month LIBOR rate, increasing at higher levels of
indebtedness, without a LIBOR floor. The one-month LIBOR was 0.31% at February 10, 2011, resulting
in an effective rate of 2.61% for the Company.
Exchangeable Senior Notes
In October 2006, the Company issued $200 million of exchangeable senior notes with a coupon rate of
4.125% (Senior Notes), which generated net proceeds of $195.8 million. The net proceeds were
used to repurchase 933,000 shares of common stock for a total of $58 million, pay down $70 million
on the line of credit, with the balance used for redemption of the Series F Preferred Shares and
property acquisitions. During the fourth quarter of 2008, the Company repurchased $60 million of
the Senior Notes for $45.4 million. The exchange terms and conditions are more fully described
under Contractual Obligations and Other Commitments below.
The Company anticipates that it will have to finance some of the $140 million senior convertible
debt that has a put option in November 2011. The Company will finance any puts with proceeds from
the line of credit, additional secured or unsecured financings and/or proceeds from the sale of
stock under the ATM program.
Indebtedness
As of December 31, 2010, the weighted average interest rate on the Companys total indebtedness of
$2.6 billion was 5.16% with staggered maturities averaging approximately seven years.
Approximately 90% of total indebtedness is at fixed rates. This limits the exposure to changes in
interest rates, minimizing the effect of interest rate fluctuations on the Companys results of
operations and cash flows.
46
Liquidity and Capital Resources (continued)
Unencumbered Assets
The Company increased the percentage of unencumbered assets of the total property pool from 20% at
the end of 2009, to 22% as of December 31, 2010. Higher levels of unsecured assets add borrowing
flexibility because more capacity is available for unsecured debt under the terms of the Companys
unsecured line of credit agreement and/or allows the Company to place secured financing on
unencumbered assets if desired.
UPREIT Units
The Company believes that the issuance of UPREIT Units for property acquisitions will continue to
be a potential source of capital for the Company. During 2010, the Company issued $4.8 million
in 98,728 UPREIT Units as consideration for one acquired property.
Universal Shelf Registration
On April 4, 2007, the Company filed a Form S-3 universal shelf registration statement with the SEC
that registered the issuance, from time to time, of common stock, preferred stock or debt
securities. Under that registration statement, the Company could offer and sell securities issued
pursuant to the universal shelf registration statement after a prospectus supplement, describing
the type of security and amount being offered, was filed with the SEC. Sales of common stock under
the Companys ATM offering from December 2009 to March 3, 2010 as described below were made under
this registration statement.
The April 2007 shelf registration statement was set to expire in April 2010. As a result, the
Company filed a new Form S-3 shelf registration statement with the SEC on March 3, 2010 having
substantially the same provisions and purposes as the April 2007 registration statement. Sales of
common stock under the Companys ATM on or after March 3, 2010 described below were made under this
registration statement.
At-the-Market Equity Offering Program
On December 3, 2009, the Company initiated an At-the-Market (ATM) equity offering program
through which it was authorized to sell up to 3.7 million shares of common stock (not to exceed
$150 million of gross proceeds), from time to time in ATM offerings or negotiated transactions.
From December 2009 through completion of the offering in May 2010, the Company issued 3.2 million
shares of common stock at an average price per share of $47.19, for aggregate gross proceeds of
$150.0 million and aggregate net proceeds of $147.0 million after deducting commissions and other
transaction costs of approximately $3.0 million.
On September 17, 2010, the Company filed a prospectus supplement with respect to another ATM equity
offering program, with similar terms and conditions as the December 2009 program, through which it
is authorized to sell up to 3.6 million shares of common stock, from time to time in ATM offerings
or negotiated transactions. There were no shares issued from this program since inception through
December 31, 2010. If shares are issued, the Company intends to use the net proceeds from the
offering for general corporate purposes, which may include the repayment of debt, working capital,
capital expenditures, acquisitions, development and redevelopment of apartment communities.
47
Liquidity and Capital Resources (continued)
Dividend Reinvestment and Direct Stock Purchase Plan (DRIP)
The Companys DRIP provides the stockholders of the Company an opportunity to automatically invest
their cash dividends in additional shares of common stock. In addition, eligible participants may
make monthly payments or other voluntary cash investments in shares of common stock. The maximum
monthly investment permitted without prior Company approval is currently $10,000. The Company
currently meets share demand under the DRIP through stock repurchases by the transfer agent in the
open market on the Companys behalf or new stock issuances. Management monitors the relationship
between the Companys stock price and its estimated net asset value (NAV). During times when the
difference between these two values is small, resulting in little dilution of NAV by common stock
issuances, the Company can choose to issue new shares. At times when the gap between NAV and stock
price is greater, the Company has the flexibility to satisfy the demand for DRIP shares with stock
repurchased by the transfer agent in the open market. In addition, the Company can issue waivers
to DRIP participants to provide for investments in excess of the $10,000 maximum monthly
investment. No such waivers were granted during 2009 or 2010.
Stock Repurchase Program
In 1997, the Board approved a stock repurchase program under which the Company may repurchase
shares of its common stock or UPREIT Units (Company Program). The shares and units may be
repurchased through open market or privately negotiated transactions at the discretion of Company
management. The Boards action did not establish a target stock price or a specific timetable for
repurchase. There were no repurchases under the Company Program during 2009 and 2010. The
remaining authorization level as of December 31, 2010 is 2,291,160 shares. The Company will
continue to monitor stock prices relative to the NAV to determine the current best use of capital
among our major uses of capital: stock buybacks, debt paydown to increase the unencumbered pool,
acquisitions, rehabilitation and/or redevelopment of owned properties and development of new
properties. At the present time, the Company has no intention of buying any stock back during the
remainder of 2011.
48
Critical Accounting Policies
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 in certain
circumstances that affect amounts reported in the accompanying consolidated financial statements
and related notes. In preparing these financial statements, management has utilized information
available including industry practice and its own past history in forming its estimates and
judgments of certain amounts included in the financial statements, giving due consideration to
materiality. It is possible that the ultimate outcome as anticipated by management in formulating
its estimates inherent in these financial statements may not materialize. However, application of
the accounting policies involves the exercise of judgment and use of assumptions as to future
uncertainties and, as a result, actual results could differ from these estimates. In addition,
other companies may utilize different estimates which may impact comparability of the Companys
financial position and results of operations to those of companies in similar businesses.
The Companys significant accounting policies are described in Notes 2 and 3 to Consolidated
Financial Statements. These policies were followed in preparing the Consolidated Financial
Statements for the year ended December 31, 2010 and are consistent with the year ended December 31,
2009.
The Company has identified the following significant accounting policies as critical accounting
policies. These critical accounting policies are those that have the most impact on the reporting
of our financial condition and those requiring significant judgments and estimates. With respect
to these critical accounting policies, management believes that the application of judgments and
estimates is consistently applied and produces financial information that fairly presents the
results of operations for all periods presented.
Acquisition of Investments in Real Estate
The Company accounts for its acquisitions of investments in real estate in accordance with the
authoritative guidance for the initial measurement, which requires the assets and liabilities
acquired to be recognized using fair value. Typical assets and liabilities acquired include land,
building, and personal property and identified intangible assets and liabilities, consisting of the
value of above-market and below-market leases, value of in-place leases and value of resident
relationships, based in each case on their fair values. In making estimates of fair value for
purposes of the initial accounting of the purchased real estate, the Company utilizes a number of
sources, including our own analysis of recently acquired and existing comparable properties in our
portfolio and other market data. The Company also considers information obtained about each
property as a result of its pre-acquisition due diligence, marketing and leasing activities in
estimating the fair value of the tangible and intangible assets acquired.
Cost Capitalization
The Company capitalizes the payroll and associated costs of employees directly responsible for the
supervision and/or construction of major capital and/or rehabilitation projects. These costs are
reflected on the balance sheet as an increase to depreciable property.
For development properties, the Company uses its professional judgment in determining whether such
costs meet the criteria for capitalization or must be expensed as incurred. Costs directly related
to the development of properties are capitalized. The Company capitalizes interest, real estate
taxes and insurance and payroll and associated costs for those individuals directly responsible for
and who spend all their time on development activities. Determination of when a development
project commences and capitalization begins, and when a development project is substantially
complete and capitalization must end involves a degree of judgment. We begin the capitalization of
costs during the pre-construction period which we define as activities that are necessary to the
development of the property. We consider a development property as substantially complete after
major construction has ended and the property is available for occupancy. For properties that are
built in phases, we end capitalization on the portion of a property that is considered
substantially complete, and we capitalize only those costs associated with the portion under
construction. These costs are reflected on the balance sheet as construction in progress.
49
Critical Accounting Policies (continued)
Depreciation of Investments in Real Estate
The Company depreciates the building component of its investment in real estate over a 40-year
estimated useful life, building improvements over a 3-year to 20-year estimated useful life and the
furniture, fixtures and equipment over a 5-year to 10-year estimated useful life, all of which are
judgmental determinations. These assessments have a direct impact on the Companys net income.
Impairment of Long-Lived Assets
Management reviews its long-lived assets used in operations for impairment when, in accordance with
the authoritative guidance for the accounting for the impairment or disposal of long-lived assets,
there is an event or change in circumstances that indicates an impairment in value. The judgments
regarding the existence of impairment indicators are based on factors such as operational
performance, market conditions and legal and environmental concerns, as well as the Companys
ability to hold and its intent with regard to each asset. Future events could occur which could
cause the Company to conclude that impairment indicators exist and an impairment charge is
warranted.
Variable Interest Entities (dollars in thousands, except unit data)
During the fourth quarter of 2010, the Company sold its general partnership interest in its one
variable interest entity (VIE). Previously, the VIE was consolidated in accordance with
authoritative guidance for consolidation of VIEs (ASC 810-10). The consideration for the sale
included the assumption of the existing $15,762 non-recourse loan. The sale was recorded in the
fourth quarter, generating other income of $669, which is included in income from discontinued
operations, and is the difference between the consideration received and the carrying value of the
net assets and liabilities less sale related expenses. The effect of the VIE on the December 31,
2009 Consolidated Balance Sheets includes total assets of $11,436, total liabilities of $17,060 and
partners deficit of $5,624. The VIE is included in discontinued operations within the
Consolidated Statement of Operations for the years ended December 31, 2010, 2009, and 2008.
During 2008, the Company determined to pursue a strategy to sell its general partner interest in
the VIE as a result of continued deterioration in property performance and the surrounding market
in general. In addition, the limited partner of the VIE agreed to allow the Company to pursue an
exit strategy. The Company had the property under contract for sale with significant outstanding
contingencies that needed to be resolved, including limited partner approval and a pending
refinancing, before the property could be sold. The decision to pursue a plan to exit the property
lead to a re-evaluation of the holding period cash flows and resulting fair market value of the
VIEs assets under the authoritative guidance for impairment of long-lived assets (ASC 360-10).
Under the authoritative guidance, the Company estimated the undiscounted cash flows for the holding
period along with a residual sales value. The undiscounted cash flows of the assets did not equal
or exceed the assets net book value, which is indicative of an impairment of the asset. In order
to determine the amount of the impairment, the Company calculated the fair value of the assets by
using a weighted combination of a direct capitalization approach and a comparable sales approach,
as this combination was deemed to be the most indicative of the Companys fair value in an orderly
transaction between market participants. The data used to determine the fair market value included
historical industry data for estimated capitalization rates, historical and budgeted NOI for the
VIE, and recent comparable sales in the market in which the property is located. This resulted in
an impairment charge of $4,000 (including $394 of goodwill), which is included in discontinued
operations as the impairment of assets held as general partner for the year ended December 31,
2008.
50
Acquisitions and Development
Acquisitions
In 2010, the Company acquired nine communities with 2,614 units for a combined purchase price of
$339.1 million, for an average of $130,000 per unit. In connection with these acquisitions,
closing costs of $2.9 million were incurred and are included in other expenses. The weighted
average expected first year cap rate of the 2010 Acquisition
Communities was 6.1%.
Development
At the close of 2009, the Company had two projects under construction: 1200 East West Highway
located in Silver Spring, Maryland, a 14-story high rise with 247 apartment units; and, the Courts
at Huntington Station, located in Alexandria, Virginia, consisting of four four-story buildings
with 421 apartment units.
During the fourth quarter of 2010, construction activities on 1200 East West Highway were
substantially completed, the property reached stabilization (physical occupancy of 95% or higher).
During 2010, the 247 apartment units were placed into service in several phases. The total cost
for this community was $83 million.
At the end of 2010, construction of 202 units in first phase of the Courts at Huntington Station
was complete and available to rent, with 145 units occupied. The lease-up period is projected to
last through mid-2011. Construction on the second phase, consisting of 219 units, has commenced
and is scheduled to be completed in the second quarter of 2011, reaching stabilization
approximately one year later. Upon completion, the total cost for this community is expected to be
$127 million.
The Company also has two projects in pre-construction development: Cobblestone Square located in
Fredericksburg, Virginia, consisting of 314 apartment units; and Ripley Street located in Silver
Spring, Maryland, an 18-story high rise development with 379 apartment units. Both projects are on
entitled land that the Company purchased from other developers and both are in the final stages of
the design process.
Contractual Obligations and Other Commitments
The primary obligations of the Company relate to its borrowings under the line of credit, Senior
Notes and mortgage notes payable. The Companys line of credit matures in August 2012 (not
including a one-year extension, at the option of the Company), and had $56.5 million in loans and
letters of credit totaling $4.5 million, outstanding at December 31, 2010. The $2.4 billion in
mortgage notes payable have varying maturities ranging from two months to twenty-three years. The
principal and interest payments on the mortgage notes payable for the years subsequent to December
31, 2010, are set forth in the table below as Long-term debt principal and Long-term debt -
interest.
In October 2006, the Company issued $200 million of Senior Notes with a coupon rate of 4.125%.
During 2008, the Company repurchased and retired $60 million principal amount of its Senior Notes
and $140 million remain outstanding at December 31, 2010. The notes are exchangeable into cash
equal to the principal amount of the notes and, at the Companys option, cash or common stock for
the exchange value, to the extent that the market price of common stock exceeds the initial
exchange price of $73.34 per share, subject to adjustment. The exchange price is adjusted for
payments of dividends in excess of the reference dividend set in the indenture of $0.64 per share.
The adjusted exchange price at December 31, 2010 was $72.87 per share. Upon an exchange of the
notes, the Company will settle any amounts up to the principal amount of the notes in cash and the
remaining exchange value, if any, will be settled, at the Companys option, in cash, common stock
or a combination of both. The notes are not redeemable at the option of the Company for five years
from their issue date, except to preserve the status of the Company as a REIT. Holders of the
notes may require the Company to repurchase the notes upon the occurrence of certain designated
events. In addition, prior to November 1, 2026, the holders may require the Company to repurchase
the notes on November 1, 2011, 2016 and 2021. The notes will mature on November 1, 2026, unless
previously redeemed, repurchased or exchanged in accordance with their terms prior to that date.
51
Contractual Obligations and Other Commitments (continued)
The Company leases its corporate office space from an affiliate and the office space for its
regional offices from non-affiliated third parties. The rent for the corporate office space is a
gross rent that includes real estate taxes and common area maintenance. The regional office leases
are net leases which require an annual base rent plus a pro-rata portion of real estate taxes.
These leases are set forth in the table below as Operating leases.
Purchase obligations represent those costs that the Company is contractually obligated to pay in
the future. The significant components of this caption are costs for capital improvements at the
Companys properties, as well as costs for normal operating and maintenance expenses at the site
level that are tied to contracts such as utilities, landscaping and grounds maintenance and
advertising. The purchase obligations include amounts tied to contracts, some of which expire in
2011. It is the Companys intention to renew these normal operating contracts, however, there has
been no attempt to estimate the length or future costs of these contracts.
Tabular Disclosure of Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period (in thousands) |
|
Contractual Obligations(4) |
|
Total |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2015 |
|
|
Thereafter |
|
Long-term debt-principal |
|
$ |
2,424,214 |
|
|
$ |
80,681 |
|
|
$ |
156,621 |
|
|
$ |
225,119 |
|
|
$ |
128,115 |
|
|
$ |
276,598 |
|
|
$ |
1,557,080 |
|
Long-term debt-interest |
|
|
739,143 |
|
|
|
123,591 |
|
|
|
114,355 |
|
|
|
105,950 |
|
|
|
95,351 |
|
|
|
86,323 |
|
|
|
213,573 |
|
Senior Notes (1) (2) |
|
|
140,000 |
|
|
|
140,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit (1) (3) |
|
|
56,500 |
|
|
|
|
|
|
|
56,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
9,339 |
|
|
|
1,787 |
|
|
|
1,737 |
|
|
|
1,511 |
|
|
|
1,498 |
|
|
|
1,518 |
|
|
|
1,288 |
|
Purchase obligations |
|
|
4,210 |
|
|
|
4,193 |
|
|
|
11 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (4) |
|
$ |
3,373,406 |
|
|
$ |
350,252 |
|
|
$ |
329,224 |
|
|
$ |
332,586 |
|
|
$ |
224,964 |
|
|
$ |
364,439 |
|
|
$ |
1,771,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts include principal payments only. The Company will pay interest on
outstanding indebtedness based on the rates and terms summarized in Notes 7 and 8 to
Consolidated Financial Statements. |
|
(2) |
|
The payment in 2011 corresponds to the earliest possible date at which note holders
could require the Company to repurchase the Senior Notes. |
|
(3) |
|
The payment in 2012 reflects the amendment of the line of credit agreement as
described in Note 18 to Consolidated Financial Statements. |
|
(4) |
|
The contractual obligations and other commitments in the table are set forth as
required by Item 303(a)(5) of Regulation S-K promulgated by the SEC in January of 2003 and are
not prepared in accordance with generally-accepted accounting principles. |
The Company, through its general partnership interest in an affordable property limited
partnership, has a secondary guarantee through 2015 on certain low income housing tax credits to
limited partners in this partnership totaling approximately $3 million. With respect to the
guarantee of the low income housing tax credits, the new unrelated general partner assumed
operating deficit guarantee and primary tax credit guarantee positions, as more fully described in
Notes 4 and 14 to Consolidated Financial Statements. The Company believes the propertys
operations conform to the applicable requirements and does not anticipate any payment on the
guarantee.
52
Capital Improvements (dollars in thousands, except unit and per unit data)
For 2010, the Company estimates that the amount of recurring, non-revenue enhancing capital
expenditures incurred on an annual basis for a standard garden style apartment will remain
unchanged at $800 per apartment unit.
The Companys policy is to capitalize costs related to the construction, development,
rehabilitation and improvement of properties. Capital improvements are costs that increase the
value and extend the useful life of an asset. Ordinary repair and maintenance costs that do not
extend the useful life of the asset are expensed as incurred. Costs incurred on a lease turnover
due to normal wear and tear by the resident are expensed on the turn. Recurring capital
improvements typically include appliances, carpeting and flooring, HVAC equipment, kitchen and bath
cabinets, new roofs, site improvements and various exterior building improvements. Non-recurring,
revenue generating capital improvements include, among other items, community centers, new windows,
and kitchen and bath apartment upgrades. Revenue generating capital improvements will directly
result in rental earnings or expense savings. The Company capitalizes interest and certain
internal personnel costs related to the communities under rehabilitation and construction.
The table below is a list of the items that management considers recurring, non-revenue enhancing
capital and maintenance expenditures for a standard garden style apartment. Included are the per
unit replacement cost and the useful life that management estimates the Company incurs on an annual
basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized |
|
|
Expense |
|
|
Total |
|
|
|
Capitalized |
|
|
|
|
|
|
Expenditure |
|
|
Cost per |
|
|
Cost per |
|
|
|
Cost per |
|
|
Useful |
|
|
Per Unit |
|
|
Unit |
|
|
Unit |
|
Category |
|
Unit |
|
|
Life(1) |
|
|
Per Year(2) |
|
|
Per Year(3) |
|
|
Per Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appliances |
|
$ |
1,436 |
|
|
|
9 |
|
|
$ |
160 |
|
|
$ |
13 |
|
|
$ |
173 |
|
Blinds, shades |
|
|
135 |
|
|
|
3 |
|
|
|
45 |
|
|
|
7 |
|
|
|
52 |
|
Carpets, cleaning |
|
|
770 |
|
|
|
4 |
|
|
|
193 |
|
|
|
180 |
|
|
|
373 |
|
Computers, equipment, misc.(4) |
|
|
120 |
|
|
|
6 |
|
|
|
20 |
|
|
|
18 |
|
|
|
38 |
|
Contract repairs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147 |
|
|
|
147 |
|
Exterior painting (5) |
|
|
84 |
|
|
|
3 |
|
|
|
28 |
|
|
|
|
|
|
|
28 |
|
Flooring |
|
|
250 |
|
|
|
9 |
|
|
|
28 |
|
|
|
|
|
|
|
28 |
|
Furnace, air (HVAC) |
|
|
824 |
|
|
|
24 |
|
|
|
34 |
|
|
|
105 |
|
|
|
139 |
|
Hot water heater |
|
|
260 |
|
|
|
7 |
|
|
|
37 |
|
|
|
|
|
|
|
37 |
|
Interior painting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205 |
|
|
|
205 |
|
Kitchen, bath cabinets upgrade |
|
|
1,200 |
|
|
|
15 |
|
|
|
80 |
|
|
|
|
|
|
|
80 |
|
Landscaping site |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131 |
|
|
|
131 |
|
New roof |
|
|
800 |
|
|
|
24 |
|
|
|
33 |
|
|
|
|
|
|
|
33 |
|
Parking lot site |
|
|
540 |
|
|
|
15 |
|
|
|
36 |
|
|
|
|
|
|
|
36 |
|
Pool, exercise facility |
|
|
119 |
|
|
|
15 |
|
|
|
8 |
|
|
|
54 |
|
|
|
62 |
|
Windows major |
|
|
1,505 |
|
|
|
20 |
|
|
|
75 |
|
|
|
|
|
|
|
75 |
|
Miscellaneous (6) |
|
|
385 |
|
|
|
17 |
|
|
|
23 |
|
|
|
|
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8,428 |
|
|
|
|
|
|
$ |
800 |
|
|
$ |
860 |
|
|
$ |
1,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Estimated weighted average actual physical useful life of the expenditure
capitalized. |
|
(2) |
|
This amount is not necessarily incurred each and every year. Some years will be
higher, or lower depending on the timing of certain longer life expenditures. |
|
(3) |
|
These expenses are included in the Operating and Maintenance line item of the
Consolidated Statement of Operations. Maintenance labor costs are not included in the $860
per unit estimate. All personnel costs for site supervision, leasing agents, and maintenance
staff are combined and disclosed in the Companys Core Properties expense detail schedule. |
|
(4) |
|
Includes computers, office equipment, furniture, and maintenance vehicles. |
|
(5) |
|
The level of exterior painting may be lower than other similar titled presentations
as the Companys portfolio has a significant amount of brick exteriors. In addition, the
other exposed surfaces are most often covered in aluminum or vinyl. |
|
(6) |
|
Includes items such as balconies, siding, and concrete sidewalks. |
53
Capital Improvements (continued)
The breakdown of costs above reflects the Companys unique strategies to improve every property
every year regardless of age, and to purchase older properties and rehabilitate and reposition them
to enhance internal rates of return. These strategies result in higher costs of capital
expenditures and maintenance costs which permit the Company to realize higher revenue growth,
higher net operating income growth and a higher rate of property appreciation.
The Company estimates that on an annual basis approximately $800 per unit was spent on recurring
capital expenditures in 2010 and 2009. The table below summarizes the breakdown of capital
improvements by major categories between recurring and non-recurring, revenue generating capital
improvements as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
Recurring |
|
|
(a) |
|
|
Non-recurring |
|
|
(a) |
|
|
Total Capital |
|
|
(a) |
|
|
Total Capital |
|
|
(a) |
|
|
|
Cap Ex |
|
|
Per Unit |
|
|
Cap Ex |
|
|
Per Unit |
|
|
Improvements |
|
|
Per Unit |
|
|
Improvements |
|
|
Per Unit |
|
New buildings |
|
$ |
|
|
|
$ |
|
|
|
$ |
288 |
|
|
$ |
8 |
|
|
$ |
288 |
|
|
$ |
8 |
|
|
$ |
723 |
|
|
$ |
20 |
|
Major bldg
improvements |
|
|
4,634 |
|
|
|
126 |
|
|
|
10,857 |
|
|
|
295 |
|
|
|
15,491 |
|
|
|
421 |
|
|
|
14,401 |
|
|
|
402 |
|
Roof replacements |
|
|
1,214 |
|
|
|
33 |
|
|
|
1,879 |
|
|
|
51 |
|
|
|
3,093 |
|
|
|
84 |
|
|
|
2,765 |
|
|
|
77 |
|
Site improvements |
|
|
1,618 |
|
|
|
44 |
|
|
|
9,026 |
|
|
|
245 |
|
|
|
10,644 |
|
|
|
289 |
|
|
|
5,541 |
|
|
|
155 |
|
Apartment upgrades |
|
|
5,346 |
|
|
|
145 |
|
|
|
27,192 |
|
|
|
739 |
|
|
|
32,538 |
|
|
|
884 |
|
|
|
23,451 |
|
|
|
655 |
|
Appliances |
|
|
5,135 |
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
5,135 |
|
|
|
140 |
|
|
|
4,515 |
|
|
|
126 |
|
Carpeting/flooring |
|
|
8,128 |
|
|
|
221 |
|
|
|
2,976 |
|
|
|
81 |
|
|
|
11,104 |
|
|
|
302 |
|
|
|
10,690 |
|
|
|
299 |
|
HVAC/mechanicals |
|
|
2,611 |
|
|
|
71 |
|
|
|
13,452 |
|
|
|
366 |
|
|
|
16,063 |
|
|
|
437 |
|
|
|
9,215 |
|
|
|
257 |
|
Miscellaneous |
|
|
736 |
|
|
|
20 |
|
|
|
1,811 |
|
|
|
49 |
|
|
|
2,547 |
|
|
|
69 |
|
|
|
1,870 |
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
29,422 |
|
|
$ |
800 |
|
|
$ |
67,481 |
|
|
$ |
1,834 |
|
|
$ |
96,903 |
|
|
$ |
2,634 |
|
|
$ |
73,171 |
|
|
$ |
2,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Calculated using the weighted average number of units owned, including 35,798 core
units and 2010 acquisition units of 979 for the year ended December 31, 2010 and 35,798 core
units for the year ended December 31, 2009. |
The schedule below summarizes the breakdown of total capital improvements between core and
non-core:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, |
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
Recurring |
|
|
(b) |
|
|
Non-recurring |
|
|
(b) |
|
|
Total Capital |
|
|
(b) |
|
|
Total Capital |
|
|
(b) |
|
|
|
Cap Ex |
|
|
Per Unit |
|
|
Cap Ex |
|
|
Per Unit |
|
|
Improvements |
|
|
Per Unit |
|
|
Improvements |
|
|
Per Unit |
|
Core Communities |
|
$ |
28,638 |
|
|
$ |
800 |
|
|
$ |
65,497 |
|
|
$ |
1,830 |
|
|
$ |
94,135 |
|
|
$ |
2,630 |
|
|
$ |
73,171 |
|
|
$ |
2,043 |
|
2010 Acquisition Communities |
|
|
784 |
|
|
|
800 |
|
|
|
1,984 |
|
|
|
2,027 |
|
|
|
2,768 |
|
|
|
2,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
29,422 |
|
|
|
800 |
|
|
|
67,481 |
|
|
|
1,834 |
|
|
|
96,903 |
|
|
|
2,634 |
|
|
|
73,171 |
|
|
|
2,043 |
|
2009 Disposed Communities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
634 |
|
|
|
1,177 |
|
Corporate office (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,168 |
|
|
|
|
|
|
|
1,959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
29,422 |
|
|
$ |
800 |
|
|
$ |
67,481 |
|
|
$ |
1,834 |
|
|
$ |
100,071 |
|
|
$ |
2,634 |
|
|
$ |
75,764 |
|
|
$ |
2,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
No distinction is made between recurring and non-recurring expenditures for
corporate office. Corporate office expenditures include principally computer hardware,
software, office furniture, fixtures and leasehold improvements. |
|
(b) |
|
Calculated using the weighted average number of units owned, including 35,798 core
units and 2010 acquisition units of 979 for the year ended December 31, 2010; and 35,798 core
units and 2009 disposed units of 539 for the year ended December 31, 2009. |
54
Environmental Issues
Phase I environmental site assessments have been completed on substantially all of the Owned
Properties. As of December 31, 2010, there were no recorded amounts resulting from environmental
liabilities as there were no known contingencies with respect thereto. Furthermore, no condition
is known to exist that would give rise to a material liability for site restoration or other costs
that may be incurred with respect to the sale or disposal of a property.
During the past few years, there has been media attention given to the subject of mold in
residential communities. We have responded to this attention by providing our community management
with an Operation and Maintenance Plan for the Control of Moisture (O&M Plan). The O&M Plan,
designed to analyze and manage all exposures to mold, has been implemented at all of our Companys
communities. There have been only limited cases of mold identified to management due to the
application and practice of the O&M Plan. No condition is known to exist that would give rise to a
material liability for site restoration or other costs that may be incurred with respect to mold.
Recent Accounting Pronouncements
Disclosure of recently adopted and recently issued accounting standards is incorporated herein by
reference to the discussion under Part IV, Item 15, Notes to Consolidated Financial Statements,
Note 3.
Economic Conditions
Substantially all of the leases at the communities are for a term of one year or less, which
enables the Company to seek increased rents upon renewal of existing leases or commencement of new
leases. These short-term leases minimize the potential adverse effect of inflation on rental
income, although residents may leave without penalty at the end of their lease terms and may do so
if rents are increased significantly.
In the fourth quarter of 2007, throughout 2008, 2009 and continuing into 2010, the sub-prime issue
put significant pressure on the mortgage lending industry. This led to problems in the financial
system which developed into the worst recession since the Great Depression. The credit markets
tightened, consumer confidence plunged and unemployment soared. The Company has continued to
receive favorable financing at market rates of interest. Its average physical occupancy at 95.0%
in 2008, 94.9% in 2009 and 95.2% in 2010 was the highest it has been since 2000 and financial
performance continued strong. However, a recessionary economy and increasing job losses typically
slow household formations which could affect occupancy and decrease the Companys ability to raise
rents. In light of this, we will continue to review our business strategy throughout the year.
Contingencies
The Company is not a party to any legal proceedings which are expected to have a material adverse
effect on the Companys liquidity, financial position or results of operations. The Company is
subject to a variety of legal actions for personal injury or property damage arising in the
ordinary course of its business, most of which are covered by liability and property insurance.
Various claims of employment and resident discrimination are also periodically brought, most of
which also are covered by insurance. While the resolution of these matters cannot be predicted
with certainty, management believes that the final outcome of such legal proceedings and claims
will not have a material adverse effect on the Companys liquidity, financial position or results
of operations.
55
Forward-Looking Statements
This Form 10-K contains forward-looking statements within the meaning of Section 27A of the
Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as
amended. Some examples of forward-looking statements include statements related to acquisitions
(including any related pro forma financial information), future capital expenditures, potential
development and redevelopment opportunities, projected costs and rental rates for development and
redevelopment projects, financing sources and availability, and the effects of environmental and
other regulations. Although management believes that the expectations reflected in those
forward-looking statements are based upon reasonable assumptions, it can give no assurance that
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 activities and development within
anticipated budgets, the actual pace of future development, acquisitions and sales, and continued
access to capital to fund growth. For this purpose, any statements contained in this Form 10-K
that are not statements of historical fact should be considered to be forward-looking statements.
Some of the words used to identify forward-looking statements include believes, anticipates,
plans, expects, seeks, estimates, and similar expressions. Readers should exercise caution
in interpreting and relying on forward-looking statements since they involve known and unknown
risks, uncertainties and other factors which are, in some cases, beyond the Companys control and
could materially affect the Companys actual results, performance or achievements.
|
|
|
Item 7A. |
|
Quantitative and Qualitative Disclosures About Market Risk |
The Companys primary market risk exposure is interest rate risk. At December 31, 2010 and
December 31, 2009, approximately 90% and 89%, respectively, of the Companys debt bore interest at
fixed rates. At December 31, 2010 and 2009, approximately 84% and 83%, respectively, of the
Companys debt was secured and bore interest at fixed rates. The secured fixed rate debt had
weighted average maturities of approximately 6.52 and 5.35 years and a weighted average interest
rate of approximately 5.36% and 5.86% at December 31, 2010 and 2009, respectively. The remainder
of the Companys secured debt bore interest at variable rates with a weighted average maturity of
approximately 7.05 and 7.75 years and a weighted average interest rate of 3.00% and 2.92%, for 2010
and 2009, respectively. The Company does not intend to utilize a significant amount of permanent
variable rate debt to acquire properties in the future. On occasion, the Company may use its line
of credit in connection with a property acquisition with the intention to refinance at a later
date. The Company believes, however, that increases in interest expense as a result of inflation
would not significantly impact the Companys distributable cash flow.
At December 31, 2010 and December 31, 2009, the fair value of the Companys fixed and variable rate
secured debt amounted to a liability of $2.48 billion and $2.15 billion, respectively, compared to
its carrying amount of $2.42 billion and $2.11 billion, respectively. The Company estimates that a
100 basis point increase in market interest rates at December 31, 2010 would have changed the fair
value of the Companys fixed and variable rate secured debt to a liability of $2.36 billion and
would result in $2.1 million higher interest expense on the variable rate secured debt on an
annualized basis. At December 31, 2010 and December 31, 2009, the fair value of the Companys
total debt, including the Senior Notes and line of credit, amounted to a liability of $2.68 billion
and $2.34 billion, respectively, compared to its carrying amount of $2.62 billion and $2.30
billion.
The Company intends to continuously monitor and actively manage interest costs on its variable rate
debt portfolio and may enter into swap positions based upon market fluctuations. Accordingly, the
cost of obtaining such interest rate protection agreements in relation to the Companys access to
capital markets will continue to be evaluated. The Company has not, and does not plan to, enter
into any derivative financial instruments for trading or speculative purposes. In addition, the
Company believes that it has the ability to obtain funds through additional debt and/or equity
offerings and/or the issuance of UPREIT Units. As of December 31, 2010, the Company had no other
material exposure to market risk.
Additional disclosure about market risk is incorporated herein by reference to the discussion under
the heading Results of Operations in Item 7: Managements Discussion and Analysis of Financial
Condition and Results of Operations.
56
|
|
|
Item 8. |
|
Financial Statements and Supplementary Data |
The financial statements and supplementary data are listed under Item 15(a) and filed as part of
this report on the pages indicated.
|
|
|
Item 9. |
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
|
|
|
Item 9A. |
|
Controls and Procedures |
Evaluation of Disclosure Controls and Procedures.
The Company maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports filed or submitted by the Company under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms, and that such
information is accumulated and communicated to the officers who certify the Companys financial
reports and to the other members of senior management and the Board.
The principal executive officer and principal financial officer evaluated, as of December 31, 2010,
the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) and have
determined that such disclosure controls and procedures are effective.
Managements Annual Report on Internal Control Over Financial Reporting
The Companys management is responsible for establishing and maintaining adequate internal control
over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Because of its
inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate. The Companys internal
control over financial reporting is a process designed under the supervision of the Companys
principal executive officer and principal financial officer to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the Companys financial
statements for external reporting purposes in accordance with the United States of America
generally accepted accounting principles.
Under the supervision and with the participation of management, including the Companys principal
executive officer and principal financial officer, the Company conducted an evaluation of the
effectiveness of its internal control over financial reporting based on the framework in Internal
Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on its evaluation under that framework, management concluded that the Companys
internal control over financial reporting was effective as of December 31, 2010. In addition,
management has not identified any material weaknesses in the Companys internal controls.
Attestation Report of the Registered Public Accounting Firm
The effectiveness of the Companys internal control over financial reporting as of December 31,
2010, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting
firm, as stated in their report which appears elsewhere herein.
Changes in Internal Control Over Financial Reporting
There were no changes in the internal controls over financial reporting that occurred during the
fourth quarter of the year ended December 31, 2010, that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial reporting.
|
|
|
Item 9B. |
|
Other Information |
None.
57
PART III
|
|
|
Item 10. |
|
Directors, Executive Officers and Corporate Governance |
Except for information pertaining to the executive officers of the Company, the information
required by this Item is incorporated herein by reference to the Companys Proxy Statement to be
issued in connection with the Annual Meeting of the Stockholders of the Company to be held on May
3, 2011. The proxy statement will be filed within 120 days after the end of the Companys last
fiscal year.
See Item 4 in Part I hereof for information regarding executive officers of the Company.
|
|
|
Item 11. |
|
Executive Compensation |
The information required by this Item is incorporated herein by reference to the Companys Proxy
Statement to be issued in connection with the Annual Meeting of the Stockholders of the Company to
be held on May 3, 2011. The proxy statement will be filed within 120 days after the end of the
Companys last fiscal year.
|
|
|
Item 12. |
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The information required by this Item is incorporated herein by reference to the Companys Proxy
Statement to be issued in connection with the Annual Meeting of Stockholders of the Company to be
held on May 3, 2011. The proxy statement will be filed within 120 days after the end of the
Companys last fiscal year.
|
|
|
Item 13. |
|
Certain Relationships and Related Transactions, and Director Independence |
The information required by this Item is incorporated herein by reference to the Companys Proxy
Statement to be issued in connection with the Annual Meeting of Stockholders of the Company to be
held on May 3, 2011. The proxy statement will be filed within 120 days after the end of the
Companys last fiscal year.
|
|
|
Item 14. |
|
Principal Accounting Fees and Services |
The information required by this Item is incorporated herein by reference to the Companys Proxy
Statement to be issued in connection with the Annual Meeting of Stockholders of the Company to be
held on May 3, 2011, under Report of the Audit Committee and Principal Accounting Fees and
Services. The proxy statement will be filed within 120 days after the end of the Companys fiscal
year.
58
PART IV
|
|
|
Item 15. |
|
Exhibits, Financial Statement Schedules |
(a) 1 and (a) 2. Financial Statements and Schedules
The financial statements and schedules listed below are filed as part of this annual report on
the pages indicated.
HOME PROPERTIES, INC.
Consolidated Financial Statements
|
|
|
|
|
|
|
Page |
|
|
|
|
60 |
|
|
|
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
|
|
62 |
|
|
|
|
|
|
|
|
|
63 |
|
|
|
|
|
|
|
|
|
64 |
|
|
|
|
|
|
|
|
|
65 |
|
|
|
|
|
|
|
|
|
89 |
|
|
|
|
|
|
|
|
|
90 |
|
|
|
|
|
|
All other schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto. |
|
|
|
|
|
|
|
|
|
(a) 3. Exhibits |
|
|
|
|
|
|
|
|
|
|
|
|
95 |
|
59
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Home Properties, Inc.:
In our opinion, the consolidated financial statements listed in the index appearing under Item
15(a)(1) present fairly, in all material respects, the financial position of Home Properties, Inc.
and its subsidiaries (the Company) at December 31, 2010 and 2009, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2010
in conformity with accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedules listed in the index appearing under
Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2010, based on criteria established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial statements and financial statement
schedules, for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in
Managements Annual Report on Internal Control Over Financial Reporting under Item 9A. Our
responsibility is to express opinions on these financial statements, on the financial statement
schedules, and on the Companys internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
|
|
|
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
|
|
|
February 25, 2011 |
|
|
60
HOME PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2010 and 2009
(Dollars in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
ASSETS |
|
|
|
|
|
|
|
|
Real estate: |
|
|
|
|
|
|
|
|
Land |
|
$ |
589,359 |
|
|
$ |
508,087 |
|
Construction in progress |
|
|
119,992 |
|
|
|
184,617 |
|
Buildings, improvements and equipment |
|
|
3,668,379 |
|
|
|
3,223,275 |
|
|
|
|
|
|
|
|
|
|
|
4,377,730 |
|
|
|
3,915,979 |
|
Less: accumulated depreciation |
|
|
(841,801 |
) |
|
|
(733,142 |
) |
|
|
|
|
|
|
|
Real estate, net |
|
|
3,535,929 |
|
|
|
3,182,837 |
|
Cash and cash equivalents |
|
|
10,782 |
|
|
|
8,809 |
|
Cash in escrows |
|
|
34,070 |
|
|
|
27,278 |
|
Accounts receivable |
|
|
12,540 |
|
|
|
14,137 |
|
Prepaid expenses |
|
|
17,662 |
|
|
|
16,783 |
|
Deferred charges |
|
|
15,079 |
|
|
|
13,931 |
|
Other assets |
|
|
8,641 |
|
|
|
4,259 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,634,703 |
|
|
$ |
3,268,034 |
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Mortgage notes payable |
|
$ |
2,424,214 |
|
|
$ |
2,112,645 |
|
Exchangeable senior notes |
|
|
138,218 |
|
|
|
136,136 |
|
Line of credit |
|
|
56,500 |
|
|
|
53,500 |
|
Accounts payable |
|
|
20,935 |
|
|
|
19,695 |
|
Accrued interest payable |
|
|
11,389 |
|
|
|
10,661 |
|
Accrued expenses and other liabilities |
|
|
28,730 |
|
|
|
27,989 |
|
Security deposits |
|
|
19,583 |
|
|
|
19,334 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,699,569 |
|
|
|
2,379,960 |
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Common stock, $.01 par value; 80,000,000
shares authorized; 37,949,229 and 34,655,428
shares issued and outstanding at December 31,
2010 and 2009, respectively |
|
|
379 |
|
|
|
347 |
|
Excess stock, $.01 par value; 10,000,000
shares authorized; no shares issued or
outstanding |
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
1,047,325 |
|
|
|
922,078 |
|
Distributions in excess of accumulated earnings |
|
|
(326,811 |
) |
|
|
(261,313 |
) |
|
|
|
|
|
|
|
Total common stockholders equity |
|
|
720,893 |
|
|
|
661,112 |
|
Noncontrolling interest |
|
|
214,241 |
|
|
|
226,962 |
|
|
|
|
|
|
|
|
Total equity |
|
|
935,134 |
|
|
|
888,074 |
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
3,634,703 |
|
|
$ |
3,268,034 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
61
HOME PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Dollars in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
473,833 |
|
|
$ |
457,690 |
|
|
$ |
447,877 |
|
Property other income |
|
|
42,640 |
|
|
|
40,727 |
|
|
|
41,324 |
|
Interest income |
|
|
27 |
|
|
|
59 |
|
|
|
165 |
|
Other income |
|
|
79 |
|
|
|
700 |
|
|
|
401 |
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
516,579 |
|
|
|
499,176 |
|
|
|
489,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance |
|
|
211,038 |
|
|
|
207,293 |
|
|
|
203,571 |
|
General and administrative |
|
|
25,138 |
|
|
|
24,476 |
|
|
|
25,489 |
|
Interest |
|
|
124,126 |
|
|
|
121,765 |
|
|
|
118,263 |
|
Depreciation and amortization |
|
|
126,668 |
|
|
|
118,573 |
|
|
|
110,194 |
|
Other expenses |
|
|
2,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
489,841 |
|
|
|
472,107 |
|
|
|
457,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before gain on early
extinguishment
of debt |
|
|
26,738 |
|
|
|
27,069 |
|
|
|
32,250 |
|
Gain on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
11,304 |
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
26,738 |
|
|
|
27,069 |
|
|
|
43,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
|
(407 |
) |
|
|
(4,305 |
) |
|
|
(1,909 |
) |
Gain (loss) on disposition of property |
|
|
(13 |
) |
|
|
24,314 |
|
|
|
51,560 |
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
|
(420 |
) |
|
|
20,009 |
|
|
|
49,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
26,318 |
|
|
|
47,078 |
|
|
|
93,205 |
|
Net income attributable to noncontrolling interest |
|
|
(6,237 |
) |
|
|
(12,659 |
) |
|
|
(27,124 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
$ |
20,081 |
|
|
$ |
34,419 |
|
|
$ |
66,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.56 |
|
|
$ |
0.60 |
|
|
$ |
0.97 |
|
Discontinued operations |
|
|
(0.01 |
) |
|
|
0.44 |
|
|
|
1.10 |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
$ |
0.55 |
|
|
$ |
1.04 |
|
|
$ |
2.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.55 |
|
|
$ |
0.60 |
|
|
$ |
0.95 |
|
Discontinued operations |
|
|
(0.01 |
) |
|
|
0.44 |
|
|
|
1.09 |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
$ |
0.54 |
|
|
$ |
1.04 |
|
|
$ |
2.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
36,682,191 |
|
|
|
33,040,839 |
|
|
|
31,991,817 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
37,169,886 |
|
|
|
33,172,116 |
|
|
|
32,332,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share |
|
$ |
2.32 |
|
|
$ |
2.68 |
|
|
$ |
2.65 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
62
HOME PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Dollars in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
in Excess of |
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Noncontrolling |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Interest |
|
|
Totals |
|
Balance, December 31, 2007 |
|
|
32,600,614 |
|
|
$ |
326 |
|
|
$ |
863,046 |
|
|
$ |
(187,689 |
) |
|
$ |
282,199 |
|
|
$ |
957,882 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,081 |
|
|
|
27,124 |
|
|
|
93,205 |
|
Issuance of common stock, net |
|
|
357,963 |
|
|
|
3 |
|
|
|
10,834 |
|
|
|
|
|
|
|
|
|
|
|
10,837 |
|
Stock-based compensation |
|
|
12,751 |
|
|
|
|
|
|
|
5,990 |
|
|
|
|
|
|
|
|
|
|
|
5,990 |
|
Repurchase of common stock |
|
|
(1,165,783 |
) |
|
|
(11 |
) |
|
|
(53,919 |
) |
|
|
|
|
|
|
|
|
|
|
(53,930 |
) |
Redemption of convertible debt |
|
|
|
|
|
|
|
|
|
|
88 |
|
|
|
(88 |
) |
|
|
|
|
|
|
0 |
|
Conversion of UPREIT Units for
common stock |
|
|
625,759 |
|
|
|
6 |
|
|
|
30,222 |
|
|
|
|
|
|
|
(12,435 |
) |
|
|
17,793 |
|
Adjustment of noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
1,154 |
|
|
|
|
|
|
|
(1,154 |
) |
|
|
0 |
|
Dividends and distributions paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85,265 |
) |
|
|
(34,980 |
) |
|
|
(120,245 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008 |
|
|
32,431,304 |
|
|
$ |
324 |
|
|
$ |
857,415 |
|
|
$ |
(206,961 |
) |
|
$ |
260,754 |
|
|
$ |
911,532 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,419 |
|
|
|
12,659 |
|
|
|
47,078 |
|
Issuance of common stock, net |
|
|
1,228,070 |
|
|
|
12 |
|
|
|
46,636 |
|
|
|
|
|
|
|
|
|
|
|
46,648 |
|
Stock-based compensation |
|
|
6,746 |
|
|
|
|
|
|
|
7,291 |
|
|
|
|
|
|
|
|
|
|
|
7,291 |
|
Repurchase of common stock |
|
|
(97,304 |
) |
|
|
|
|
|
|
(2,935 |
) |
|
|
|
|
|
|
|
|
|
|
(2,935 |
) |
Conversion of UPREIT Units for
common stock |
|
|
1,086,612 |
|
|
|
11 |
|
|
|
21,321 |
|
|
|
|
|
|
|
(21,332 |
) |
|
|
0 |
|
Adjustment of noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
(7,650 |
) |
|
|
|
|
|
|
7,650 |
|
|
|
0 |
|
Dividends and distributions paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(88,771 |
) |
|
|
(32,769 |
) |
|
|
(121,540 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009 |
|
|
34,655,428 |
|
|
$ |
347 |
|
|
$ |
922,078 |
|
|
$ |
(261,313 |
) |
|
$ |
226,962 |
|
|
|
888,074 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,081 |
|
|
|
6,237 |
|
|
|
26,318 |
|
Issuance of common stock, net |
|
|
2,827,856 |
|
|
|
28 |
|
|
|
123,728 |
|
|
|
|
|
|
|
|
|
|
|
123,756 |
|
Stock-based compensation |
|
|
6,206 |
|
|
|
|
|
|
|
7,647 |
|
|
|
|
|
|
|
|
|
|
|
7,647 |
|
Repurchase of common stock |
|
|
(68,265 |
) |
|
|
(1 |
) |
|
|
(3,273 |
) |
|
|
|
|
|
|
|
|
|
|
(3,274 |
) |
Conversion of UPREIT Units for
common stock |
|
|
528,004 |
|
|
|
5 |
|
|
|
10,229 |
|
|
|
|
|
|
|
(10,234 |
) |
|
|
0 |
|
Issuance of UPREIT Units associated
with property acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,845 |
|
|
|
4,845 |
|
Adjustment of noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
(13,084 |
) |
|
|
|
|
|
|
13,084 |
|
|
|
0 |
|
Dividends and distributions paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85,579 |
) |
|
|
(26,653 |
) |
|
|
(112,232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010 |
|
|
37,949,229 |
|
|
$ |
379 |
|
|
$ |
1,047,325 |
|
|
$ |
(326,811 |
) |
|
$ |
214,241 |
|
|
$ |
935,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
63
HOME PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
26,318 |
|
|
$ |
47,078 |
|
|
$ |
93,205 |
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
132,215 |
|
|
|
123,148 |
|
|
|
115,560 |
|
Amortization of senior note debt discount |
|
|
2,082 |
|
|
|
1,967 |
|
|
|
2,519 |
|
Impairment of assets held as general partner |
|
|
|
|
|
|
|
|
|
|
4,000 |
|
Loss (gain) on disposition of property |
|
|
13 |
|
|
|
(24,314 |
) |
|
|
(51,560 |
) |
Gain on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
(11,304 |
) |
Stock-based compensation |
|
|
7,647 |
|
|
|
7,291 |
|
|
|
5,990 |
|
Carrying amount of assets and liabilities disposed in
connection with sale of general partnership interest |
|
|
(1,728 |
) |
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash in escrows, net |
|
|
(4,087 |
) |
|
|
1,359 |
|
|
|
2,086 |
|
Other assets |
|
|
(2,823 |
) |
|
|
(372 |
) |
|
|
(6,307 |
) |
Accounts payable and accrued liabilities |
|
|
382 |
|
|
|
(6,533 |
) |
|
|
5,892 |
|
|
|
|
|
|
|
|
|
|
|
Total adjustments |
|
|
133,701 |
|
|
|
102,546 |
|
|
|
66,876 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
160,019 |
|
|
|
149,624 |
|
|
|
160,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of properties, net of mortgage notes assumed and
UPREIT Units issued |
|
|
(186,284 |
) |
|
|
|
|
|
|
(34,866 |
) |
Purchase of land for development |
|
|
|
|
|
|
|
|
|
|
(28,320 |
) |
Additions to properties |
|
|
(97,590 |
) |
|
|
(79,292 |
) |
|
|
(107,430 |
) |
Additions to construction in progress |
|
|
(45,981 |
) |
|
|
(73,627 |
) |
|
|
(33,019 |
) |
Proceeds from (payments for) sale of properties, net |
|
|
(13 |
) |
|
|
105,930 |
|
|
|
121,975 |
|
Purchase of notes receivable |
|
|
(1,433 |
) |
|
|
|
|
|
|
|
|
Withdrawals from (additions to) cash held in escrow, net |
|
|
(3,238 |
) |
|
|
(576 |
) |
|
|
1,076 |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(334,539 |
) |
|
|
(47,565 |
) |
|
|
(80,584 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Payments for early extinguishment of exchangeable senior notes |
|
|
|
|
|
|
|
|
|
|
(45,360 |
) |
Proceeds from sale of common stock, net |
|
|
123,756 |
|
|
|
46,648 |
|
|
|
10,837 |
|
Repurchase of common stock |
|
|
(3,274 |
) |
|
|
(2,935 |
) |
|
|
(53,930 |
) |
Proceeds from mortgage notes payable |
|
|
628,154 |
|
|
|
266,483 |
|
|
|
242,862 |
|
Payments of mortgage notes payable |
|
|
(456,192 |
) |
|
|
(264,248 |
) |
|
|
(178,621 |
) |
Proceeds from line of credit |
|
|
449,000 |
|
|
|
481,500 |
|
|
|
490,500 |
|
Payments on line of credit |
|
|
(446,000 |
) |
|
|
(499,000 |
) |
|
|
(422,000 |
) |
Payments of deferred loan costs, net |
|
|
(6,324 |
) |
|
|
(6,592 |
) |
|
|
(3,021 |
) |
Additions to cash escrows, net |
|
|
(395 |
) |
|
|
(133 |
) |
|
|
(61 |
) |
Dividends and distributions paid |
|
|
(112,232 |
) |
|
|
(121,540 |
) |
|
|
(120,245 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
176,493 |
|
|
|
(99,817 |
) |
|
|
(79,039 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
1,973 |
|
|
|
2,242 |
|
|
|
458 |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
|
8,809 |
|
|
|
6,567 |
|
|
|
6,109 |
|
|
|
|
|
|
|
|
|
|
|
End of year |
|
$ |
10,782 |
|
|
$ |
8,809 |
|
|
$ |
6,567 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
64
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
1 ORGANIZATION AND BASIS OF PRESENTATION
Organization
Home Properties, Inc. (the Company) was formed in November 1993, as a Maryland corporation and is
engaged primarily in the ownership, management, acquisition, rehabilitation and development of
residential apartment communities primarily in selected Northeast and Mid-Atlantic regions of the
United States. The Company conducts its business through Home Properties, L.P. (the Operating
Partnership), a New York limited partnership. As of December 31, 2010, the Company owned and
operated 116 apartment communities with 38,861 apartments.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its
ownership of 77.1% of the limited partnership units in the Operating Partnership (UPREIT Units)
at December 31, 2010 (74.7% at December 31, 2009). The remaining 22.9% is included as
noncontrolling interest in these consolidated financial statements at December 31, 2010 (25.3% at
December 31, 2009). The Company periodically adjusts the carrying value of noncontrolling interest
to reflect its share of the book value of the Operating Partnership. Such adjustments are recorded
to additional paid in capital as a reallocation of noncontrolling interest in the accompanying
consolidated statements of equity. The Company owns a 1.0% general partner interest in the
Operating Partnership and the remainder indirectly as a limited partner through its wholly owned
subsidiary, Home Properties I, LLC, which owns 100% of Home Properties Trust, which is the limited
partner. Home Properties Trust was formed in September 1997, as a Maryland real estate trust and
as a qualified REIT subsidiary (QRS), and owns the Companys share of the limited partner
interests in the Operating Partnership.
The accompanying consolidated financial statements include the accounts of Home Properties Resident
Services, Inc. (HPRS or the Management Company). The Management Company is a wholly owned
subsidiary of the Company. All significant inter-company balances and transactions have been
eliminated in these consolidated financial statements.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate
Real estate is recorded at cost. Costs related to the development, construction and improvement of
properties are capitalized. Recurring capital replacements typically include carpeting and tile,
appliances, HVAC equipment, new roofs, site improvements and various exterior building
improvements. Non-recurring upgrades include, among other items, community centers, new windows,
kitchens and bathrooms. Costs incurred on a lease turnover due to normal wear and tear by the
resident are expensed on the turn. Ordinary repairs and maintenance that do not extend the life of
the asset are expensed as incurred. When retired or otherwise disposed of, the related asset cost
and accumulated depreciation are cleared from the respective accounts and the net difference, less
any amount realized from disposition, is reflected in income.
The Company capitalizes the payroll and associated costs of employees directly responsible for the
supervision and/or construction of major capital and/or rehabilitation projects. Interest costs
for major capital projects and properties under rehabilitation are capitalized during the
construction period. These costs are reflected on the balance sheet as an increase to depreciable
property.
65
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
For development properties, the Company uses its professional judgment in determining whether such
costs meet the criteria for capitalization or must be expensed as incurred. Costs directly related
to the development of properties are capitalized. The Company capitalizes interest, real estate
taxes and insurance and payroll and associated costs for those individuals directly responsible for
and who spend all their time on development activities. Determination of when a development
project commences and capitalization begins, and when a development project is substantially
complete and capitalization must end involves a degree of judgment. We begin the capitalization of
costs during the pre-construction period which we define as activities that are necessary to the
development of the property. We consider a development property as substantially complete after
major construction has ended and the property is available for occupancy. For properties that are
built in phases, we end capitalization on the portion of a property that is considered
substantially complete, and we capitalize only those costs associated with the portion under
construction. These costs are reflected on the balance sheet as construction in progress.
The interest rate used for capitalization is the weighted average interest rate for all Company
indebtedness, including amortization of debt issuance costs. In connection with development
properties, major capital projects and rehabilitation projects, there was $9,384, $8,900 and $5,472
of interest capitalized in 2010, 2009 and 2008, respectively, and payroll and associated costs
capitalized were $3,007, $2,896 and $3,537 for the years ended December 31, 2010, 2009 and 2008,
respectively.
Management reviews its long-lived assets used in operations for impairment when, in accordance with
the authoritative guidance for the accounting for the impairment or disposal of long-lived assets
(ASC 360-10), there is an event or change in circumstances that indicates an
impairment in value. An asset is considered impaired when the undiscounted future cash flows are
not sufficient to recover the assets carrying value. If such impairment is present, an impairment
loss is recognized based on the excess of the carrying amount of the asset over its fair value.
The Company records impairment losses and reduces the carrying amounts of assets held for sale when
the carrying amounts exceed the estimated selling proceeds less the costs to sell.
The Company accounts for its acquisitions of investments in real estate in accordance with the
authoritative guidance for the initial measurement (ASC 805-10), which requires the assets and
liabilities acquired to be recognized using fair value. Typical assets and liabilities acquired
include land, building, and personal property and identified intangible assets and liabilities,
consisting of the value of above-market and below-market leases, value of in-place leases and value
of resident relationships, based in each case on their fair values. Additionally, acquisition
related costs are expensed in the periods in which the costs are incurred and the services are
received. The Company considers acquisitions of operating real estate assets to be businesses as
that term is defined in the authoritative guidance.
The Company determines the fair value of the tangible assets of an acquired property (which
includes the land, building, and personal property) by valuing the property as if it were vacant.
The as-if-vacant value is assigned to land, buildings, and personal property based on managements
determination of the relative fair values of these assets.
Above-market and below-market in-place lease values for acquired properties are recorded based on
the present value (using an interest rate which reflects the risks associated with the leases
acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place
leases and (ii) managements estimate of fair market lease rates for the corresponding in-place
leases, measured over a period equal to the remaining non-cancelable term of the lease. The
capitalized above-market lease values are included in other assets and are amortized as a reduction
of rental income over the remaining non-cancelable terms of the respective leases. The capitalized
below-market lease values are included in accrued expenses and other liabilities and are amortized
as an increase to rental income over the initial term of the respective leases.
66
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The fair value of in-place leases is based upon the Companys evaluation of the specific
characteristics of the leases. Factors considered in these analyses include an estimate of
carrying costs during hypothetical expected lease-up periods considering current market conditions,
and costs to execute similar leases. The Company also considers information obtained about each
property as a result of its pre-acquisition due diligence, marketing and leasing activities in
estimating the fair value of the tangible and intangible assets acquired. In estimating carrying
costs, management also includes real estate taxes, insurance and other operating expenses and
estimates of lost rentals at market rates during the expected lease-up periods depending on the
property acquired.
The fair value of resident relationships is based on managements evaluation of the specific
characteristics of the residential leases and the Companys resident retention history.
The in-place leases and resident relationships are amortized and included in depreciation and
amortization expense over the initial term of the respective leases.
Exchange of UPREIT Units for shares
In accordance with the revised authoritative guidance for noncontrolling interests (ASC 810-10),
which was adopted on January 1, 2009, with respect to the exchanges of noncontrolling interests for
shares, exchanges of UPREIT Units for shares of the Companys common stock are recorded under the
historical cost method with UPREIT Units acquired reflected at their book value (exchange value).
The exchange value of UPREIT Units is allocated to common stock and additional paid in capital.
In 2008 and prior periods, exchanges of UPREIT Units for shares of the Companys common stock were
recorded under the purchase method with UPREIT Units acquired reflected at the fair market value of
the Companys common stock on the date of exchange (market value). The exchange value of UPREIT
Units was allocated to common stock and additional paid in capital, with the difference between the
market value and exchange value (basis step-up) allocated to the underlying real estate assets
based on their estimated fair values.
There were 528,004, 1,086,612 and 625,759 shares of UPREIT Units exchanged for common stock, during
2010, 2009 and 2008, respectively. The Company made adjustments within equity in the amount of
$10,234, $21,332 and $12,435, during 2010, 2009 and 2008, respectively, to record the exchange
value of the transactions, and an adjustment to real estate assets in the amount of $17,793 to
record the basis step-up of the conversions during 2008.
Costs Incurred for Stock Issuances
Costs incurred in connection with the Companys stock issuances are reflected as a reduction of
additional paid in capital.
Discontinued Operations
The Company reports its property dispositions as discontinued operations as prescribed by the
authoritative guidance. Pursuant to the definition of a component of an entity in the
authoritative guidance for discontinued operations (ASC 205-20), assuming no significant
continuing involvement by the former owner after the sale, the sale of an apartment community is
considered a discontinued operation. In addition, apartment communities classified as held for
sale are also considered a discontinued operation. The Company generally considers assets to be
held for sale when all significant contingencies surrounding the closing have been resolved, which
often corresponds with the actual closing date. For purposes of the discontinued operations
presentation, the Company includes interest expense and losses from early extinguishment of debt
associated with specific mortgage indebtedness of the properties that are considered discontinued
operations.
67
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Depreciation
The Company is required to make subjective assessments as to the useful lives of its properties and
improvements for purposes of determining the amount of depreciation to record on an annual basis.
These assessments have a direct impact on the Companys net income.
Assets are depreciated using a straight-line method over the following estimated useful lives:
|
|
|
|
|
Land improvements |
|
3-20 years |
Buildings and improvements |
|
3-40 years |
Furniture, fixtures and equipment |
|
5-10 years |
Computer software |
|
5 years |
Depreciation expense charged to operations was $125,634, $117,694 and $109,298 from continuing
operations and $832, $2,346 and $6,513 from discontinued operations for the years ended December
31, 2010, 2009 and 2008, respectively.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and highly liquid investments purchased with original
maturities of three months or less. The Company estimates that the fair value of cash equivalents
approximates the carrying value due to the relatively short maturity of these instruments. The
majority of the Companys cash and cash equivalents are held at major commercial banks which at
times may exceed the Federal Deposit Insurance Corporation limit of $250. The Company has not
experienced any losses to date on its invested cash.
Cash in Escrows
Cash in escrows consists of cash restricted under the terms of various loan agreements to be used
for the payment of property taxes and insurance as well as required replacement reserves, resident
security deposits for residential properties and occasionally funds held in escrow from tax-free
exchanges.
Accounts Receivable and Allowance for Doubtful Receivables
Accounts receivable are generally comprised of amounts receivable from residents and other
miscellaneous receivables from non-affiliated entities. We evaluate the collectability of accounts
receivable from residents and establish an allowance for accounts greater than 60 days past due for
current residents and all receivables due from former residents, after the application of security
deposits. The allowance for doubtful resident receivables was $3,134 and $2,993 as of December 31,
2010 and 2009, respectively.
Deferred Charges
Costs relating to the financing of properties are deferred and amortized over the life of the
related financing agreement. The straight-line method, which approximates the effective interest
method, is used to amortize all financing costs; such amortization is reflected as interest expense
in the consolidated statement of operations, with remaining terms ranging from 2 to 16 years.
Unamortized financing costs are written off when the financing agreement is retired before the
maturity date. Accumulated amortization was $10,788 and $11,703, as of December 31, 2010 and 2009,
respectively.
68
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible Assets
Intangible assets of $10,093 and $8,982 at December 31, 2010 and 2009, respectively, included in
Other Assets, consist solely of intangible assets recorded in connection with the authoritative
guidance for the acquisition of real estate assets (ASC 805-10). These intangible assets are
amortized on the straight-line basis over their estimated useful lives of 6 months to 3 years.
Accumulated amortization of intangible assets was $8,680 and $8,526 as of December 31, 2010 and
2009, respectively. Amortization expense charged to operations was $1,034, $878 and $897 from
continuing operations and $7, $10 and $13 from discontinued operations for the years ended December
31, 2010, 2009 and 2008, respectively. The carrying value of intangible assets is periodically
reviewed by the Company and impairments are recognized when the expected future operating cash
flows derived from such intangible assets are less than their carrying value. During 2008, the
Company wrote off the goodwill associated with its variable interest entity (VIE) of $394 which
is included in impairment of assets held as general partner in discontinued operations.
Insurance Reserves
The Company has self insured retentions and aggregates up to certain limits for general liability
and property claims. The Company relies on third-party actuaries in the development of reserve
requirements. Reserves are currently funded for the estimated cost of claims incurred, both
reported and unreported.
Fair Value of Financial Instruments
The Company follows the authoritative guidance for fair value measurements (ASC 820-10), when
valuing its financial instruments for disclosure purposes. The valuation of financial instruments
requires the Company to make estimates and judgments that affect the fair value of the instruments.
The Company determined the fair value of its mortgage notes payable and line of credit facility
using a discounted future cash flow technique that incorporates a market interest yield curve with
adjustments for duration, loan to value, and risk profile (level 2 inputs, as defined by ASC
820-10). In determining the market interest yield curve, the Company considered its BBB credit
rating. The Company based the fair value of its exchangeable senior notes using quoted prices (a
level 1 input, as defined by ASC 820-10).
At December 31, 2010 and 2009, the fair value of the Companys total debt, including the
exchangeable senior notes and line of credit, amounted to a liability of $2,678,524 and $2,337,866,
respectively, compared to its carrying amount of $2,618,932 and $2,302,281.
Revenue Recognition
The Company leases its residential apartment units under leases with terms generally one year or
less. Rental income is recognized on a straight-line basis over the related lease term. As a
result, deferred rents receivable are created when rental income is recognized during the
concession period of certain negotiated leases and amortized over the remaining term of the lease.
In accordance with the authoritative guidance for business combinations (ASC 805-10), the Company
recognizes rental revenue of acquired in-place above and below market leases at their fair value
over the weighted average remaining lease term. Property other income, which consists primarily of
income from operation of laundry facilities, utility recovery, administrative fees, garage and
carport rentals and miscellaneous charges to residents, is recognized when earned (when the
services are provided, or when the resident incurs the charge).
Property management fees are recognized when earned based on a contractual percentage of net
monthly cash collected on rental income.
69
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Other Income
Other income for the years ended December 31, 2010, 2009 and 2008 is primarily comprised of
management and other real estate service fees.
Other Expenses
Other expenses for the year ended December 31, 2010 are the transaction costs from the apartment
communities acquired during 2010 that were expensed according to authoritative guidance for
business combinations (ASC 805-10). These costs, which are primarily transfer taxes and title
fees, represent 0.85% of the total purchase price of the apartment communities acquired during
2010. Prior to 2009, the authoritative guidance required these costs to be capitalized as part of
the acquisition of properties. There were no costs incurred during 2009 as the company did not
acquire any properties.
Gains on Real Estate Sales
Gains on disposition of properties are recognized using the full accrual method in accordance with
the authoritative guidance (ASC 360-20), provided that various criteria relating to the terms of
sale and any subsequent involvement by the Company with the properties sold are met.
Advertising
Advertising expenses are charged to operations during the year in which they are incurred.
Advertising expenses incurred and charged to operations were $4,604, $4,321 and $4,414 from
continuing operations, and $2, $116 and $341 from discontinued operations, for the years ended
December 31, 2010, 2009 and 2008, respectively.
Federal Income Taxes
The Company has elected to be taxed as a real estate investment trust (REIT) under the Internal
Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 1994. As a
result, the Company generally is not subject to federal or state income taxation at the corporate
level to the extent it distributes annually at least 90% of its REIT taxable income to its
shareholders and satisfies certain other requirements. For the years ended December 31, 2010, 2009
and 2008, the Company distributed in excess of 100% of its taxable income; accordingly, no
provision has been made for federal income taxes in the accompanying consolidated financial
statements. Stockholders of the Company are taxed on dividends and must report distributions from
the Company as either ordinary income, capital gains, or as return of capital (see Note 9).
The Company adopted the provisions of the authoritative guidance for accounting for uncertainty in
income taxes (ASC 740-10) on January 1, 2007, which addresses the recognition and measurement of
assets and liabilities associated with tax positions taken or expected to be taken in a tax return.
As a result of the adoption of the authoritative guidance, the Company reviewed its potential
uncertain tax positions and made no adjustments to its existing financial and tax accounting
treatment. ASC 740-10 also requires a public enterprise to disclose the aggregate difference in
the basis of its net assets for financial and tax reporting purposes. The tax basis of assets is
less than the amounts reported in the accompanying consolidated financial statements by
approximately $478,591 and $501,616 at December 31, 2010 and 2009, respectively.
70
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The following table reconciles net income to taxable income for the years ended December 31, 2010,
2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Net income |
|
$ |
26,318 |
|
|
$ |
47,078 |
|
|
$ |
93,205 |
|
Deduct: Net income attributable to noncontrolling interest |
|
|
(6,237 |
) |
|
|
(12,659 |
) |
|
|
(27,124 |
) |
Add back: Net loss of taxable REIT Subsidiaries included in net income |
|
|
54 |
|
|
|
38 |
|
|
|
52 |
|
Add back: Net loss of taxable VIE, including impairment of real
property |
|
|
821 |
|
|
|
1,244 |
|
|
|
3,897 |
|
|
|
|
|
|
|
|
|
|
|
Net income from REIT operations |
|
|
20,956 |
|
|
|
35,701 |
|
|
|
70,030 |
|
Add: Book depreciation and amortization |
|
|
96,153 |
|
|
|
87,424 |
|
|
|
81,835 |
|
Less: Tax depreciation and amortization |
|
|
(96,158 |
) |
|
|
(86,594 |
) |
|
|
(82,562 |
) |
Book/tax difference on gains/losses from capital transactions |
|
|
(86 |
) |
|
|
(3,131 |
) |
|
|
(6,176 |
) |
Book/tax difference on carrying value of mortgages |
|
|
(322 |
) |
|
|
(2,095 |
) |
|
|
(4,291 |
) |
Book/tax difference on equity compensation |
|
|
(1,770 |
) |
|
|
2,057 |
|
|
|
(2,295 |
) |
Book/tax difference on amortization of debt discount |
|
|
1,586 |
|
|
|
1,438 |
|
|
|
1,757 |
|
Book/tax difference on property acquisition costs |
|
|
2,188 |
|
|
|
|
|
|
|
|
|
Book/tax difference on gain on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
1,828 |
|
Other book/tax differences, net |
|
|
1,609 |
|
|
|
(1,042 |
) |
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted taxable income subject to 90% REIT dividend requirement |
|
$ |
24,156 |
|
|
$ |
33,758 |
|
|
$ |
60,180 |
|
|
|
|
|
|
|
|
|
|
|
The Company made actual distributions in excess of 100% of taxable income before capital gains.
All adjustments to net income from REIT operations are net of amounts attributable to
noncontrolling interest and the taxable REIT subsidiary, HPRS.
Included in total assets on the Consolidated Balance Sheets are deferred tax assets of $12,750 and
$10,195 as of December 31, 2010 and 2009, respectively. The deferred tax assets were a result of
the net losses associated with the affordable property portfolio sales during 2004 and 2003. In
2010, an additional deferred tax asset of $2,555 resulted from the sale of a variable interest
entity, as more fully described in Note 4. Management does not believe it is more likely than not
that these deferred assets will be used, and accordingly has recorded a reserve against the
deferred tax assets of $12,750 and $10,195 for the years ended December 31, 2010 and 2009,
respectively. The deferred tax assets are associated with HPRS who performs certain of the
residential and development activities of the Company. HPRS historically provided commercial
management services and provided loan advances to affordable housing entities owned through general
partnership interests. As these activities are no longer provided, Management does not currently
believe there is a source for future material taxable earnings for HPRS that would give rise to
value for the deferred tax assets.
Use of Estimates
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 amount of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
71
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
3 RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS
Recently Adopted Accounting Standards
Effective January 1, 2010, the Company adopted the amended guidance related to the consolidation of
variable interest entities (Accounting Standards Update 2009-17, Consolidations (Topic 810):
Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities). The
Companys adoption of this authoritative guidance did not have any impact on its financial position
and results of operations.
4 VARIABLE INTEREST ENTITIES
On October 13, 2010, the Company sold its general partnership interest in its one remaining
variable interest entity (VIE). Previously, the VIE was consolidated in accordance with
authoritative guidance for consolidation of VIEs (ASC 810-10). The
consideration for the sale included the assumption of the existing $15,762 non-recourse loan. The
sale was recorded in the fourth quarter, generating other income of $669, which is included in
income from discontinued operations, and is the difference between the consideration received of
$50 and the carrying value of the net assets and liabilities of $1,728, less sale related expenses
of $1,109, which included payments to the limited partners of $800. Per authoritative guidance,
held for sale treatment is not applied until all contingencies under the contract have been
mitigated. Due to the nature of this transaction and the limited number of buyers able to complete
the sale, significant financing contingencies existed which prevented the close of the sale until
these contingencies were successfully mitigated. These contingencies were successfully mitigated
on October 13, 2010. Giving consideration to the facts and circumstances, the Company classified
the results of the VIE as discontinued operations upon the closing of the sale transaction and did
not apply held for sale treatment in prior periods.
Through October 12, 2010, the Company was the general partner in the VIE which was initially
syndicated using low income housing tax credits under Section 42 of the Internal Revenue Code. As
general partner, the Company managed the day-to-day operations of the partnership for a management
fee. In addition, the Company had an operating deficit guarantee and a $3,000 tax credit guarantee
to the limited partners of that partnership. The Company was responsible for funding operating
deficits to the extent there were any and could receive operating incentive awards if cash flows
reached certain levels. As a result of the sale, the Companys operating deficit guarantee ended
and the tax credit guarantee was reduced to a $3,000 secondary guarantee, with the new general
partner assuming the operating guarantee and primary tax credit guarantee positions. The Company
consolidated the VIE in accordance with the authoritative guidance and the effect on the
Consolidated Balance Sheets of consolidating this VIE as of December 31, 2009 included total assets
of $11,436, total liabilities of $17,060 and partners deficit of $5,624. The VIE is included in
discontinued operations within the Consolidated Statement of Operations for the years ended
December 31, 2010, 2009 and 2008.
During 2008, the Company determined to pursue a strategy to sell its general partner interest in
the VIE as a result of continued deterioration in property performance and the surrounding market
in general. In addition, the limited partner of the VIE agreed to allow the Company to pursue an
exit strategy. This decision to pursue a plan to exit the property lead to a re-evaluation of the
holding period cash flows and resulting fair market value of the VIEs assets under the
authoritative guidance for impairment of long-lived assets (ASC 360-10). Under the authoritative
guidance, the Company estimated the undiscounted cash flows for the hold period along with a
residual sales value. The undiscounted cash flows of the assets did not equal or exceed the assets
net book value, which is indicative of an impairment of the asset. In order to determine the
amount of the impairment, the Company calculated the fair value of the assets by using a weighted
combination of a direct capitalization approach and a comparable sales approach, as this
combination was deemed to be the most indicative of the Companys fair value in an orderly
transaction between market participants. The data used to determine the fair market value included
historical industry data for estimated capitalization rates, historical and budgeted net operating
income for the VIE, and recent comparable sales in the market in which the property is located.
This resulted in an impairment charge of $4,000 (including $394 of goodwill), which is included in
discontinued operations as the impairment of assets held as general partner for the year ended
December 31, 2008. As discussed above, held for sale treatment was not applied due to the facts
and circumstances leading up to the sale on October 13, 2010.
72
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
5 ACQUISITIONS AND DEVELOPMENT
Property Acquisitions
For the years ended December 31, 2010, 2009 and 2008, the Company acquired the communities listed
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of |
|
|
|
|
|
Date |
|
|
Year |
|
|
Number |
|
|
Cost of |
|
|
Acquisition |
|
Apartment Community |
|
Market Area |
|
Acquired |
|
|
Constructed |
|
|
of Units |
|
|
Acquisition |
|
|
Per Unit |
|
Saddle Brooke Apartments |
|
Baltimore |
|
|
10/29/2008 |
|
|
|
1973 |
|
|
|
468 |
|
|
$ |
51,459 |
|
|
$ |
110 |
|
Westchester West Apartments |
|
Suburban D.C. |
|
|
12/30/2008 |
|
|
|
1972 |
|
|
|
345 |
|
|
|
48,969 |
|
|
|
142 |
|
Middlebrooke Apartments |
|
Baltimore |
|
|
4/1/2010 |
|
|
|
1974-1977 |
|
|
|
208 |
|
|
|
17,350 |
|
|
|
83 |
|
Westbrooke Apartments |
|
Baltimore |
|
|
4/1/2010 |
|
|
|
1961-1970 |
|
|
|
110 |
|
|
|
6,350 |
|
|
|
58 |
|
Annapolis Roads Apartments
(1) |
|
Baltimore |
|
|
6/17/2010 |
|
|
|
1974-1979 |
|
|
|
282 |
|
|
|
32,500 |
|
|
|
115 |
|
The Greens at Columbia |
|
Baltimore |
|
|
7/29/2010 |
|
|
|
1986-1987 |
|
|
|
168 |
|
|
|
25,600 |
|
|
|
152 |
|
Village at Potomac Falls |
|
Suburban D.C. |
|
|
8/5/2010 |
|
|
|
1999 |
|
|
|
247 |
|
|
|
38,500 |
|
|
|
156 |
|
Charleston Place |
|
Baltimore |
|
|
9/30/2010 |
|
|
|
1971-1983 |
|
|
|
858 |
|
|
|
103,000 |
|
|
|
120 |
|
The Courts at Fair Oaks |
|
Suburban D.C. |
|
|
9/30/2010 |
|
|
|
1990 |
|
|
|
364 |
|
|
|
70,100 |
|
|
|
193 |
|
Crescent Club Apartments |
|
Long Island |
|
|
9/30/2010 |
|
|
|
1973 |
|
|
|
257 |
|
|
|
31,250 |
|
|
|
122 |
|
Lakeview Townhomes |
|
Chicago |
|
|
10/18/2010 |
|
|
|
1996 |
|
|
|
120 |
|
|
|
14,475 |
|
|
|
121 |
|
|
|
|
(1) |
|
Property fee-managed by the Company prior to acquisition. |
The following unaudited pro forma information was prepared as if the 2010 transactions related to
the acquisition of apartment communities occurred as of January 1, 2009. The pro forma financial
information is based upon the historical consolidated financial statements and is not necessarily
indicative of the consolidated results which actually would have occurred if the transactions had
been consummated at January 1, 2009, nor does it purport to represent the results of operations for
future periods. Adjustments to the pro forma financial information for the year ended December 31,
2010 and 2009 consist principally of providing net operating activity and recording interest,
depreciation and amortization from January 1, 2009 to the acquisition date as appropriate.
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Pro forma total revenues |
|
$ |
538,659 |
|
|
$ |
533,190 |
|
Pro forma net income attributable to common stockholders |
|
|
21,521 |
|
|
|
36,145 |
|
Pro forma earnings per common share: |
|
|
|
|
|
|
|
|
Basic |
|
|
0.59 |
|
|
|
1.09 |
|
Diluted |
|
|
0.58 |
|
|
|
1.09 |
|
Included in the consolidated statements of income for the year ended December 31, 2010 are total
revenues of $12,831 and net income attributable to common shareholders of $2,018 since the
respective date of acquisition through December 31, 2010 for the 2010 acquired apartment
communities.
All of the 2010 acquired apartment communities were recorded at fair value which approximated
actual purchase price. None of the 2010 acquisitions were subject to bargain purchase options or
resulted in goodwill being recorded.
73
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
5 ACQUISITIONS AND DEVELOPMENT (continued)
Development
During 2007, the Company started construction on a project in Silver Spring, Maryland (1200 East
West Highway), a 14-story high rise with 247 apartment units and 10,600 square feet of retail
space. During 2010, the Company completed construction and placed into service all 247 apartment
units. The total cost for this community was $82,976 for an overall average cost per apartment
unit of $329.
During 2008, the Company started construction on a project located in Alexandria, Virginia,
consisting of four, four-story buildings with 421 units (the Courts at Huntington Station). As of
December 31, 2010, two buildings with 202 units were completed and there were 145 units rented and
occupied. Construction on the second phase (two buildings with 219 units) has commenced and
construction is scheduled to be completed in 2011. The construction in progress for this
development was $83,640 as of December 31, 2010.
The Company also has two projects in pre-construction development: Cobblestone Square, a
development located in Fredericksburg, Virginia, consisting of 314 apartment units; and Ripley
Street located in Silver Spring, Maryland, an 18-story high rise development with 379 apartment
units. Both projects are on entitled land that the Company purchased from other developers and
both are in the final stages of the design process. The construction in progress for these
developments, consisting mostly of land value, was $36,352 as of December 31, 2010.
The Company had one project in the pre-redevelopment phase during 2010. Falkland Chase, located in
Silver Spring, Maryland, currently has 450 garden apartments constructed between 1936 and 1939.
The Company is planning on redeveloping the North parcel, which will be renamed Falkland North.
The Company is making progress on the design and obtaining the necessary approvals to redevelop
this parcel into approximately 1,100 units. Construction is expected to start at the earliest
during late 2012 or early 2013, with a total projected cost of $315,000. The costs associated with
this project were $3,139 and are included in other assets as of December 31, 2010.
Acquisition of Notes Receivable
On September 22, 2010, the Company purchased two non-performing mortgage notes from a community
bank for $1,433 in an arms length transaction. Both notes are in default. One of the notes,
purchased for $1,015, is secured by land and buildings, and is operated as a strip center adjacent
to one of the Companys apartment communities. The other note, purchased for $418 is secured by
vacant land. The notes were purchased at face value including accrued interest and late fees. The
Company notified the existing tenants at the strip center that it exercised its rights to receive
rents under the terms of the mortgage agreements. Rents in the amount of approximately $20 per
month will be used to pay taxes and public utilities and to relieve indebtedness secured by the
mortgage. In accordance with authoritative guidance, the Company will recognize impairment to the
extent the fair value of the collateral is less than the carrying amount of our investment in the
notes receivable. Interest income, if any, will be recognized on the cost recovery method. As of
December 31, 2010, there was no impairment recognized and no interest income recorded. Notes
receivable of $1,433 are included in other assets on the Consolidated Balance Sheet as of December
31, 2010.
74
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
6 MORTGAGE NOTES PAYABLE
The Companys mortgage notes payable are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Fixed rate mortgage notes payable |
|
$ |
2,207,495 |
|
|
$ |
1,908,172 |
|
Variable rate mortgage notes payable |
|
|
216,719 |
|
|
|
204,473 |
|
|
|
|
|
|
|
|
Mortgage notes payable |
|
$ |
2,424,214 |
|
|
$ |
2,112,645 |
|
|
|
|
|
|
|
|
For 2010 and 2009, mortgage notes payable are collateralized by certain apartment communities. The
mortgage notes payable outstanding as of December 31, 2010 mature at various dates from 2011
through 2034, with a weighted average remaining term of six and one-half years. The weighted
average interest rate of the Companys fixed rate notes was 5.36% and 5.86% at December 31, 2010
and 2009, respectively. The weighted average interest rate of the Companys variable rate notes
was 3.00% and 2.92% at December 31, 2010 and 2009, respectively.
Principal payments on the mortgage notes payable for years subsequent to December 31, 2010 are as
follows:
|
|
|
|
|
2011 |
|
$ |
80,681 |
|
2012 |
|
|
156,621 |
|
2013 |
|
|
225,119 |
|
2014 |
|
|
128,115 |
|
2015 |
|
|
276,598 |
|
Thereafter |
|
|
1,557,080 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,424,214 |
|
|
|
|
|
Prepayment penalties of $190, $5,610 and $4,746 were incurred for the years ended December 31,
2010, 2009 and 2008, respectively. For 2009 and 2008, prepayment penalties of $4,717 and $1,266,
respectively, were incurred in connection with the sale of property and are included in
discontinued operations. For 2010, 2009 and 2008, prepayment penalties of $190, $893 and $3,480,
respectively, were incurred in connection with the repayment of mortgages and are included in
interest expense.
Deferred financing costs of $340, $285 and $164 were written off for the years ended December 31,
2010, 2009 and 2008, respectively. For 2010, deferred financing costs written off of $216 were
incurred in connection with the deconsolidation of the VIE and are included in discontinued
operations. For 2009 and 2008, deferred financing costs written off of $210 and $147,
respectively, were incurred in connection with the sale of property and are included in
discontinued operations. For 2010, 2009 and 2008, deferred financing costs written off of $124,
$75 and $17, respectively, were incurred in connection with the repayment of mortgages and are
included in interest expense.
75
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
7 EXCHANGEABLE SENIOR NOTES
In October 2006, the Company issued $200,000 of exchangeable senior notes under an Indenture
Agreement (the Indenture), with a coupon rate of 4.125% (Senior Notes). In the fourth quarter
of 2008, the Company repurchased $60,000 principal amount of the Senior Notes, leaving $140,000
outstanding. The Senior Notes are exchangeable into cash equal to the principal amount of the
notes and, at the Companys option, cash or common stock for the exchange value, to the extent that
the market price of common stock exceeds the initial exchange price of $73.34 per share, subject to
adjustment. The exchange price is adjusted for payments of dividends in excess of the reference
dividend per the Indenture of $0.64 per share. The adjusted exchange price at December 31, 2010
and 2009 was $72.87 per share. Upon an exchange of the notes, the Company will settle any amounts
up to the principal amount of the notes in cash and the remaining exchange value, if any, will be
settled, at the Companys option, in cash, common stock or a combination of both. The notes are
not redeemable at the option of the Company for five years, except to preserve the status of the
Company as a REIT. Holders of the notes may require the Company to repurchase the notes upon the
occurrence of certain designated events. In addition, prior to November 1, 2026, the holders may
require the Company to repurchase the notes on November 1, 2011, 2016 and 2021. The notes will
mature on November 1, 2026, unless previously redeemed, repurchased or exchanged in accordance with
their terms prior to that date. The notes are structurally subordinated to the secured
indebtedness of the Company. The Company is not subject to any financial covenants under the
Indenture. In addition, the Indenture does not restrict the ability to pay distributions, incur
debt or issue or repurchase securities.
The following table provides additional information about the Senior Notes as of December 31, 2010
and 2009:
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Principal amount of liability component |
|
$ |
140,000 |
|
|
$ |
140,000 |
|
Unamortized discount |
|
|
(1,782 |
) |
|
|
(3,864 |
) |
|
|
|
|
|
|
|
Carrying amount of liability component |
|
$ |
138,218 |
|
|
$ |
136,136 |
|
|
|
|
|
|
|
|
Carrying amount of equity component |
|
$ |
13,950 |
|
|
$ |
13,950 |
|
|
|
|
|
|
|
|
The following table provides additional information about the Senior Notes for the years ended
December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Coupon interest |
|
$ |
5,775 |
|
|
$ |
5,775 |
|
|
$ |
7,902 |
|
Issuance cost amortization |
|
|
547 |
|
|
|
547 |
|
|
|
742 |
|
Discount amortization |
|
|
2,082 |
|
|
|
1,968 |
|
|
|
2,519 |
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
$ |
8,404 |
|
|
$ |
8,290 |
|
|
$ |
11,163 |
|
|
|
|
|
|
|
|
|
|
|
Effective interest rate |
|
|
5.75 |
% |
|
|
5.75 |
% |
|
|
5.75 |
% |
|
|
|
|
|
|
|
|
|
|
Conversion price per share, as adjusted |
|
$ |
72.87 |
|
|
$ |
72.87 |
|
|
$ |
73.11 |
|
|
|
|
|
|
|
|
|
|
|
76
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
8 LINE OF CREDIT
As of December 31, 2010, the Company had a $175,000 unsecured line of credit agreement with M&T
Bank, as administrative agent and lead bank, which was set to expire August 31, 2011, not including
a one-year extension, at the Companys option. The credit facility succeeds the $140,000 credit
facility that matured on September 1, 2009. The Company had $56,500 outstanding under the credit
facility on December 31, 2010. Borrowings under the line of credit bear interest at rates ranging
from 2.50% to 3.25% over the one-month LIBOR rate, increasing at higher levels of outstanding
indebtedness, with a LIBOR floor of 1.50%. The one-month LIBOR was 0.26% at December 31, 2010
resulting in an effective rate of 4.50% for the Company.
The credit agreement relating to this line of credit requires the Company to maintain certain
financial ratios and measurements. The Company was in compliance with these financial covenants
for the year ended December 31, 2010.
The Companys line of credit agreement provides the ability to issue up to $20,000 in letters of
credit. While the issuance of letters of credit does not increase borrowings outstanding under the
line of credit, it does reduce the amount available. At December 31, 2010, the Company had
outstanding letters of credit of $4,461 and the amount available on the credit facility was
$114,039.
As more fully described in Note 18, the line of credit was amended and extended on February 10, 2011.
9 STOCKHOLDERS EQUITY
Common Stock
In 1997, the Companys Board of Directors approved a stock repurchase program under which the
Company may repurchase shares of its outstanding common stock and UPREIT Units (Company Program).
The shares/units may be repurchased through open market or privately negotiated transactions at
the discretion of Company management. The Boards action did not establish a target price or a
specific timetable for repurchase. At December 31, 2007 the Company had authorization to
repurchase 1,362,748 shares of common stock and UPREIT Units under the Company Program. On May 1,
2008, the Board of Directors approved a 2,000,000-share increase in the stock repurchase program.
During 2008, the Company repurchased 1,071,588 additional shares at a cost of $49,998. There were
no share repurchases in 2010 or 2009. The Company has authorization to repurchase 2,291,160
shares/units as of December 31, 2010.
At-The-Market Equity Offering Programs
On December 3, 2009, the Company initiated an At-the-Market (ATM) equity offering program
through which it was authorized to sell up to 3.7 million shares of common stock (not to exceed
$150,000 of gross proceeds), from time to time in ATM offerings or negotiated transactions. The
following are issuances of common stock of this program since inception through the completion of
the program on May 11, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Gross |
|
|
|
|
|
|
Average Sales |
|
Period |
|
Shares Sold |
|
|
Proceeds |
|
|
Net Proceeds |
|
|
Price |
|
Fourth quarter 2009 |
|
|
871,600 |
|
|
$ |
39,830 |
|
|
$ |
38,916 |
|
|
$ |
45.70 |
|
First quarter 2010 |
|
|
1,285,700 |
|
|
|
60,092 |
|
|
|
58,856 |
|
|
|
46.74 |
|
Second quarter 2010 |
|
|
1,021,400 |
|
|
|
50,078 |
|
|
|
49,273 |
|
|
|
49.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,178,700 |
|
|
$ |
150,000 |
|
|
$ |
147,045 |
|
|
$ |
47.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On September 17, 2010, the Company registered another ATM equity offering program through which it
is authorized to sell up to 3.6 million shares of common stock, from time to time in ATM offerings
or negotiated transactions. There were no shares issued from this program since inception through
December 31, 2010.
77
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
9 STOCKHOLDERS EQUITY (continued)
Dividend Reinvestment Plan
The Company has a Dividend Reinvestment Plan (the DRIP). The DRIP provides the stockholders of
the Company an opportunity to automatically invest their cash dividends in common stock. In
addition, eligible participants may make monthly payments or other voluntary cash investments in
shares of common stock. The maximum monthly investment without prior Company approval is currently
$10. There is no discount offered on the investment. The Company meets share demand under the
DRIP through share repurchases by the transfer agent in the open market on the Companys behalf or
new share issuance.
Dividends
Stockholders are taxed on dividends and must report such dividends as either ordinary income,
capital gains, or as return of capital. The Company has declared a $2.32 distribution per common
share (CUSIP 437306103) during its most recent fiscal year. Pursuant to Internal Revenue Code
Section 857(b)(3)(C), for the years ended December 31, 2010, 2009 and 2008, the Company designated
the taxable composition of the following cash distributions to holders of common shares in the
amounts set forth in the tables below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary |
|
|
|
|
|
|
|
|
|
|
Long-Term |
|
|
Unrecaptured |
|
Declaration |
|
Record |
|
|
Payable |
|
|
Distributions |
|
|
Taxable |
|
|
Qualified |
|
|
Return of |
|
|
Capital |
|
|
Sec. 1250 |
|
Dates |
|
Dates |
|
|
Dates |
|
|
Per Share |
|
|
Dividend |
|
|
Dividend |
|
|
Capital |
|
|
Gain |
|
|
Gain |
|
2/13/2010 |
|
|
3/1/2010 |
|
|
|
3/5/2010 |
|
|
$ |
0.58 |
|
|
|
53.7293 |
% |
|
|
0.0000 |
% |
|
|
46.2707 |
% |
|
|
0.0000 |
% |
|
|
0.0000 |
% |
5/4/2010 |
|
|
5/17/2010 |
|
|
|
5/27/2010 |
|
|
$ |
0.58 |
|
|
|
53.7293 |
% |
|
|
0.0000 |
% |
|
|
46.2707 |
% |
|
|
0.0000 |
% |
|
|
0.0000 |
% |
8/4/2010 |
|
|
8/16/2010 |
|
|
|
8/26/2010 |
|
|
$ |
0.58 |
|
|
|
53.7293 |
% |
|
|
0.0000 |
% |
|
|
46.2707 |
% |
|
|
0.0000 |
% |
|
|
0.0000 |
% |
10/26/2010 |
|
|
11/12/2010 |
|
|
|
11/23/2010 |
|
|
$ |
0.58 |
|
|
|
53.7293 |
% |
|
|
0.0000 |
% |
|
|
46.2707 |
% |
|
|
0.0000 |
% |
|
|
0.0000 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTALS |
|
$ |
2.32 |
|
|
|
53.7293 |
% |
|
|
0.0000 |
% |
|
|
46.2707 |
% |
|
|
0.0000 |
% |
|
|
0.0000 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The taxable composition of cash distributions for each common share for 2009 and 2008 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Type |
|
|
|
|
|
|
|
Ordinary |
|
|
|
|
|
|
|
|
|
|
Long-Term |
|
|
Unrecaptured |
|
|
|
Distributions |
|
|
Taxable |
|
|
Qualified |
|
|
Return of |
|
|
Capital |
|
|
Sec. 1250 |
|
Year |
|
Per Share |
|
|
Dividend |
|
|
Dividend |
|
|
Capital |
|
|
Gain |
|
|
Gain |
|
2009 |
|
$ |
2.68 |
|
|
|
39.44 |
% |
|
|
0.00 |
% |
|
|
44.02 |
% |
|
|
2.75 |
% |
|
|
13.79 |
% |
2008 |
|
$ |
2.65 |
|
|
|
51.12 |
% |
|
|
0.00 |
% |
|
|
12.68 |
% |
|
|
22.51 |
% |
|
|
13.69 |
% |
Total Shares/Units Outstanding
At December 31, 2010, 37,949,229 common shares, and 11,305,282 UPREIT Units were outstanding for a
total of 49,254,511 common share equivalents.
78
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
9 STOCKHOLDERS EQUITY (continued)
Earnings Per Share
Basic earnings per share (EPS) is computed as net income attributable to common stockholders
divided by the weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable through stock-based
compensation including stock options (using the treasury stock method) and the conversion of any
Senior Notes. The exchange of an UPREIT Unit for a share of common stock will have no effect on
diluted EPS as unitholders and stockholders effectively share equally in the net income of the
Operating Partnership. Income from continuing operations and discontinued operations is the same
for both the basic and diluted calculation.
The reconciliation of basic and diluted earnings per share for the years ended December 31, 2010,
2009 and 2008, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
26,738 |
|
|
$ |
27,069 |
|
|
$ |
43,554 |
|
Less: Income from continuing operations attributable to noncontrolling
interest |
|
|
(6,344 |
) |
|
|
(7,312 |
) |
|
|
(12,698 |
) |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to common stockholders |
|
$ |
20,394 |
|
|
$ |
19,757 |
|
|
$ |
30,856 |
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
$ |
(420 |
) |
|
$ |
20,009 |
|
|
$ |
49,651 |
|
Less: Discontinued operations attributable to noncontrolling interest |
|
|
107 |
|
|
|
(5,347 |
) |
|
|
(14,426 |
) |
|
|
|
|
|
|
|
|
|
|
Discontinued operations attributable to common stockholders |
|
$ |
(313 |
) |
|
$ |
14,662 |
|
|
$ |
35,225 |
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of common shares outstanding |
|
|
36,682,191 |
|
|
|
33,040,839 |
|
|
|
31,991,817 |
|
Effect of dilutive stock options |
|
|
419,380 |
|
|
|
100,519 |
|
|
|
325,473 |
|
Effect of phantom and restricted shares |
|
|
68,315 |
|
|
|
30,758 |
|
|
|
15,398 |
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding |
|
|
37,169,886 |
|
|
|
33,172,116 |
|
|
|
32,332,688 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.56 |
|
|
$ |
0.60 |
|
|
$ |
0.97 |
|
Discontinued operations |
|
|
(0.01 |
) |
|
|
0.44 |
|
|
|
1.10 |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
$ |
0.55 |
|
|
$ |
1.04 |
|
|
$ |
2.07 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.55 |
|
|
$ |
0.60 |
|
|
$ |
0.95 |
|
Discontinued operations |
|
|
(0.01 |
) |
|
|
0.44 |
|
|
|
1.09 |
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
$ |
0.54 |
|
|
$ |
1.04 |
|
|
$ |
2.04 |
|
|
|
|
|
|
|
|
|
|
|
Unexercised stock options to purchase 1,702,783, 2,828,018 and 1,462,713 shares of the
Companys common stock were not included in the computations of diluted EPS because the options
exercise prices were greater than the average market price of the Companys stock during the years
ended December 31, 2010, 2009 and 2008, respectively. In conjunction with the issuance of the
Senior Notes, there were 331,257, 331,257 and 337,653 potential shares issuable under certain
circumstances, none of which are considered dilutive as of December 31, 2010, 2009 and 2008,
respectively.
79
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
10 STOCK BENEFIT PLAN
Description of Stock Benefit Plans
The Company has established a Stock Benefit Plan for the purpose of attracting and retaining
experienced employees and non-employee Directors and to provide incentive for them to exert their
best efforts on behalf of the Company.
The Companys 1994 Stock Benefit Plan (the 1994 Plan) was adopted by the Company at the time of
its initial public offering. On February 1, 2000, the Company adopted the 2000 Stock Benefit Plan,
which was subsequently amended (the 2000 Plan). On May 6, 2003, the Company adopted the 2003
Stock Benefit Plan and on May 6, 2005, the shareholders approved the Amended and Restated 2003
Stock Benefit Plan (the 2003 Plan). On May 1, 2008, the Company adopted the 2008 Stock Benefit
Plan (the 2008 Plan), as a successor to the 2003 Plan. Participants in each of the above
referenced plans (the Stock Plans) include officers, non-employee Directors, and key employees of
the Company. The Stock Plans allow for the award of options, stock appreciation rights and
restricted stock. No stock appreciation rights have been awarded. No additional awards will be
issued under the 1994 Plan, 2000 Plan, and the 2003 Plan.
The 2008 Plan limits the number of shares issuable under the plan to 2,450,000. Stock options
awarded reduce the number of shares available for awards by one share for every one share granted.
Awards of restricted stock reduce the number of shares available for award by one share for every
one share awarded, up to 250,000; beyond that, restricted stock reduces the number of shares
available for award by 3.5 shares for every one share awarded. As of December 31, 2010, in
accordance with the 2008 Plan, awards of 59,945 shares which have been forfeited or cancelled have
been returned to the Plan and are available for future grants. Director awards for 2008 were
limited to a number of options and shares of restricted stock equal to a value of $26,000 and
$55,000, respectively. During 2009 and 2010, the number of options and shares of restricted stock
issued to each non-employee Director were subject to a provision that they not exceed 6,000 options
and 2,000 shares.
Awards granted to employees and non-employee Directors under the various plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Awards |
|
|
Non-Employee Director Awards |
|
|
Available |
|
|
|
Stock |
|
|
Restricted |
|
|
|
|
|
|
Stock |
|
|
Restricted |
|
|
|
|
|
|
for Future |
|
|
|
Options |
|
|
Stock |
|
|
Total |
|
|
Options |
|
|
Stock |
|
|
Total |
|
|
Grant of |
|
Name of Plan |
|
Granted |
|
|
Granted |
|
|
Granted |
|
|
Granted |
|
|
Granted |
|
|
Granted |
|
|
Awards |
|
1994 Plan |
|
|
1,542,381 |
|
|
|
|
|
|
|
1,542,381 |
|
|
|
153,654 |
|
|
|
|
|
|
|
153,654 |
|
|
|
|
|
2000 Plan |
|
|
2,101,220 |
|
|
|
350,702 |
|
|
|
2,451,922 |
|
|
|
163,760 |
|
|
|
2,700 |
|
|
|
166,460 |
|
|
|
|
|
2003 Plan |
|
|
2,737,142 |
|
|
|
96,822 |
|
|
|
2,833,964 |
|
|
|
217,723 |
|
|
|
28,935 |
|
|
|
246,658 |
|
|
|
|
|
2008 Plan |
|
|
1,354,837 |
|
|
|
290,131 |
|
|
|
1,644,968 |
|
|
|
134,146 |
|
|
|
36,313 |
|
|
|
170,459 |
|
|
|
503,408 |
|
Options granted under the Stock Plans vest 20% for each year of service until 100% vested on the
fifth anniversary, except that options issued to certain officers (276,000) and all of the options
issued to non-employee Directors under the 1994 Plan and 2000 Plan vested immediately upon grant.
The exercise price per share for stock options issued under all of the Stock Plans may not be less
than 100% of the closing price of a share of common stock on the date the stock option is granted.
Options granted to non-employee Directors under the 1994 Plan and the 2000 Plan expired after five
years from the date of grant. All other options expire after ten years from the date of grant.
Restricted stock awards granted to Directors vest 100% on the fifth anniversary of the date of
grant. All of the 108,252, 114,078 and 67,801 restricted stock awards granted to employees during
2010, 2009 and 2008 vest 25% on each anniversary of the date of grant for a period of four years.
The Company has a policy of issuing new shares upon the exercise of stock options and upon the
vesting of restricted stock.
80
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
10 STOCK BENEFIT PLAN (continued)
Stock Options
Stock-based compensation cost for stock options is estimated at the grant date based on each
options fair value as calculated using the Black-Scholes option pricing model (BSM). The BSM
incorporates various assumptions including expected dividend yields, volatility, lives and interest
rates. The Company recognizes stock-based compensation cost as expense ratably on a straight-line
basis over the requisite service period. In determining the service period, the Company considers
service requirements, the vesting period and retirement eligibility of the grantee. Accounting
principles require the estimation of forfeitures when recognizing compensation expense and that
this estimate of forfeitures be adjusted over the requisite service period should actual
forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a
cumulative catch-up adjustment, which is recognized in the period of change, and impacts the amount
of unamortized compensation expense to be recognized in future periods.
The following weighted average assumptions are used for the years ended December 31, 2010, 2009 and
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumption |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected dividend yield |
|
|
5.87 |
% |
|
|
6.93 |
% |
|
|
5.48 |
% |
Expected volatility |
|
|
19.31 |
% |
|
|
31.33 |
% |
|
|
20.97 |
% |
Expected lives of the employee options |
|
5.7 Years |
|
|
5.7 Years |
|
|
5.7 Years |
|
Expected lives of the director options |
|
6.7 Years |
|
|
4.9 Years |
|
|
4.6 Years |
|
Risk free interest rate |
|
|
2.75 |
% |
|
|
2.46 |
% |
|
|
3.35 |
% |
Fair value of granted options, per share |
|
$ |
4.16 |
|
|
$ |
4.75 |
|
|
$ |
5.85 |
|
The expected dividend yield was based on the historical dividend growth rates and the historical
annual dividends. The expected volatility was based on the historical volatility of the Companys
common stock. The weighted average expected option lives, for both employee and director options,
with a lifetime of ten years, was based on the Companys historical data for prior period stock
option exercise and cancellation activity. The risk free interest rates for the expected life of
the options were based on the implied U.S. Treasury yield curve.
A summary of stock option activity for the year ended December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise Price |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Number of Options |
|
|
Per Option |
|
|
Term in Years |
|
|
Value |
|
Options outstanding at December 31, 2009 |
|
|
3,222,450 |
|
|
$ |
43.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
400,944 |
|
|
|
49.35 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(378,038 |
) |
|
|
37.27 |
|
|
|
|
|
|
|
|
|
Cancelled |
|
|
(76,251 |
) |
|
|
49.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2010 |
|
|
3,169,105 |
|
|
$ |
44.98 |
|
|
|
6.1 |
|
|
$ |
33,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2010 |
|
|
1,778,092 |
|
|
$ |
44.37 |
|
|
|
4.7 |
|
|
$ |
19,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
10 STOCK BENEFIT PLAN (continued)
A summary of unvested stock option activity for the year ended December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Exercise Price |
|
|
|
Number of Options |
|
|
Per Option |
|
|
|
|
|
|
|
|
|
|
Unvested stock options at December 31, 2009 |
|
|
1,513,621 |
|
|
$ |
45.15 |
|
Granted |
|
|
400,944 |
|
|
|
49.35 |
|
Vested |
|
|
(447,301 |
) |
|
|
46.28 |
|
Cancelled |
|
|
(76,251 |
) |
|
|
49.52 |
|
|
|
|
|
|
|
|
Unvested stock options at December 31, 2010 |
|
|
1,391,013 |
|
|
$ |
45.75 |
|
|
|
|
|
|
|
|
As of December 31, 2010, there was $3,073 of total unrecognized compensation cost related to
unvested stock options that is expected to be recognized over a weighted average period of 1.68
years.
A summary of stock option activity for the years ended December 31, 2010, 2009 and 2008 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Stock-based compensation costs recognized |
|
$ |
2,818 |
|
|
$ |
3,289 |
|
|
$ |
2,411 |
|
Fair value of options vested |
|
|
2,457 |
|
|
|
2,385 |
|
|
|
2,065 |
|
Cash received from the exercise of options |
|
|
14,090 |
|
|
|
5,904 |
|
|
|
7,933 |
|
Intrinsic value of options exercised |
|
|
5,723 |
|
|
|
1,348 |
|
|
|
3,422 |
|
Number of options granted to employees |
|
|
352,454 |
|
|
|
535,056 |
|
|
|
467,327 |
|
Number of options granted to Directors |
|
|
48,490 |
|
|
|
54,000 |
|
|
|
31,656 |
|
Restricted Stock
Stock-based compensation cost for restricted stock is measured based on the closing price of the
Companys common stock on the date of grant and is recognized ratably on a straight-line basis over
the requisite service period. In determining the service period, the Company considers service
requirements, the vesting period and retirement eligibility of the grantee.
A summary of restricted stock activity for the year ended December 31, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
Number of |
|
|
Grant Date Fair Value |
|
|
|
Shares |
|
|
Per Share |
|
Restricted stock outstanding and unvested at December 31, 2009 |
|
|
243,499 |
|
|
$ |
42.00 |
|
Granted |
|
|
121,012 |
|
|
|
49.35 |
|
Vested and issued |
|
|
(70,698 |
) |
|
|
43.79 |
|
Cancelled |
|
|
(10,598 |
) |
|
|
44.89 |
|
|
|
|
|
|
|
|
Restricted stock outstanding and unvested at December 31, 2010 |
|
|
283,215 |
|
|
$ |
44.58 |
|
|
|
|
|
|
|
|
As of December 31, 2010, there was $6,355 of total unrecognized compensation cost related to
unvested restricted stock that is expected to be recognized over a weighted-average period of 2.33
years.
82
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
10 STOCK BENEFIT PLAN (continued)
A summary of restricted stock activity for the years ended December 31, 2010, 2009 and 2008 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Stock-based compensation costs recognized |
|
$ |
4,527 |
|
|
$ |
3,549 |
|
|
$ |
3,133 |
|
Fair value of restricted shares vested |
|
|
3,447 |
|
|
|
1,749 |
|
|
|
5,378 |
|
Number of restricted shares granted to employees |
|
|
108,252 |
|
|
|
114,078 |
|
|
|
67,801 |
|
Number of restricted shares granted to Directors |
|
|
12,760 |
|
|
|
14,769 |
|
|
|
8,784 |
|
Weighted average price of shares granted, per
share |
|
$ |
49.35 |
|
|
$ |
33.90 |
|
|
$ |
50.09 |
|
11 EMPLOYEE BENEFIT PLAN
401(k) Savings Plan
The Company sponsors a defined contribution plan. Under the plan, the Company will match 75% of
the first 4% of each participants contributions not to exceed 3% of that participants eligible
compensation. The matching expense under this plan was $968, $886 and $844 for the years ended
December 31, 2010, 2009 and 2008, respectively.
12 SEGMENT REPORTING
The Company is engaged in the ownership and management of market rate apartment communities. Each
apartment community is considered a separate operating segment. Each segment on a standalone basis
is less than 10% of the revenues, net operating income, and assets of the combined reported
operating segments and meets all of the aggregation criteria under the authoritative guidance. The
operating segments are aggregated as Core and Non-core properties.
Non-segment revenue to reconcile to total revenue consists of interest income and other income.
Non-segment assets to reconcile to total assets include cash and cash equivalents, cash in escrows,
accounts receivable, prepaid expenses, deferred charges, and other assets.
Core properties consist of all apartment communities owned throughout 2009 and 2010 where
comparable operating results are available. Therefore, the Core Properties represent communities
owned as of January 1, 2009. Non-core properties consist of apartment communities acquired or
developed during 2009 and 2010, such that full year comparable operating results are not available.
The Company assesses and measures segment operating results based on a performance measure referred
to as net operating income. Net operating income is defined as total revenues less operating and
maintenance expenses. The accounting policies of the segments are the same as those described in
Notes 1, 2 and 3.
83
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
12 SEGMENT REPORTING (continued)
The revenues and net operating income for each of the reportable segments are summarized as follows
for the years ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Apartments owned |
|
|
|
|
|
|
|
|
|
|
|
|
Core properties |
|
$ |
499,793 |
|
|
$ |
498,250 |
|
|
$ |
489,201 |
|
Non-core properties |
|
|
16,680 |
|
|
|
167 |
|
|
|
|
|
Reconciling items |
|
|
106 |
|
|
|
759 |
|
|
|
566 |
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
516,579 |
|
|
$ |
499,176 |
|
|
$ |
489,767 |
|
|
|
|
|
|
|
|
|
|
|
Net operating income |
|
|
|
|
|
|
|
|
|
|
|
|
Apartments owned |
|
|
|
|
|
|
|
|
|
|
|
|
Core properties |
|
$ |
296,009 |
|
|
$ |
290,971 |
|
|
$ |
285,630 |
|
Non-core properties |
|
|
9,426 |
|
|
|
153 |
|
|
|
|
|
Reconciling items |
|
|
106 |
|
|
|
759 |
|
|
|
566 |
|
|
|
|
|
|
|
|
|
|
|
Net operating income, including
reconciling items |
|
|
305,541 |
|
|
|
291,883 |
|
|
|
286,196 |
|
General and administrative expenses |
|
|
(25,138 |
) |
|
|
(24,476 |
) |
|
|
(25,489 |
) |
Interest expense |
|
|
(124,126 |
) |
|
|
(121,765 |
) |
|
|
(118,263 |
) |
Depreciation and amortization |
|
|
(126,668 |
) |
|
|
(118,573 |
) |
|
|
(110,194 |
) |
Other expenses |
|
|
(2,871 |
) |
|
|
|
|
|
|
|
|
Gain on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
11,304 |
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
26,738 |
|
|
$ |
27,069 |
|
|
$ |
43,554 |
|
|
|
|
|
|
|
|
|
|
|
The assets for each of the reportable segments are summarized as follows as of December 31, 2010
and 2009:
|
|
|
|
|
|
|
|
|
Assets |
|
2010 |
|
|
2009 |
|
Apartments owned |
|
|
|
|
|
|
|
|
Core properties |
|
$ |
2,950,884 |
|
|
$ |
2,975,642 |
|
Non-core properties |
|
|
585,045 |
|
|
|
207,195 |
|
Reconciling items |
|
|
98,774 |
|
|
|
85,197 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,634,703 |
|
|
$ |
3,268,034 |
|
|
|
|
|
|
|
|
13 TRANSACTIONS WITH AFFILIATES
The Company and HPRS recognized management and development fee revenue, interest income and other
miscellaneous income from affiliated entities of $7 and $19 for the years ended December 31, 2009
and 2008, respectively.
The Company leases its corporate office space from an affiliate. The rent for the corporate office
space is a gross rent that includes real estate taxes and common area maintenance. In July 2009,
the Company extended the lease on its corporate office space through September 2019, plus two
five-year renewal options. Rental expense was $1,353, $1,432 and $1,711 for each of the years
ended December 31, 2010, 2009 and 2008, respectively.
84
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
14 COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company has entered into operating leases for office space and office equipment with remaining
terms of 1 to 6 years. Future minimum rental payments under non-cancelable operating leases in
effect as of December 31, 2010 were as follows:
|
|
|
|
|
2011 |
|
$ |
1,787 |
|
2012 |
|
|
1,737 |
|
2013 |
|
|
1,511 |
|
2014 |
|
|
1,498 |
|
2015 |
|
|
1,518 |
|
Thereafter |
|
|
1,288 |
|
|
|
|
|
|
|
$ |
9,339 |
|
|
|
|
|
The Company incurred $2,046, $1,934 and $1,985 of rent expense under operating leases in 2010, 2009
and 2008, respectively.
Letters of Credit
As of December 31, 2010 the Company had issued $4,461 in letters of credit, which were provided
under the Companys $175,000 unsecured line of credit agreement. The letters of credit were
required to be issued under certain tax escrow agreements, workers compensation and health
insurance policies, and construction projects.
Debt Covenants
The line of credit agreement contains restrictions which, among other things, require maintenance
of certain financial ratios.
Included in the Companys consolidated balance sheet at December 31, 2010 are assets of Home
Properties Fair Oaks, LLC, owner of the Courts at Fair Oaks, Fairfax County, VA, that are pledged
as collateral for specific indebtedness and are not available to satisfy any other obligations of
the Company.
Tax Protection Obligations
In connection with various UPREIT transactions, the Company has agreed to maintain certain levels
of nonrecourse debt for a period of 5 to 10 years associated with the contributed properties
acquired. In addition, the Company is restricted in its ability to sell certain contributed
properties (16% of the owned portfolio) for a contract period of 7 to 15 years except through a tax
deferred Internal Revenue Code Section 1031 like-kind exchange. The remaining terms on the sale
restrictions range from 1 month to 6.5 years.
85
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
14 COMMITMENTS AND CONTINGENCIES (continued)
Limited Partnership
For periods before October 13, 2010, the Company, through its general partnership interest in an
affordable property limited partnership, had guaranteed certain low income housing tax credits to
limited partners in this partnership through 2015 totaling approximately $3,000. As of December
31, 2010, there were no known conditions that would make such payments necessary relating to the
tax credit guarantee. In addition, through October 12, 2010, the Company, acting as general
partner in this partnership, was obligated to advance funds to meet partnership operating deficits.
As more fully described in Note 4, the Companys general partner interest in this entity was sold
on October 13, 2010, relieving the Company of the operating deficit guarantee and reducing the tax
credit guarantee to a $3,000 secondary guarantee, with the new general partner assuming the
operating guarantee and primary tax credit guarantee positions.
Executive Retention Plan
The Executive Retention Plan provides for severance benefits and other compensation to be paid to
certain employees in the event of a change in control of the Company and a subsequent termination
of their employment.
15 DISCONTINUED OPERATIONS
Included in discontinued operations for the three years ended December 31, 2010 are the operating
results of 20 apartment community dispositions (5 sold in 2009 and 15 sold in 2008) and the
operating results of the VIE for which the Companys general partnership interest was sold in 2010.
A summary of community dispositions is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposed |
|
|
Disposed |
|
|
Number of |
|
|
Total Sales |
|
|
Sales Price |
|
|
|
|
Year |
|
Communities |
|
|
Units |
|
|
Transactions |
|
|
Price |
|
|
Per Unit |
|
|
Total Gain On Sale |
|
2009 |
|
|
5 |
|
|
|
1,333 |
|
|
|
3 |
|
|
$ |
108,300 |
|
|
$ |
81 |
|
|
$ |
24,314 |
|
2008 |
|
|
15 |
|
|
|
1,227 |
|
|
|
6 |
|
|
|
124,500 |
|
|
|
101 |
|
|
|
51,560 |
|
The operating results of discontinued operations are summarized as follows for the years ended
December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
3,441 |
|
|
$ |
9,710 |
|
|
$ |
27,086 |
|
Property other income |
|
|
14 |
|
|
|
583 |
|
|
|
2,306 |
|
Other income |
|
|
669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
4,124 |
|
|
|
10,293 |
|
|
|
29,392 |
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance |
|
|
2,889 |
|
|
|
6,695 |
|
|
|
15,588 |
|
Interest expense, including prepayment penalties |
|
|
802 |
|
|
|
5,546 |
|
|
|
5,187 |
|
Depreciation and amortization |
|
|
840 |
|
|
|
2,357 |
|
|
|
6,526 |
|
Impairment of assets held as general partner |
|
|
|
|
|
|
|
|
|
|
4,000 |
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
4,531 |
|
|
|
14,598 |
|
|
|
31,301 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
$ |
(407 |
) |
|
$ |
(4,305 |
) |
|
$ |
(1,909 |
) |
|
|
|
|
|
|
|
|
|
|
86
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
16 SUPPLEMENTAL CASH FLOW DISCLOSURES
Supplemental cash flow information including non-cash financing and investing activities for the
years ended December 31, 2010, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of capitalized interest |
|
$ |
117,292 |
|
|
$ |
121,800 |
|
|
$ |
118,137 |
|
Interest capitalized |
|
|
9,384 |
|
|
|
8,900 |
|
|
|
5,472 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans assumed associated with property acquisitions |
|
|
155,639 |
|
|
|
|
|
|
|
65,517 |
|
Issuance of UPREIT Units associated with property acquisitions |
|
|
4,845 |
|
|
|
|
|
|
|
|
|
Increase in real estate associated with the purchase of UPREIT
Units (1) |
|
|
|
|
|
|
|
|
|
|
17,793 |
|
Exchange of UPREIT Units for common shares |
|
|
10,234 |
|
|
|
21,332 |
|
|
|
12,435 |
|
Transfers of construction in progress to buildings, improvements
and equipment |
|
|
110,902 |
|
|
|
|
|
|
|
|
|
Additions to properties included in accounts payable |
|
|
5,292 |
|
|
|
2,210 |
|
|
|
5,764 |
|
Exchangeable senior notes issuance costs written off in
connection with early extinguishment |
|
|
|
|
|
|
|
|
|
|
1,260 |
|
Mortgage note premium written off |
|
|
270 |
|
|
|
1,921 |
|
|
|
4,218 |
|
Net real estate disposed in connection with VIE deconsolidation |
|
|
13,837 |
|
|
|
|
|
|
|
|
|
Other assets disposed in connection with VIE deconsolidation |
|
|
1,228 |
|
|
|
|
|
|
|
|
|
Mortgage debt disposed in connection with VIE deconsolidation |
|
|
15,762 |
|
|
|
|
|
|
|
|
|
Other liabilities disposed in connection with VIE deconsolidation |
|
|
1,031 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Refer to Note 2 for discussion on the required change in accounting for the
exchanges of UPREIT Units for common shares that became effective January 1, 2009. |
17 QUARTERLY FINANCIAL STATEMENT INFORMATION (UNAUDITED)
Quarterly financial information for the years ended December 31, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
Total revenue |
|
$ |
125,867 |
|
|
$ |
124,946 |
|
|
$ |
128,627 |
|
|
$ |
137,139 |
|
Net income attributable to common stockholders |
|
|
2,637 |
|
|
|
5,168 |
|
|
|
5,507 |
|
|
|
6,769 |
|
Basic earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
|
0.08 |
|
|
|
0.14 |
|
|
|
0.15 |
|
|
|
0.18 |
|
Diluted earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
|
0.07 |
|
|
|
0.14 |
|
|
|
0.15 |
|
|
|
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
First |
|
|
Second |
|
|
Third |
|
|
Fourth |
|
Total revenue |
|
$ |
126,770 |
|
|
$ |
124,037 |
|
|
$ |
123,676 |
|
|
$ |
124,693 |
|
Net income attributable to common stockholders |
|
|
10,902 |
|
|
|
6,020 |
|
|
|
5,264 |
|
|
|
12,233 |
|
Basic earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
|
0.33 |
|
|
|
0.18 |
|
|
|
0.16 |
|
|
|
0.36 |
|
Diluted earnings per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
|
|
0.33 |
|
|
|
0.18 |
|
|
|
0.16 |
|
|
|
0.36 |
|
The sum of the quarterly earnings per common share amounts may not equal the annual earnings per
common share amounts due primarily to changes in the number of common shares outstanding quarter to
quarter. The quarterly reports for the years ended December 31, 2010 and 2009 have been
reclassified to reflect discontinued operations in accordance with authoritative guidance.
87
HOME PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
18 SUBSEQUENT EVENTS
On February 10, 2011, the Company amended and extended its $175,000 unsecured line of credit
agreement with M&T Bank, as administrative agent and lead bank, which was scheduled to expire
August 31, 2011. The amended line of credit agreement expires August 31, 2012, not including a
one-year extension, at the Companys option. Borrowings under the amended line of credit bear
interest at rates ranging from 1.90% to 2.63% over the one-month LIBOR rate, increasing at higher
levels of indebtedness, without a LIBOR floor.
On February 12, 2011, the Board declared a dividend of $0.62 per share for the quarter ended
December 31, 2010. This is the equivalent of an annual distribution of $2.48 per share. The
dividend is payable March 4, 2011 to shareholders of record on February 28, 2011.
88
SCHEDULE II
HOME PROPERTIES, INC.
Schedule
VALUATION AND QUALIFYING ACCOUNTS
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31:
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Charged to |
|
|
Adjustments/ |
|
|
|
|
|
|
Beginning |
|
|
Costs and |
|
|
Amounts |
|
|
Balance at |
|
|
|
of Year |
|
|
Expenses |
|
|
Written Off |
|
|
End of Year |
|
Allowance for Doubtful Receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010: |
|
$ |
3,220 |
|
|
$ |
6,636 |
|
|
$ |
(6,722 |
) |
|
$ |
3,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009: |
|
|
2,925 |
|
|
|
6,403 |
|
|
|
(6,108 |
) |
|
|
3,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008: |
|
|
1,699 |
|
|
|
6,378 |
|
|
|
(5,152 |
) |
|
|
2,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Asset Valuation Allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010: |
|
|
10,195 |
|
|
|
|
|
|
|
2,555 |
|
|
|
12,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009: |
|
|
10,176 |
|
|
|
|
|
|
|
19 |
|
|
|
10,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008: |
|
|
10,149 |
|
|
|
|
|
|
|
27 |
|
|
|
10,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III
HOME PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2010
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPREIT |
|
|
Initial Cost |
|
|
UPREIT |
|
|
Costs |
|
|
|
|
|
|
Total Cost |
|
|
|
|
|
|
|
|
|
|
Total Cost, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit |
|
|
Buildings, |
|
|
Unit |
|
|
Capitalized |
|
|
|
|
|
|
Buildings, |
|
|
|
|
|
|
|
|
|
|
Net of |
|
|
|
|
|
|
Encum- |
|
|
|
|
|
|
Alloc. |
|
|
Improvements |
|
|
Alloc. |
|
|
Subsequent to |
|
|
|
|
|
|
Improvements |
|
|
|
|
|
|
Accumulated |
|
|
Accumulated |
|
|
Year of |
|
Community |
|
brances |
|
|
Land |
|
|
Land(a) |
|
|
& Equipment |
|
|
Bldg.(a) |
|
|
Acquisition |
|
|
Land |
|
|
& Equipment |
|
|
Total(b) |
|
|
Depreciation |
|
|
Depreciation |
|
|
Acquisition |
|
1200 East West |
|
$ |
|
|
|
$ |
13,068 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
69,908 |
|
|
$ |
13,068 |
|
|
$ |
69,908 |
|
|
$ |
82,976 |
|
|
$ |
825 |
|
|
$ |
82,151 |
|
|
|
2010 |
|
Annapolis Roads Apartments |
|
|
23,990 |
|
|
|
14,400 |
|
|
|
|
|
|
|
18,035 |
|
|
|
|
|
|
|
542 |
|
|
|
14,400 |
|
|
|
18,577 |
|
|
|
32,977 |
|
|
|
263 |
|
|
|
32,714 |
|
|
|
2010 |
|
Barrington Gardens |
|
|
10,996 |
|
|
|
888 |
|
|
|
35 |
|
|
|
6,658 |
|
|
|
296 |
|
|
|
5,536 |
|
|
|
923 |
|
|
|
12,490 |
|
|
|
13,413 |
|
|
|
2,418 |
|
|
|
10,995 |
|
|
|
2005 |
|
Bayview & Colonial |
|
|
10,596 |
|
|
|
1,600 |
|
|
|
72 |
|
|
|
8,471 |
|
|
|
709 |
|
|
|
5,040 |
|
|
|
1,672 |
|
|
|
14,220 |
|
|
|
15,892 |
|
|
|
4,581 |
|
|
|
11,311 |
|
|
|
2000 |
|
Blackhawk Apartments |
|
|
|
|
|
|
2,968 |
|
|
|
83 |
|
|
|
14,568 |
|
|
|
858 |
|
|
|
6,933 |
|
|
|
3,051 |
|
|
|
22,359 |
|
|
|
25,410 |
|
|
|
7,188 |
|
|
|
18,222 |
|
|
|
2000 |
|
Bonnie Ridge Apartments |
|
|
53,825 |
|
|
|
4,830 |
|
|
|
411 |
|
|
|
42,769 |
|
|
|
4,147 |
|
|
|
34,156 |
|
|
|
5,241 |
|
|
|
81,072 |
|
|
|
86,313 |
|
|
|
28,600 |
|
|
|
57,713 |
|
|
|
1999 |
|
Braddock Lee Apartments |
|
|
|
|
|
|
3,810 |
|
|
|
152 |
|
|
|
8,842 |
|
|
|
1,488 |
|
|
|
7,571 |
|
|
|
3,962 |
|
|
|
17,901 |
|
|
|
21,863 |
|
|
|
7,113 |
|
|
|
14,750 |
|
|
|
1998 |
|
Cambridge Village Associates |
|
|
|
|
|
|
2,460 |
|
|
|
54 |
|
|
|
3,188 |
|
|
|
520 |
|
|
|
2,389 |
|
|
|
2,514 |
|
|
|
6,097 |
|
|
|
8,611 |
|
|
|
1,726 |
|
|
|
6,885 |
|
|
|
2002 |
|
Canterbury Apartments |
|
|
43,356 |
|
|
|
4,944 |
|
|
|
235 |
|
|
|
21,384 |
|
|
|
2,353 |
|
|
|
12,450 |
|
|
|
5,179 |
|
|
|
36,187 |
|
|
|
41,366 |
|
|
|
11,432 |
|
|
|
29,934 |
|
|
|
1999 |
|
Castle Club Apartments |
|
|
6,198 |
|
|
|
948 |
|
|
|
57 |
|
|
|
8,933 |
|
|
|
566 |
|
|
|
5,850 |
|
|
|
1,005 |
|
|
|
15,349 |
|
|
|
16,354 |
|
|
|
4,643 |
|
|
|
11,711 |
|
|
|
2000 |
|
Charleston Place |
|
|
75,549 |
|
|
|
22,764 |
|
|
|
|
|
|
|
84,648 |
|
|
|
|
|
|
|
259 |
|
|
|
22,764 |
|
|
|
84,907 |
|
|
|
107,671 |
|
|
|
761 |
|
|
|
106,910 |
|
|
|
2010 |
|
Chatham Hill Apartments |
|
|
44,455 |
|
|
|
1,848 |
|
|
|
286 |
|
|
|
46,150 |
|
|
|
2,434 |
|
|
|
12,888 |
|
|
|
2,134 |
|
|
|
61,472 |
|
|
|
63,606 |
|
|
|
11,576 |
|
|
|
52,030 |
|
|
|
2004 |
|
Chesterfield Apartments |
|
|
|
|
|
|
1,482 |
|
|
|
89 |
|
|
|
8,206 |
|
|
|
869 |
|
|
|
8,290 |
|
|
|
1,571 |
|
|
|
17,365 |
|
|
|
18,936 |
|
|
|
6,429 |
|
|
|
12,507 |
|
|
|
1997 |
|
Cider Mill |
|
|
62,825 |
|
|
|
15,552 |
|
|
|
464 |
|
|
|
65,939 |
|
|
|
4,549 |
|
|
|
13,508 |
|
|
|
16,016 |
|
|
|
83,996 |
|
|
|
100,012 |
|
|
|
19,800 |
|
|
|
80,212 |
|
|
|
2002 |
|
Cinnamon Run Apartments |
|
|
55,224 |
|
|
|
7,731 |
|
|
|
231 |
|
|
|
59,693 |
|
|
|
1,934 |
|
|
|
6,563 |
|
|
|
7,962 |
|
|
|
68,190 |
|
|
|
76,152 |
|
|
|
9,661 |
|
|
|
66,491 |
|
|
|
2005 |
|
Country Village Apartments |
|
|
18,682 |
|
|
|
2,236 |
|
|
|
113 |
|
|
|
11,149 |
|
|
|
1,120 |
|
|
|
10,581 |
|
|
|
2,349 |
|
|
|
22,850 |
|
|
|
25,199 |
|
|
|
8,730 |
|
|
|
16,469 |
|
|
|
1998 |
|
Courtyards Village |
|
|
|
|
|
|
3,360 |
|
|
|
53 |
|
|
|
9,824 |
|
|
|
525 |
|
|
|
4,442 |
|
|
|
3,413 |
|
|
|
14,791 |
|
|
|
18,204 |
|
|
|
4,162 |
|
|
|
14,042 |
|
|
|
2001 |
|
Crescent Club Apartments |
|
|
|
|
|
|
2,338 |
|
|
|
|
|
|
|
28,792 |
|
|
|
|
|
|
|
165 |
|
|
|
2,338 |
|
|
|
28,957 |
|
|
|
31,295 |
|
|
|
257 |
|
|
|
31,038 |
|
|
|
2010 |
|
Curren Terrace |
|
|
23,248 |
|
|
|
1,908 |
|
|
|
109 |
|
|
|
10,957 |
|
|
|
1,082 |
|
|
|
8,055 |
|
|
|
2,017 |
|
|
|
20,094 |
|
|
|
22,111 |
|
|
|
8,186 |
|
|
|
13,925 |
|
|
|
1997 |
|
Cypress Place |
|
|
10,200 |
|
|
|
2,304 |
|
|
|
45 |
|
|
|
7,861 |
|
|
|
479 |
|
|
|
4,811 |
|
|
|
2,349 |
|
|
|
13,151 |
|
|
|
15,500 |
|
|
|
4,209 |
|
|
|
11,291 |
|
|
|
2000 |
|
Devonshire Hills |
|
|
45,570 |
|
|
|
14,850 |
|
|
|
317 |
|
|
|
32,934 |
|
|
|
3,172 |
|
|
|
7,788 |
|
|
|
15,167 |
|
|
|
43,894 |
|
|
|
59,061 |
|
|
|
11,201 |
|
|
|
47,860 |
|
|
|
2001 |
|
Dunfield Townhomes |
|
|
11,897 |
|
|
|
1,683 |
|
|
|
|
|
|
|
30,302 |
|
|
|
|
|
|
|
4,778 |
|
|
|
1,683 |
|
|
|
35,080 |
|
|
|
36,763 |
|
|
|
3,228 |
|
|
|
33,535 |
|
|
|
2007 |
|
East Hill Gardens |
|
|
|
|
|
|
231 |
|
|
|
24 |
|
|
|
1,560 |
|
|
|
241 |
|
|
|
1,361 |
|
|
|
255 |
|
|
|
3,162 |
|
|
|
3,417 |
|
|
|
1,179 |
|
|
|
2,238 |
|
|
|
1998 |
|
East Meadow Apartments |
|
|
14,769 |
|
|
|
2,250 |
|
|
|
89 |
|
|
|
10,803 |
|
|
|
863 |
|
|
|
3,035 |
|
|
|
2,339 |
|
|
|
14,701 |
|
|
|
17,040 |
|
|
|
3,997 |
|
|
|
13,043 |
|
|
|
2000 |
|
Elmwood Terrace |
|
|
26,793 |
|
|
|
6,048 |
|
|
|
155 |
|
|
|
14,680 |
|
|
|
1,561 |
|
|
|
10,995 |
|
|
|
6,203 |
|
|
|
27,236 |
|
|
|
33,439 |
|
|
|
8,490 |
|
|
|
24,949 |
|
|
|
2000 |
|
Falcon Crest Townhomes |
|
|
18,555 |
|
|
|
2,772 |
|
|
|
161 |
|
|
|
11,116 |
|
|
|
1,590 |
|
|
|
9,691 |
|
|
|
2,933 |
|
|
|
22,397 |
|
|
|
25,330 |
|
|
|
7,594 |
|
|
|
17,736 |
|
|
|
1999 |
|
Falkland Chase Apartments |
|
|
36,197 |
|
|
|
9,000 |
|
|
|
327 |
|
|
|
49,753 |
|
|
|
3,008 |
|
|
|
5,652 |
|
|
|
9,327 |
|
|
|
58,413 |
|
|
|
67,740 |
|
|
|
11,424 |
|
|
|
56,316 |
|
|
|
2003 |
|
Fox Hall Apartments |
|
|
47,000 |
|
|
|
9,959 |
|
|
|
|
|
|
|
51,874 |
|
|
|
|
|
|
|
10,066 |
|
|
|
9,959 |
|
|
|
61,940 |
|
|
|
71,899 |
|
|
|
7,075 |
|
|
|
64,824 |
|
|
|
2007 |
|
Gardencrest Apartments |
|
|
|
|
|
|
24,674 |
|
|
|
507 |
|
|
|
61,526 |
|
|
|
4,974 |
|
|
|
23,095 |
|
|
|
25,181 |
|
|
|
89,595 |
|
|
|
114,776 |
|
|
|
22,367 |
|
|
|
92,409 |
|
|
|
2002 |
|
Gateway Village Apartments |
|
|
6,372 |
|
|
|
1,320 |
|
|
|
71 |
|
|
|
6,621 |
|
|
|
695 |
|
|
|
2,647 |
|
|
|
1,391 |
|
|
|
9,963 |
|
|
|
11,354 |
|
|
|
3,317 |
|
|
|
8,037 |
|
|
|
1999 |
|
Glen Brook Apartments |
|
|
|
|
|
|
1,414 |
|
|
|
46 |
|
|
|
4,816 |
|
|
|
452 |
|
|
|
4,363 |
|
|
|
1,460 |
|
|
|
9,631 |
|
|
|
11,091 |
|
|
|
3,210 |
|
|
|
7,881 |
|
|
|
1999 |
|
Glen Manor Apartments |
|
|
7,927 |
|
|
|
1,044 |
|
|
|
44 |
|
|
|
4,565 |
|
|
|
440 |
|
|
|
3,428 |
|
|
|
1,088 |
|
|
|
8,433 |
|
|
|
9,521 |
|
|
|
3,037 |
|
|
|
6,484 |
|
|
|
1997 |
|
Golf Club Apartments |
|
|
32,893 |
|
|
|
3,990 |
|
|
|
187 |
|
|
|
21,298 |
|
|
|
1,840 |
|
|
|
14,071 |
|
|
|
4,177 |
|
|
|
37,209 |
|
|
|
41,386 |
|
|
|
12,358 |
|
|
|
29,028 |
|
|
|
2000 |
|
Hackensack Gardens |
|
|
8,649 |
|
|
|
2,376 |
|
|
|
50 |
|
|
|
10,900 |
|
|
|
423 |
|
|
|
5,805 |
|
|
|
2,426 |
|
|
|
17,128 |
|
|
|
19,554 |
|
|
|
3,153 |
|
|
|
16,401 |
|
|
|
2005 |
|
Hawthorne Court |
|
|
34,530 |
|
|
|
8,940 |
|
|
|
260 |
|
|
|
23,446 |
|
|
|
2,521 |
|
|
|
17,827 |
|
|
|
9,200 |
|
|
|
43,794 |
|
|
|
52,994 |
|
|
|
11,972 |
|
|
|
41,022 |
|
|
|
2002 |
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPREIT |
|
|
Initial Cost |
|
|
UPREIT |
|
|
Costs |
|
|
|
|
|
|
Total Cost |
|
|
|
|
|
|
|
|
|
|
Total Cost, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit |
|
|
Buildings, |
|
|
Unit |
|
|
Capitalized |
|
|
|
|
|
|
Buildings, |
|
|
|
|
|
|
|
|
|
|
Net of |
|
|
|
|
|
|
Encum- |
|
|
|
|
|
|
Alloc. |
|
|
Improvements |
|
|
Alloc. |
|
|
Subsequent to |
|
|
|
|
|
|
Improvements |
|
|
|
|
|
|
Accumulated |
|
|
Accumulated |
|
|
Year of |
|
Community |
|
brances |
|
|
Land |
|
|
Land(a) |
|
|
& Equipment |
|
|
Bldg.(a) |
|
|
Acquisition |
|
|
Land |
|
|
& Equipment |
|
|
Total(b) |
|
|
Depreciation |
|
|
Depreciation |
|
|
Acquisition |
|
Heritage Square |
|
|
|
|
|
|
2,000 |
|
|
|
58 |
|
|
|
4,805 |
|
|
|
566 |
|
|
|
2,686 |
|
|
|
2,058 |
|
|
|
8,057 |
|
|
|
10,115 |
|
|
|
2,076 |
|
|
|
8,039 |
|
|
|
2002 |
|
Heritage Woods |
|
|
14,500 |
|
|
|
1,640 |
|
|
|
|
|
|
|
12,420 |
|
|
|
|
|
|
|
3,523 |
|
|
|
1,640 |
|
|
|
15,943 |
|
|
|
17,583 |
|
|
|
2,058 |
|
|
|
15,525 |
|
|
|
2006 |
|
Highland House Apartments |
|
|
5,922 |
|
|
|
3,414 |
|
|
|
|
|
|
|
14,761 |
|
|
|
|
|
|
|
2,176 |
|
|
|
3,414 |
|
|
|
16,937 |
|
|
|
20,351 |
|
|
|
2,192 |
|
|
|
18,159 |
|
|
|
2006 |
|
Hill Brook Place Apartments |
|
|
12,849 |
|
|
|
2,192 |
|
|
|
85 |
|
|
|
9,118 |
|
|
|
848 |
|
|
|
7,644 |
|
|
|
2,277 |
|
|
|
17,610 |
|
|
|
19,887 |
|
|
|
5,531 |
|
|
|
14,356 |
|
|
|
1999 |
|
Holiday Square |
|
|
|
|
|
|
3,575 |
|
|
|
77 |
|
|
|
6,108 |
|
|
|
722 |
|
|
|
2,138 |
|
|
|
3,652 |
|
|
|
8,968 |
|
|
|
12,620 |
|
|
|
2,115 |
|
|
|
10,505 |
|
|
|
2002 |
|
Home Properties of Bryn Mawr |
|
|
17,138 |
|
|
|
3,160 |
|
|
|
154 |
|
|
|
17,956 |
|
|
|
1,537 |
|
|
|
14,110 |
|
|
|
3,314 |
|
|
|
33,603 |
|
|
|
36,917 |
|
|
|
9,895 |
|
|
|
27,022 |
|
|
|
2000 |
|
Home Properties of Devon |
|
|
60,400 |
|
|
|
6,280 |
|
|
|
332 |
|
|
|
35,643 |
|
|
|
3,280 |
|
|
|
27,246 |
|
|
|
6,612 |
|
|
|
66,169 |
|
|
|
72,781 |
|
|
|
21,196 |
|
|
|
51,585 |
|
|
|
2000 |
|
Jacob Ford Village |
|
|
|
|
|
|
6,750 |
|
|
|
|
|
|
|
20,022 |
|
|
|
|
|
|
|
6,998 |
|
|
|
6,750 |
|
|
|
27,020 |
|
|
|
33,770 |
|
|
|
3,188 |
|
|
|
30,582 |
|
|
|
2007 |
|
Lake Grove Apartments |
|
|
34,466 |
|
|
|
7,360 |
|
|
|
254 |
|
|
|
11,952 |
|
|
|
2,557 |
|
|
|
15,783 |
|
|
|
7,614 |
|
|
|
30,292 |
|
|
|
37,906 |
|
|
|
12,627 |
|
|
|
25,279 |
|
|
|
1997 |
|
Lakeview Apartments |
|
|
9,103 |
|
|
|
636 |
|
|
|
59 |
|
|
|
4,552 |
|
|
|
590 |
|
|
|
3,784 |
|
|
|
695 |
|
|
|
8,926 |
|
|
|
9,621 |
|
|
|
3,288 |
|
|
|
6,333 |
|
|
|
1998 |
|
Lakeview Townhomes |
|
|
|
|
|
|
1,118 |
|
|
|
|
|
|
|
13,335 |
|
|
|
|
|
|
|
12 |
|
|
|
1,118 |
|
|
|
13,347 |
|
|
|
14,465 |
|
|
|
89 |
|
|
|
14,376 |
|
|
|
2010 |
|
Liberty Commons |
|
|
|
|
|
|
1,330 |
|
|
|
15 |
|
|
|
|
|
|
|
125 |
|
|
|
13,333 |
|
|
|
1,345 |
|
|
|
13,458 |
|
|
|
14,803 |
|
|
|
3,482 |
|
|
|
11,321 |
|
|
|
2005 |
|
Liberty Place Apartments |
|
|
5,886 |
|
|
|
2,033 |
|
|
|
|
|
|
|
13,125 |
|
|
|
|
|
|
|
2,357 |
|
|
|
2,033 |
|
|
|
15,482 |
|
|
|
17,515 |
|
|
|
2,029 |
|
|
|
15,486 |
|
|
|
2006 |
|
Mid-Island Apartments |
|
|
19,456 |
|
|
|
4,160 |
|
|
|
128 |
|
|
|
6,567 |
|
|
|
1,268 |
|
|
|
6,861 |
|
|
|
4,288 |
|
|
|
14,696 |
|
|
|
18,984 |
|
|
|
5,928 |
|
|
|
13,056 |
|
|
|
1997 |
|
Middlebrooke Apartments |
|
|
|
|
|
|
2,888 |
|
|
|
|
|
|
|
14,369 |
|
|
|
|
|
|
|
980 |
|
|
|
2,888 |
|
|
|
15,349 |
|
|
|
18,237 |
|
|
|
293 |
|
|
|
17,944 |
|
|
|
2010 |
|
Mill Towne Village |
|
|
24,239 |
|
|
|
3,840 |
|
|
|
154 |
|
|
|
13,279 |
|
|
|
1,486 |
|
|
|
12,980 |
|
|
|
3,994 |
|
|
|
27,745 |
|
|
|
31,739 |
|
|
|
8,470 |
|
|
|
23,269 |
|
|
|
2001 |
|
Morningside Heights Apartments |
|
|
|
|
|
|
6,147 |
|
|
|
406 |
|
|
|
28,699 |
|
|
|
4,000 |
|
|
|
29,624 |
|
|
|
6,553 |
|
|
|
62,323 |
|
|
|
68,876 |
|
|
|
24,419 |
|
|
|
44,457 |
|
|
|
1998 |
|
Mount Vernon Square Apartments |
|
|
84,174 |
|
|
|
55,810 |
|
|
|
|
|
|
|
86,946 |
|
|
|
|
|
|
|
12,265 |
|
|
|
55,810 |
|
|
|
99,211 |
|
|
|
155,021 |
|
|
|
12,196 |
|
|
|
142,825 |
|
|
|
2006 |
|
New Orleans Park Apartments |
|
|
23,684 |
|
|
|
2,920 |
|
|
|
124 |
|
|
|
13,215 |
|
|
|
1,227 |
|
|
|
11,908 |
|
|
|
3,044 |
|
|
|
26,350 |
|
|
|
29,394 |
|
|
|
9,796 |
|
|
|
19,598 |
|
|
|
1997&1999 |
|
Northwood Apartments |
|
|
10,531 |
|
|
|
804 |
|
|
|
71 |
|
|
|
14,299 |
|
|
|
602 |
|
|
|
3,707 |
|
|
|
875 |
|
|
|
18,608 |
|
|
|
19,483 |
|
|
|
3,451 |
|
|
|
16,032 |
|
|
|
2004 |
|
Oak Manor Apartments |
|
|
6,923 |
|
|
|
616 |
|
|
|
70 |
|
|
|
4,111 |
|
|
|
690 |
|
|
|
3,107 |
|
|
|
686 |
|
|
|
7,908 |
|
|
|
8,594 |
|
|
|
3,009 |
|
|
|
5,585 |
|
|
|
1998 |
|
Orleans Village |
|
|
97,532 |
|
|
|
8,528 |
|
|
|
429 |
|
|
|
58,912 |
|
|
|
4,286 |
|
|
|
29,053 |
|
|
|
8,957 |
|
|
|
92,251 |
|
|
|
101,208 |
|
|
|
26,146 |
|
|
|
75,062 |
|
|
|
2000 |
|
Owings Run Apartments |
|
|
42,112 |
|
|
|
5,533 |
|
|
|
255 |
|
|
|
32,622 |
|
|
|
2,538 |
|
|
|
7,448 |
|
|
|
5,788 |
|
|
|
42,608 |
|
|
|
48,396 |
|
|
|
13,153 |
|
|
|
35,243 |
|
|
|
1999 |
|
Park Shirlington Apartments |
|
|
21,095 |
|
|
|
4,410 |
|
|
|
157 |
|
|
|
10,180 |
|
|
|
1,581 |
|
|
|
8,517 |
|
|
|
4,567 |
|
|
|
20,278 |
|
|
|
24,845 |
|
|
|
8,429 |
|
|
|
16,416 |
|
|
|
1998 |
|
Peppertree Farm Apartments |
|
|
78,902 |
|
|
|
12,571 |
|
|
|
317 |
|
|
|
83,804 |
|
|
|
2,654 |
|
|
|
15,325 |
|
|
|
12,888 |
|
|
|
101,783 |
|
|
|
114,671 |
|
|
|
15,142 |
|
|
|
99,529 |
|
|
|
2005 |
|
Pleasant View Gardens |
|
|
96,433 |
|
|
|
5,710 |
|
|
|
499 |
|
|
|
47,816 |
|
|
|
5,021 |
|
|
|
27,399 |
|
|
|
6,209 |
|
|
|
80,236 |
|
|
|
86,445 |
|
|
|
28,169 |
|
|
|
58,276 |
|
|
|
1998 |
|
Pleasure Bay Apartments |
|
|
|
|
|
|
1,620 |
|
|
|
124 |
|
|
|
6,234 |
|
|
|
1,210 |
|
|
|
8,537 |
|
|
|
1,744 |
|
|
|
15,981 |
|
|
|
17,725 |
|
|
|
5,785 |
|
|
|
11,940 |
|
|
|
1998 |
|
Racquet Club East Apartments |
|
|
37,875 |
|
|
|
1,868 |
|
|
|
218 |
|
|
|
23,107 |
|
|
|
2,137 |
|
|
|
11,617 |
|
|
|
2,086 |
|
|
|
36,861 |
|
|
|
38,947 |
|
|
|
12,330 |
|
|
|
26,617 |
|
|
|
1998 |
|
Racquet Club South |
|
|
|
|
|
|
309 |
|
|
|
35 |
|
|
|
3,891 |
|
|
|
353 |
|
|
|
2,469 |
|
|
|
344 |
|
|
|
6,713 |
|
|
|
7,057 |
|
|
|
2,520 |
|
|
|
4,537 |
|
|
|
1999 |
|
Redbank Village Apartments |
|
|
15,455 |
|
|
|
2,000 |
|
|
|
164 |
|
|
|
14,030 |
|
|
|
1,686 |
|
|
|
11,338 |
|
|
|
2,164 |
|
|
|
27,054 |
|
|
|
29,218 |
|
|
|
9,328 |
|
|
|
19,890 |
|
|
|
1998 |
|
Ridgeview at Wakefield Valley |
|
|
18,304 |
|
|
|
2,300 |
|
|
|
72 |
|
|
|
17,247 |
|
|
|
635 |
|
|
|
3,980 |
|
|
|
2,372 |
|
|
|
21,862 |
|
|
|
24,234 |
|
|
|
4,079 |
|
|
|
20,155 |
|
|
|
2005 |
|
Ridley Brook Apartments |
|
|
13,159 |
|
|
|
1,952 |
|
|
|
74 |
|
|
|
7,719 |
|
|
|
748 |
|
|
|
4,989 |
|
|
|
2,026 |
|
|
|
13,456 |
|
|
|
15,482 |
|
|
|
4,400 |
|
|
|
11,082 |
|
|
|
1999 |
|
Royal Gardens Apartment |
|
|
47,000 |
|
|
|
5,500 |
|
|
|
258 |
|
|
|
14,067 |
|
|
|
2,603 |
|
|
|
15,972 |
|
|
|
5,758 |
|
|
|
32,642 |
|
|
|
38,400 |
|
|
|
13,385 |
|
|
|
25,015 |
|
|
|
1997 |
|
Saddle Brooke Apartments |
|
|
30,123 |
|
|
|
7,609 |
|
|
|
|
|
|
|
44,040 |
|
|
|
|
|
|
|
4,283 |
|
|
|
7,609 |
|
|
|
48,323 |
|
|
|
55,932 |
|
|
|
2,949 |
|
|
|
52,983 |
|
|
|
2008 |
|
Sayville Commons |
|
|
39,767 |
|
|
|
8,005 |
|
|
|
187 |
|
|
|
55,346 |
|
|
|
1,599 |
|
|
|
1,167 |
|
|
|
8,192 |
|
|
|
58,112 |
|
|
|
66,304 |
|
|
|
8,270 |
|
|
|
58,034 |
|
|
|
2005 |
|
Selford Townhomes |
|
|
8,929 |
|
|
|
1,224 |
|
|
|
57 |
|
|
|
4,200 |
|
|
|
565 |
|
|
|
2,769 |
|
|
|
1,281 |
|
|
|
7,534 |
|
|
|
8,815 |
|
|
|
2,623 |
|
|
|
6,192 |
|
|
|
1999 |
|
Seminary Hill Apartments |
|
|
|
|
|
|
2,960 |
|
|
|
135 |
|
|
|
10,194 |
|
|
|
1,344 |
|
|
|
9,987 |
|
|
|
3,095 |
|
|
|
21,525 |
|
|
|
24,620 |
|
|
|
7,398 |
|
|
|
17,222 |
|
|
|
1999 |
|
Seminary Towers Apartments |
|
|
53,515 |
|
|
|
5,480 |
|
|
|
292 |
|
|
|
19,348 |
|
|
|
2,868 |
|
|
|
19,670 |
|
|
|
5,772 |
|
|
|
41,886 |
|
|
|
47,658 |
|
|
|
14,010 |
|
|
|
33,648 |
|
|
|
1999 |
|
Sherry Lake Apartments |
|
|
26,070 |
|
|
|
2,428 |
|
|
|
165 |
|
|
|
15,620 |
|
|
|
1,617 |
|
|
|
10,953 |
|
|
|
2,593 |
|
|
|
28,190 |
|
|
|
30,783 |
|
|
|
9,762 |
|
|
|
21,021 |
|
|
|
1998 |
|
South Bay Manor |
|
|
6,771 |
|
|
|
1,098 |
|
|
|
45 |
|
|
|
1,958 |
|
|
|
440 |
|
|
|
5,040 |
|
|
|
1,143 |
|
|
|
7,438 |
|
|
|
8,581 |
|
|
|
2,450 |
|
|
|
6,131 |
|
|
|
2000 |
|
Southern Meadows |
|
|
40,841 |
|
|
|
9,040 |
|
|
|
343 |
|
|
|
31,875 |
|
|
|
3,397 |
|
|
|
9,964 |
|
|
|
9,383 |
|
|
|
45,236 |
|
|
|
54,619 |
|
|
|
11,862 |
|
|
|
42,757 |
|
|
|
2001 |
|
Stone Ends Apartments |
|
|
25,149 |
|
|
|
5,600 |
|
|
|
166 |
|
|
|
28,468 |
|
|
|
1,554 |
|
|
|
4,381 |
|
|
|
5,766 |
|
|
|
34,403 |
|
|
|
40,169 |
|
|
|
7,324 |
|
|
|
32,845 |
|
|
|
2003 |
|
Stratford Greens Associates |
|
|
31,024 |
|
|
|
12,565 |
|
|
|
255 |
|
|
|
33,779 |
|
|
|
2,555 |
|
|
|
10,756 |
|
|
|
12,820 |
|
|
|
47,090 |
|
|
|
59,910 |
|
|
|
11,252 |
|
|
|
48,658 |
|
|
|
2002 |
|
Tamarron Apartments |
|
|
14,777 |
|
|
|
1,320 |
|
|
|
92 |
|
|
|
8,474 |
|
|
|
896 |
|
|
|
2,930 |
|
|
|
1,412 |
|
|
|
12,300 |
|
|
|
13,712 |
|
|
|
3,766 |
|
|
|
9,946 |
|
|
|
1999 |
|
The Apts at Wellington Trace |
|
|
23,925 |
|
|
|
3,060 |
|
|
|
167 |
|
|
|
26,305 |
|
|
|
1,418 |
|
|
|
681 |
|
|
|
3,227 |
|
|
|
28,404 |
|
|
|
31,631 |
|
|
|
5,106 |
|
|
|
26,525 |
|
|
|
2004 |
|
The Brooke at Peachtree |
|
|
12,355 |
|
|
|
992 |
|
|
|
51 |
|
|
|
15,137 |
|
|
|
437 |
|
|
|
3,270 |
|
|
|
1,043 |
|
|
|
18,844 |
|
|
|
19,887 |
|
|
|
2,851 |
|
|
|
17,036 |
|
|
|
2005 |
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UPREIT |
|
|
Initial Cost |
|
|
UPREIT |
|
|
Costs |
|
|
|
|
|
|
Total Cost |
|
|
|
|
|
|
|
|
|
|
Total Cost, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit |
|
|
Buildings, |
|
|
Unit |
|
|
Capitalized |
|
|
|
|
|
|
Buildings, |
|
|
|
|
|
|
|
|
|
|
Net of |
|
|
|
|
|
|
Encum- |
|
|
|
|
|
|
Alloc. |
|
|
Improvements |
|
|
Alloc. |
|
|
Subsequent to |
|
|
|
|
|
|
Improvements |
|
|
|
|
|
|
Accumulated |
|
|
Accumulated |
|
|
Year of |
|
Community |
|
brances |
|
|
Land |
|
|
Land(a) |
|
|
& Equipment |
|
|
Bldg.(a) |
|
|
Acquisition |
|
|
Land |
|
|
& Equipment |
|
|
Total(b) |
|
|
Depreciation |
|
|
Depreciation |
|
|
Acquisition |
|
The Colony |
|
|
|
|
|
|
7,830 |
|
|
|
197 |
|
|
|
34,121 |
|
|
|
2,025 |
|
|
|
13,574 |
|
|
|
8,027 |
|
|
|
49,720 |
|
|
|
57,747 |
|
|
|
16,014 |
|
|
|
41,733 |
|
|
|
1999 |
|
The Courts at Fair Oaks |
|
|
49,689 |
|
|
|
12,377 |
|
|
|
|
|
|
|
61,107 |
|
|
|
|
|
|
|
167 |
|
|
|
12,377 |
|
|
|
61,274 |
|
|
|
73,651 |
|
|
|
534 |
|
|
|
73,117 |
|
|
|
2010 |
|
The Coves at Chesapeake |
|
|
|
|
|
|
8,915 |
|
|
|
|
|
|
|
57,974 |
|
|
|
|
|
|
|
6,883 |
|
|
|
8,915 |
|
|
|
64,857 |
|
|
|
73,772 |
|
|
|
7,862 |
|
|
|
65,910 |
|
|
|
2006 |
|
The Greens at Columbia |
|
|
9,836 |
|
|
|
5,040 |
|
|
|
|
|
|
|
20,886 |
|
|
|
|
|
|
|
190 |
|
|
|
5,040 |
|
|
|
21,076 |
|
|
|
26,116 |
|
|
|
280 |
|
|
|
25,836 |
|
|
|
2010 |
|
The Hamptons |
|
|
50,872 |
|
|
|
5,749 |
|
|
|
303 |
|
|
|
50,489 |
|
|
|
2,599 |
|
|
|
11,554 |
|
|
|
6,052 |
|
|
|
64,642 |
|
|
|
70,694 |
|
|
|
12,287 |
|
|
|
58,407 |
|
|
|
2004 |
|
The Heights at Marlborough |
|
|
23,621 |
|
|
|
6,253 |
|
|
|
|
|
|
|
44,268 |
|
|
|
|
|
|
|
5,379 |
|
|
|
6,253 |
|
|
|
49,647 |
|
|
|
55,900 |
|
|
|
5,800 |
|
|
|
50,100 |
|
|
|
2006 |
|
The Landings |
|
|
26,229 |
|
|
|
2,459 |
|
|
|
162 |
|
|
|
16,753 |
|
|
|
1,595 |
|
|
|
11,175 |
|
|
|
2,621 |
|
|
|
29,523 |
|
|
|
32,144 |
|
|
|
11,122 |
|
|
|
21,022 |
|
|
|
1996 |
|
The Manor Apartments (MD) |
|
|
46,636 |
|
|
|
8,700 |
|
|
|
257 |
|
|
|
27,703 |
|
|
|
2,513 |
|
|
|
10,669 |
|
|
|
8,957 |
|
|
|
40,885 |
|
|
|
49,842 |
|
|
|
11,409 |
|
|
|
38,433 |
|
|
|
2001 |
|
The Manor Apartments (VA) |
|
|
13,869 |
|
|
|
1,386 |
|
|
|
85 |
|
|
|
5,738 |
|
|
|
832 |
|
|
|
5,132 |
|
|
|
1,471 |
|
|
|
11,702 |
|
|
|
13,173 |
|
|
|
4,557 |
|
|
|
8,616 |
|
|
|
1999 |
|
The Meadows at Marlborough |
|
|
21,170 |
|
|
|
6,598 |
|
|
|
|
|
|
|
28,736 |
|
|
|
|
|
|
|
3,477 |
|
|
|
6,598 |
|
|
|
32,213 |
|
|
|
38,811 |
|
|
|
3,880 |
|
|
|
34,931 |
|
|
|
2006 |
|
The New Colonies |
|
|
18,117 |
|
|
|
1,680 |
|
|
|
151 |
|
|
|
21,350 |
|
|
|
1,545 |
|
|
|
12,446 |
|
|
|
1,831 |
|
|
|
35,341 |
|
|
|
37,172 |
|
|
|
13,946 |
|
|
|
23,226 |
|
|
|
1998 |
|
The Sycamores |
|
|
21,341 |
|
|
|
4,625 |
|
|
|
136 |
|
|
|
15,737 |
|
|
|
1,283 |
|
|
|
2,947 |
|
|
|
4,761 |
|
|
|
19,967 |
|
|
|
24,728 |
|
|
|
4,593 |
|
|
|
20,135 |
|
|
|
2002 |
|
The Townhomes of Beverly |
|
|
|
|
|
|
5,820 |
|
|
|
|
|
|
|
30,465 |
|
|
|
|
|
|
|
4,200 |
|
|
|
5,820 |
|
|
|
34,665 |
|
|
|
40,485 |
|
|
|
3,825 |
|
|
|
36,660 |
|
|
|
2007 |
|
The Village at Marshfield |
|
|
|
|
|
|
3,158 |
|
|
|
134 |
|
|
|
28,354 |
|
|
|
1,158 |
|
|
|
5,197 |
|
|
|
3,292 |
|
|
|
34,709 |
|
|
|
38,001 |
|
|
|
6,232 |
|
|
|
31,769 |
|
|
|
2004 |
|
Timbercroft Townhomes & Apts. |
|
|
3,925 |
|
|
|
1,704 |
|
|
|
87 |
|
|
|
6,826 |
|
|
|
842 |
|
|
|
5,924 |
|
|
|
1,791 |
|
|
|
13,592 |
|
|
|
15,383 |
|
|
|
4,425 |
|
|
|
10,958 |
|
|
|
1999 |
|
Top Field Apartments |
|
|
16,625 |
|
|
|
1,635 |
|
|
|
|
|
|
|
16,684 |
|
|
|
|
|
|
|
3,706 |
|
|
|
1,635 |
|
|
|
20,390 |
|
|
|
22,025 |
|
|
|
2,448 |
|
|
|
19,577 |
|
|
|
2006 |
|
Trexler Park Apartments |
|
|
38,696 |
|
|
|
2,490 |
|
|
|
114 |
|
|
|
13,841 |
|
|
|
1,129 |
|
|
|
7,693 |
|
|
|
2,604 |
|
|
|
22,663 |
|
|
|
25,267 |
|
|
|
7,145 |
|
|
|
18,122 |
|
|
|
2000 |
|
Trexler Park West |
|
|
|
|
|
|
2,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,160 |
|
|
|
2,684 |
|
|
|
23,160 |
|
|
|
25,844 |
|
|
|
5,111 |
|
|
|
20,733 |
|
|
|
2006 |
|
Village at Potomac Falls |
|
|
|
|
|
|
7,380 |
|
|
|
|
|
|
|
30,960 |
|
|
|
|
|
|
|
106 |
|
|
|
7,380 |
|
|
|
31,066 |
|
|
|
38,446 |
|
|
|
344 |
|
|
|
38,102 |
|
|
|
2010 |
|
Village Square Townhomes&Apts. |
|
|
39,285 |
|
|
|
2,590 |
|
|
|
191 |
|
|
|
13,306 |
|
|
|
1,900 |
|
|
|
9,053 |
|
|
|
2,781 |
|
|
|
24,259 |
|
|
|
27,040 |
|
|
|
7,707 |
|
|
|
19,333 |
|
|
|
1999 |
|
Vinings at Hampton Village |
|
|
|
|
|
|
1,772 |
|
|
|
77 |
|
|
|
12,148 |
|
|
|
657 |
|
|
|
3,529 |
|
|
|
1,849 |
|
|
|
16,334 |
|
|
|
18,183 |
|
|
|
3,198 |
|
|
|
14,985 |
|
|
|
2004 |
|
Virginia Village |
|
|
29,910 |
|
|
|
5,160 |
|
|
|
207 |
|
|
|
21,918 |
|
|
|
2,027 |
|
|
|
11,717 |
|
|
|
5,367 |
|
|
|
35,662 |
|
|
|
41,029 |
|
|
|
10,015 |
|
|
|
31,014 |
|
|
|
2001 |
|
Wayne Village |
|
|
26,152 |
|
|
|
1,925 |
|
|
|
177 |
|
|
|
12,895 |
|
|
|
1,744 |
|
|
|
8,230 |
|
|
|
2,102 |
|
|
|
22,869 |
|
|
|
24,971 |
|
|
|
8,310 |
|
|
|
16,661 |
|
|
|
1998 |
|
West Springfield Terrace |
|
|
20,834 |
|
|
|
2,440 |
|
|
|
194 |
|
|
|
31,766 |
|
|
|
1,845 |
|
|
|
3,247 |
|
|
|
2,634 |
|
|
|
36,858 |
|
|
|
39,492 |
|
|
|
8,161 |
|
|
|
31,331 |
|
|
|
2002 |
|
Westbrooke Apartments |
|
|
|
|
|
|
1,103 |
|
|
|
|
|
|
|
5,229 |
|
|
|
|
|
|
|
346 |
|
|
|
1,103 |
|
|
|
5,575 |
|
|
|
6,678 |
|
|
|
125 |
|
|
|
6,553 |
|
|
|
2010 |
|
Westchester West Apartments |
|
|
34,158 |
|
|
|
6,978 |
|
|
|
|
|
|
|
41,513 |
|
|
|
|
|
|
|
2,795 |
|
|
|
6,978 |
|
|
|
44,308 |
|
|
|
51,286 |
|
|
|
2,591 |
|
|
|
48,695 |
|
|
|
2008 |
|
Westwood Village Apartments |
|
|
46,764 |
|
|
|
7,260 |
|
|
|
270 |
|
|
|
22,757 |
|
|
|
2,629 |
|
|
|
11,008 |
|
|
|
7,530 |
|
|
|
36,394 |
|
|
|
43,924 |
|
|
|
9,575 |
|
|
|
34,349 |
|
|
|
2002 |
|
Westwoods |
|
|
3,535 |
|
|
|
1,260 |
|
|
|
|
|
|
|
2,694 |
|
|
|
|
|
|
|
463 |
|
|
|
1,260 |
|
|
|
3,157 |
|
|
|
4,417 |
|
|
|
352 |
|
|
|
4,065 |
|
|
|
2007 |
|
William Henry Apartments |
|
|
28,650 |
|
|
|
4,666 |
|
|
|
187 |
|
|
|
22,277 |
|
|
|
1,839 |
|
|
|
14,597 |
|
|
|
4,853 |
|
|
|
38,713 |
|
|
|
43,566 |
|
|
|
11,315 |
|
|
|
32,251 |
|
|
|
2000 |
|
Windsor Realty Company |
|
|
|
|
|
|
402 |
|
|
|
34 |
|
|
|
3,300 |
|
|
|
337 |
|
|
|
2,245 |
|
|
|
436 |
|
|
|
5,882 |
|
|
|
6,318 |
|
|
|
2,249 |
|
|
|
4,069 |
|
|
|
1998 |
|
Woodholme Manor Apartments |
|
|
3,442 |
|
|
|
1,232 |
|
|
|
59 |
|
|
|
4,599 |
|
|
|
576 |
|
|
|
5,186 |
|
|
|
1,291 |
|
|
|
10,361 |
|
|
|
11,652 |
|
|
|
3,403 |
|
|
|
8,249 |
|
|
|
2001 |
|
Woodleaf Apartments |
|
|
|
|
|
|
2,862 |
|
|
|
122 |
|
|
|
17,720 |
|
|
|
1,028 |
|
|
|
2,843 |
|
|
|
2,984 |
|
|
|
21,591 |
|
|
|
24,575 |
|
|
|
4,266 |
|
|
|
20,309 |
|
|
|
2004 |
|
Woodmont Village Apartments |
|
|
10,007 |
|
|
|
2,880 |
|
|
|
63 |
|
|
|
5,699 |
|
|
|
622 |
|
|
|
2,862 |
|
|
|
2,943 |
|
|
|
9,183 |
|
|
|
12,126 |
|
|
|
2,383 |
|
|
|
9,743 |
|
|
|
2002 |
|
Yorkshire Village Apartments |
|
|
|
|
|
|
1,200 |
|
|
|
27 |
|
|
|
2,016 |
|
|
|
260 |
|
|
|
1,333 |
|
|
|
1,227 |
|
|
|
3,609 |
|
|
|
4,836 |
|
|
|
937 |
|
|
|
3,899 |
|
|
|
2002 |
|
Other Assets (c) |
|
|
171 |
|
|
|
296 |
|
|
|
|
|
|
|
5,919 |
|
|
|
|
|
|
|
175,084 |
|
|
|
296 |
|
|
|
181,003 |
|
|
|
181,299 |
|
|
|
19,421 |
|
|
|
161,878 |
|
|
Various |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
2,424,214 |
|
|
$ |
574,854 |
|
|
$ |
14,505 |
|
|
$ |
2,499,664 |
|
|
$ |
140,334 |
|
|
$ |
1,148,373 |
|
|
$ |
589,359 |
|
|
$ |
3,788,371 |
|
|
$ |
4,377,730 |
|
|
$ |
841,801 |
|
|
$ |
3,535,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
See discussion in Note 2 concerning exchange of noncontrolling interests (UPREIT
Units) for shares. |
|
(b) |
|
The aggregate cost for federal income tax purposes was approximately $3,899,139. |
|
(c) |
|
Includes construction in progress of $119,992, assets of one development community
placed into service of $28,224 and corporate office assets of $33,083. |
92
SCHEDULE III
HOME PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2010
(Dollars in thousands)
Depreciation and amortization of the Companys investments in real estate assets reflected in the
consolidated statements of operations are calculated over the estimated useful lives of the assets
as follows:
|
|
|
|
|
Land improvements |
|
3-20 years |
|
Buildings and improvements |
|
3-40 years |
|
Furniture, fixtures and equipment |
|
5-10 years |
|
Computer software |
|
5 years |
|
The changes in total real estate assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
|
$ |
3,915,979 |
|
|
$ |
3,872,390 |
|
|
$ |
3,680,155 |
|
New property acquisitions |
|
|
346,770 |
|
|
|
|
|
|
|
128,704 |
|
Additions |
|
|
146,645 |
|
|
|
149,134 |
|
|
|
142,529 |
|
Increase in real estate associated with the conversion of
UPREIT Units (1) |
|
|
|
|
|
|
|
|
|
|
17,793 |
|
Disposals associated with deconsolidation of the VIE (2) |
|
|
(27,464 |
) |
|
|
|
|
|
|
|
|
Disposals, retirements and impairments |
|
|
(4,200 |
) |
|
|
(105,545 |
) |
|
|
(96,791 |
) |
|
|
|
|
|
|
|
|
|
|
Balance, end of year |
|
$ |
4,377,730 |
|
|
$ |
3,915,979 |
|
|
$ |
3,872,390 |
|
|
|
|
|
|
|
|
|
|
|
The changes in accumulated depreciation are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
|
$ |
733,142 |
|
|
$ |
636,970 |
|
|
$ |
543,917 |
|
Depreciation |
|
|
126,249 |
|
|
|
120,002 |
|
|
|
115,794 |
|
Disposals associated with deconsolidation of the VIE (2) |
|
|
(13,627 |
) |
|
|
|
|
|
|
|
|
Disposals and retirements |
|
|
(3,963 |
) |
|
|
(23,830 |
) |
|
|
(22,741 |
) |
|
|
|
|
|
|
|
|
|
|
Balance, end of year |
|
$ |
841,801 |
|
|
$ |
733,142 |
|
|
$ |
636,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Refer to Note 2 for discussion on the required change in accounting for the
exchanges of UPREIT Units for shares that became effective January 1, 2009. |
|
(2) |
|
Refer to Note 4 for discussion of the Companys sale of its general partnership
interest in the VIE and the resulting deconsolidation of the VIE. |
93
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Edward J. Pettinella
Edward J. Pettinella
|
|
|
|
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
February 25, 2011
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed by
the following persons on behalf of Home Properties, Inc. and in the capacities and on the dates
indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Edward J. Pettinella
Edward J. Pettinella
|
|
Director, President and Chief Executive Officer
|
|
February 25, 2011 |
|
|
|
|
|
/s/ David P. Gardner
David P. Gardner
|
|
Executive Vice President, Chief Financial Officer
(Principal
Financial Officer)
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Robert J. Luken
Robert J. Luken
|
|
Senior Vice President, Chief Accounting Officer
and
Treasurer (Principal Accounting Officer)
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Kenneth O. Hall
Kenneth O. Hall
|
|
Vice President and Controller
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Norman P. Leenhouts
Norman P. Leenhouts
|
|
Director, Co-Chairman of the Board of Directors
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Nelson B. Leenhouts
Nelson B. Leenhouts
|
|
Director, Co-Chairman of the Board of Directors
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Stephen R. Blank
Stephen R. Blank
|
|
Director
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Josh E. Fidler
Josh E. Fidler
|
|
Director
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Alan L. Gosule
Alan L. Gosule
|
|
Director
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Leonard F. Helbig, III
Leonard F. Helbig, III
|
|
Director
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Charles J. Koch
Charles J. Koch
|
|
Director
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Thomas P. Lydon, Jr.
Thomas P. Lydon, Jr.
|
|
Director
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Clifford W. Smith, Jr.
Clifford W. Smith, Jr.
|
|
Director
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Paul L. Smith
Paul L. Smith
|
|
Director
|
|
February 25, 2011 |
|
|
|
|
|
/s/ Amy L. Tait
Amy L. Tait
|
|
Director
|
|
February 25, 2011 |
94
HOME PROPERTIES, INC.
FORM 10-K
For The Year Ended December 31, 2010
Exhibit Index
Except as otherwise indicated, the exhibits listed below are filed as part of this report.
References to exhibits or other filings under the caption Location indicate that exhibit or other
filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that
the exhibit referred to is incorporated by reference.
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Exhibit |
|
Location |
|
2.1 |
|
|
Agreement among Home Properties of New York, Inc. and Philip
J. Solondz, Daniel Solondz and Julia Weinstein Relating to
Royal Gardens I, together with Amendment No. 1
|
|
Incorporated by
reference to the
Form 8- K filed by
Home Properties of
New York, Inc.
dated 6/6/97 (the
6/6/97 8-K) |
|
|
|
|
|
|
|
|
2.2 |
|
|
Agreement among Home Properties of New York, Inc and Philip
Solondz and Daniel Solondz relating to Royal Gardens II,
together with Amendment No. 1
|
|
Incorporated by
reference to the
6/6/97 8-K |
|
|
|
|
|
|
|
|
2.3 |
|
|
Contribution Agreement dated March 2, 1998 among Home
Properties of New York, L.P., Braddock Lee Limited Partnership
and Tower Construction Group, LLC
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties of
New York, Inc.,
dated 3/24/98 (the
3/24/98 8-K) |
|
|
|
|
|
|
|
|
2.4 |
|
|
Contribution Agreement dated March 2, 1998 among Home
Properties of New York, L.P., Park Shirlington Limited
Partnership and Tower Construction Group, LLC
|
|
Incorporated by
reference to the
3/24/98 8-K |
|
|
|
|
|
|
|
|
3.1 |
|
|
Articles of Amendment and Restatement of Articles of
Incorporation of Home Properties of New York, Inc.
|
|
Incorporated by
reference to Home
Properties of New
York, Registration
Statement on Form
S-11, File No.
33-78862 (the S-11
Registration
Statement) |
|
|
|
|
|
|
|
|
3.2 |
|
|
Articles of Amendment of the Articles of Incorporation of Home
Properties of New York, Inc.
|
|
Incorporated by
reference to the
Home Properties of
New York, Inc.
Registration
Statement on Form
S-3 File No.
333-52601 filed
5/14/98 |
|
|
|
|
|
|
|
|
3.3 |
|
|
Articles of Amendment of the Articles of Incorporation of Home
Properties of New York, Inc.
|
|
Incorporated by
reference to 7/2/99
8-K |
|
|
|
|
|
|
|
|
3.4 |
|
|
Articles of Amendment of the Articles of Incorporation of Home
Properties of New York, Inc.
|
|
Incorporated by
reference to the
Form 10-Q filed by
Home Properties,
Inc. for the
quarter ended
3/31/04 |
|
|
|
|
|
|
|
|
3.5 |
|
|
Second Amended and Restated By-laws of Home Properties, Inc.
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. dated 11/2/07 |
|
|
|
|
|
|
|
|
3.6 |
|
|
By-Laws of Home Properties Management, Inc.
|
|
Incorporated by
reference to S-11
Registration
Statement |
|
|
|
|
|
|
|
|
3.7 |
|
|
Articles of Incorporation of Conifer Realty Corporation
|
|
Incorporated by
reference to Form
10-K filed by Home
Properties of New
York, Inc. for the
period ended
12/31/95 (the
12/31/95 10-K) |
95
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Exhibit |
|
Location |
|
3.8 |
|
|
Articles of Amendment to the Articles of Incorporation of
Conifer Realty Corporation Changing the name to Home
Properties Resident Services, Inc.
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties of
New York, Inc. for
the annual period
ended 12/31/00 |
|
|
|
|
|
|
|
|
3.9 |
|
|
By-Laws of Conifer Realty Corporation (now Home Properties
Resident Services, Inc.)
|
|
Incorporated by
reference to the
12/31/95 10-K |
|
|
|
|
|
|
|
|
3.10 |
|
|
Home Properties Trust Declaration of Trust, dated September
19, 1997
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties of
New York, Inc.
dated 9/26/97 (the
9/26/97 8-K) |
|
|
|
|
|
|
|
|
4.1 |
|
|
Form of certificate representing Shares of Common Stock
|
|
Incorporated by
reference to the
Form 10- K filed by
Home Properties of
New York, Inc. for
the period ended
12/31/94 (the
12/31/94 10-K) |
|
|
|
|
|
|
|
|
4.2 |
|
|
Agreement of Home Properties of New York, Inc. to file
instruments defining the rights of holders of long-term debt
of it or its subsidiaries with the Commission upon request
|
|
Incorporated by
reference to the
12/31/94 10-K |
|
|
|
|
|
|
|
|
4.3 |
|
|
Indenture, dated October 24, 2006 between Home Properties,
Inc., Home Properties, L.P. and Wells Fargo Bank, N.A., as
trustee including the form of 4.125% Exchangeable Senior Notes
due 2026 of Home Properties, L.P. and the Guarantee of Home
Properties, Inc. with respect thereto
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. on 10/25/06
(the 10/25/06
8-K) |
|
|
|
|
|
|
|
|
4.4 |
|
|
Registration Rights Agreement, dated October 24, 2006, between
Home Properties, Inc., Home Properties, L.P. and Merrill Lynch
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Bear Stearns & Co., Inc.
|
|
Incorporated by
reference to the
10/25/06 8-K |
|
|
|
|
|
|
|
|
10.1 |
|
|
Second Amended and Restated Agreement Limited Partnership of
Home Properties of New York, L.P.
|
|
Incorporated by
reference to the
9/26/97 8-K |
|
|
|
|
|
|
|
|
10.2 |
|
|
Amendment No. Four to the Second Amended and Restated
Agreement of Limited Partnership of Home Properties of New
York, L.P.
|
|
Incorporated by
reference to Form
10-K filed by Home
Properties of New
York, Inc. for the
annual period ended
12/31/97 |
|
|
|
|
|
|
|
|
10.3 |
|
|
Amendment No. Sixty-Two to the Second Amended and Restated
Limited Partnership Agreement
|
|
Incorporated by
reference to Form
10-K filed by Home
Properties of New
York, Inc. for the
annual period ended
12/31/03 |
|
|
|
|
|
|
|
|
10.4 |
|
|
Indemnification Agreement between Home Properties of New York,
Inc. and certain officers and Directors*
|
|
Incorporated by
reference to the
Form 10-Q filed by
Home Properties of
New York, Inc. for
the quarter ended
6/30/94 |
|
|
|
|
|
|
|
|
10.5 |
|
|
Indemnification Agreement between Home Properties of New York,
Inc. and Alan L. Gosule*
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties of
New York, Inc. for
the annual period
ended 12/31/96 |
96
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Exhibit |
|
Location |
|
10.6 |
|
|
Master Credit Facility Agreement by and among Home Properties
of New York, Inc., Home Properties of New York, L.P., Home
Properties WMF I LLC and Home Properties of New York, L.P. and
P-K Partnership doing business as Patricia Court and Karen
Court and WMF Washington Mortgage Corp., dated as of August
28, 1998
|
|
Incorporated by
reference to Form
10-Q filed by the
Home Properties of
New York, Inc. for
the quarter ended
9/30/98 |
|
|
|
|
|
|
|
|
10.7 |
|
|
First Amendment to Master Credit Facility Agreement, dated as
of December 11, 1998 among Home Properties of New York, Inc.,
Home Properties of New York, L.P., Home Properties WMF I LLC
and Home Properties of New York, L.P. and P-K Partnership
doing business as Patricia Court and Karen Court and WMF
Washington Mortgage Corp. and Fannie Mae
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties of
New York, Inc. for
the annual period
ended 12/31/98 |
|
|
|
|
|
|
|
|
10.8 |
|
|
Second Amendment to Master Credit Facility Agreement, dated as
of August 30, 1999 among Home Properties of New York, Inc.,
Home Properties of New York, L.P., Home Properties WMF I LLC
and Home Properties of New York, L.P. and P-K Partnership
doing business as Patricia Court and Karen Court and WMF
Washington Mortgage Corp. and Fannie Mae
|
|
Incorporated by
reference to Form
10-K filed by Home
Properties of New
York, Inc. for the
annual period ended
12/31/99 (the
12/31/99 10-K) |
|
|
|
|
|
|
|
|
10.9 |
|
|
Amended and Restated Employment Agreement, dated November 20,
2006 between Edward J. Pettinella and Home Properties, Inc.*
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. on 11/21/06 |
|
|
|
|
|
|
|
|
10.10 |
|
|
Amendment No. One to Employment Agreement between Edward J.
Pettinella and Home Properties, Inc.*
|
|
Incorporated by
reference to the
Form 10-Q filed by
Home Properties,
Inc. for the period
ended 9/30/2008
(the 9/30/2008
10-Q) |
|
|
|
|
|
|
|
|
10.11 |
|
|
Amendment No. 2 to Employment Agreement between Edward J.
Pettinella and Home Properties, Inc.*
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. on 11/2/09 |
|
|
|
|
|
|
|
|
10.12 |
|
|
Articles of Merger of Home Properties Management, Inc. into
Home Properties Resident Services, Inc.
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties,
Inc. for the annual
period ended
12/31/06 |
|
|
|
|
|
|
|
|
10.13 |
|
|
Purchase Agreement, dated October 18, 2006 between Home
Properties, Inc., Home Properties, L.P. and Merrill Lynch &
Co., Merrill Lynch, Pierce Fenner & Smith and Bear Stearns &
Co., Inc.
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. on 10/19/06 |
|
|
|
|
|
|
|
|
10.14 |
|
|
Directors Stock Grant Plan*
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties of
New York, Inc. on
5/22/98 |
|
|
|
|
|
|
|
|
10.15 |
|
|
Amended and Restated Stock Benefit Plan of Home Properties of
New York, Inc.*
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties of
New York, Inc. on
6/6/97 |
|
|
|
|
|
|
|
|
10.16 |
|
|
Home Properties of New York, Inc. Amendment Number One to the
Amended and Restated Stock Benefit Plan*
|
|
Incorporated by
reference to the
Form 10-Q of Home
Properties of New
York, Inc. for the
quarter ended
3/31/00 (the
3/31/00 10-Q) |
97
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Exhibit |
|
Location |
|
10.17 |
|
|
Home Properties of New York, Inc. Amendment Number Two to the
Amended and Restated Stock Benefit Plan*
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties of
New York, Inc. for
the annual period
ended 12/31/01 |
|
|
|
|
|
|
|
|
10.18 |
|
|
Amendment No. Three to Home Properties, Inc. Amended and
Restated Stock Benefit Plan*
|
|
Incorporated by
reference to the
9/30/08 10-Q |
|
|
|
|
|
|
|
|
10.19 |
|
|
2000 Stock Benefit Plan*
|
|
Incorporated by
reference to the
12/31/99 10-K |
|
|
|
|
|
|
|
|
10.20 |
|
|
Home Properties of New York, Inc. Amendment No. One to 2000
Stock Benefit Plan*
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties of
New York, Inc. for
the annual period
ended 12/31/01 (the
12/31/01 10-K) |
|
|
|
|
|
|
|
|
10.21 |
|
|
Home Properties of New York, Inc. Amendment No. Two to 2000
Stock Benefit Plan*
|
|
Incorporated by
reference to the
12/31/01 10-K |
|
|
|
|
|
|
|
|
10.22 |
|
|
Home Properties of New York, Inc. Amendment No. Three to 2000
Stock Benefit Plan*
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties of
New York, Inc. for
the annual period
ended 12/31/03 |
|
|
|
|
|
|
|
|
10.23 |
|
|
Amendment No. Four to Home Properties, Inc. 2000 Stock Benefit
Plan*
|
|
Incorporated by
reference to the
9/30/08 10-Q |
|
|
|
|
|
|
|
|
10.24 |
|
|
Amended and Restated 2003 Stock Benefit Plan*
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. dated 5/6/05 |
|
|
|
|
|
|
|
|
10.25 |
|
|
Amendment No. One to Amended and Restated Home Properties,
Inc. 2003 Stock Benefit Plan*
|
|
Incorporated by
reference to the
9/30/08 10-Q |
|
|
|
|
|
|
|
|
10.26 |
|
|
Home Properties, Inc. 2008 Stock Benefit Plan*
|
|
Incorporated by
reference to the
Schedule 14A filed
on 3/24/08 |
|
|
|
|
|
|
|
|
10.27 |
|
|
Amendment No. One to Home Properties, Inc. 2008 Stock Benefit
Plan*
|
|
Incorporated by
reference to the
9/30/08 10-Q |
|
|
|
|
|
|
|
|
10.28 |
|
|
Seventh Amended and Restated Dividend Reinvestment and Direct
Stock Purchase Plan
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. on 9/28/06 |
|
|
|
|
|
|
|
|
10.29 |
|
|
Home Properties of New York, Inc., Home Properties of New
York, L.P. Executive Retention Plan*
|
|
Incorporated by
reference to the
7/2/99 8-K |
|
|
|
|
|
|
|
|
10.30 |
|
|
Home Properties of New York, L.P. Amendment Number One to
Executive Retention Plan*
|
|
Incorporated by
reference to the
3/31/00 10-Q |
|
|
|
|
|
|
|
|
10.31 |
|
|
Amendment Number Two to Home Properties of New York, Inc. and
Home Properties of New York, L.P. Executive Retention Plan*
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties,
Inc. for the period
ended 12/31/03 (the
12/31/03 10-K) |
|
|
|
|
|
|
|
|
10.32 |
|
|
Amendment No. Three to Home Properties, Inc. and Home
Properties, L.P. Executive Retention Plan*
|
|
Incorporated by
reference to the
9/30/08 10-Q |
|
|
|
|
|
|
|
|
10.33 |
|
|
Purchase and Sale Agreement, dated as of January 1, 2004
among Home Properties of New York, L.P., Home Properties
Management, Inc. and Home Leasing, LLC, dated January 1,
2004*
|
|
Incorporated by
reference to
12/31/03 10-K |
98
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Exhibit |
|
Location |
|
10.34 |
|
|
Second Amended and Restated Incentive Compensation Plan
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. on 2/16/07 |
|
|
|
|
|
|
|
|
10.35 |
|
|
Amendment No. One to Home Properties, Inc. Second Amended and
Restated Incentive Compensation Plan*
|
|
Incorporated by
reference to the
9/30/08 10-Q |
|
|
|
|
|
|
|
|
10.36 |
|
|
Deferred Bonus Plan (Amended and Restated as of January 1,
2008)*
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties,
Inc. for the period
ended 12/31/07 (the
12/31/07 10-K) |
|
|
|
|
|
|
|
|
10.37 |
|
|
Director Deferred Compensation Plan (Amended and Restated as
of January 1, 2008)*
|
|
Incorporated by
reference to the
12/31/07 10-K |
|
|
|
|
|
|
|
|
10.38 |
|
|
Amendment No. One to Home Properties, Inc. Deferred Bonus Plan
(Amended and Restated January 1, 2008)*
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties,
Inc. for the period
ended 12/31/09 (the
12/31/09 10-K) |
|
|
|
|
|
|
|
|
10.39 |
|
|
Indemnification Agreement between Home Properties, Inc. and
Stephen R. Blank*
|
|
Incorporated by
reference to the
Form 10-K filed by
Home Properties,
Inc. for the period
ended 12/31/08 (the
12/31/08 10-K) |
|
|
|
|
|
|
|
|
10.40 |
|
|
Indemnification Agreement between Home Properties, Inc. and
Josh E. Fidler*
|
|
Incorporated by
reference to the
12/31/08 10-K |
|
|
|
|
|
|
|
|
10.41 |
|
|
Amended and Restated Lease Agreement Between Clinton Square
Asset Holding Associates, L.P. and Home Properties, L.P. dated
July 6, 2009
|
|
Incorporated by
reference to the
Form 10-Q filed by
Home Properties,
Inc. for the
quarter ended
6/30/09 |
|
|
|
|
|
|
|
|
10.42 |
|
|
Credit Agreement, dated as of September 1, 2009 among Home
Properties, L.P., Home Properties, Inc. and Manufacturers and
Traders Trust Company, RBS Citizens, N.A., d/b/a/ Charter One,
Chevy Chase Bank, a Division of Capital One, N.A. and Bank of
Montreal
|
|
Incorporated by
reference to the
Form 10-Q filed by
Home Properties,
Inc. for the
quarter ended
6/30/10 |
|
|
|
|
|
|
|
|
10.43 |
|
|
Guaranty, dated September 1, 2009 from Home Properties, Inc.
and certain affiliates to Manufacturers Traders Trust Company
as agent for the lenders under the Credit Agreement of the
same date.
|
|
Incorporated by
reference to the
9/2/09 8-K. |
|
|
|
|
|
|
|
|
10.44 |
|
|
ATM Equity Offering Sales Agreement, dated December 3, 2009
between Home Properties, Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and BMO Capital Markets Corp.
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties on
12/3/09. |
|
|
|
|
|
|
|
|
10.45 |
|
|
Amendment No. Eighty-Nine to Second Amended and Restated
Limited Partnership Agreement
|
|
Incorporated by
reference to the
12/31/09 10-K |
|
|
|
|
|
|
|
|
10.46 |
|
|
Indemnification Agreement between Home Properties, Inc. and
Charles J. Koch*
|
|
Incorporated by
reference to the
12/31/09 10-K |
|
|
|
|
|
|
|
|
10.47 |
|
|
Changes to Compensation Arrangements for Named Executive
Officers in 2010*
|
|
Incorporated by
reference to the
Form 10-Q filed by
Home Properties,
Inc. for the
quarter ended
3/31/10 (the
3/31/10 10-Q) |
|
|
|
|
|
|
|
|
10.48 |
|
|
Equity Grant for Non-Employee Directors in 2010*
|
|
Incorporated by
reference to the
3/31/10 10-Q |
99
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
Number |
|
Exhibit |
|
Location |
|
10.49 |
|
|
ATM Offering Sales Agreement dated September 17, 2010 between
Home Properties, Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Stifel, Nicolaus & Company, Incorporated
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. on 9/17/10 |
|
|
|
|
|
|
|
|
10.50 |
|
|
Employment Agreement between Edward J. Pettinella, the
Companys President and Chief Executive Officer and Home
Properties, Inc. effective January 1, 2011*
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. on 12/29/10 |
|
|
|
|
|
|
|
|
10.51 |
|
|
Amended and Restated Executive Retention Plan*
|
|
Incorporated by
reference to the
Form 8-K filed by
Home Properties,
Inc. on February
16, 2011 (the
February 16, 2011
8-K) |
|
|
|
|
|
|
|
|
10.52 |
|
|
Executive Stock Ownership Guidelines, adopted February 12, 2011
|
|
Incorporated by
reference to the
February 16, 2011
8-K |
|
|
|
|
|
|
|
|
10.53 |
|
|
First Amendment to Credit Agreement, dated as of February 10,
2011
|
|
Incorporated by
reference to the
February 16, 2011
8-K |
|
|
|
|
|
|
|
|
10.54 |
|
|
Indemnification Agreement between Home Properties, Inc. and
Thomas P. Lydon, Jr.*
|
|
Filed herewith |
|
|
|
|
|
|
|
|
11 |
|
|
Computation of Per Share Earnings Schedule
|
|
Filed herewith |
|
|
|
|
|
|
|
|
21 |
|
|
List of Subsidiaries of Home Properties, Inc.
|
|
Filed herewith |
|
|
|
|
|
|
|
|
23 |
|
|
Consent of PricewaterhouseCoopers LLP
|
|
Filed herewith |
|
|
|
|
|
|
|
|
31.1 |
|
|
Section 302 Certification of Chief Executive Officer
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Filed herewith |
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31.2 |
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Section 302 Certification of Chief Financial Officer
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Filed herewith |
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32.1 |
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Section 906 Certification of Chief Executive Officer**
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Furnished herewith |
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32.2 |
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Section 906 Certification of Chief Financial Officer**
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Furnished herewith |
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99 |
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Additional Exhibits Debt Summary Schedule
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Filed herewith |
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101 |
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XBRL (eXtensible Business Reporting Language). The following
materials from the Home Properties, Inc. Annual Report on Form
10-K for the year ended December 31, 2010, formatted in XBRL:
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Furnished herewith |
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(i) consolidated balance sheets, (ii) consolidated statements
of operations, (iii) consolidated statements of equity, (iv)
consolidated statements of cash flows and (v) notes to
consolidated financial statements. As provided in Rule 406T
of Regulation S-T, this information is furnished and not filed
for purposes of Sections 11 and 12 of the Securities Act of
1933 and Section 18 of the Securities Exchange Act of 1934. |
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* |
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Management contract or compensatory plan or arrangement required to be filed as an exhibit to
this Form 10-K pursuant to Item 15(b) of Form 10-K. |
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** |
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These exhibits are not incorporated by reference in any registration statement or report
which incorporates this Annual Report on Form 10-K for the year ended December 31, 2010. |
100