Nov. 5, 2009 (PR Newswire) --

ROCHESTER, N.Y., Nov. 5 /PRNewswire-FirstCall/ -- Home Properties (NYSE: HME) today released financial results for the third quarter ending September 30, 2009. All results are reported on a diluted basis.

"Home Properties exceeded both internal and street expectations for Funds From Operations in the third quarter, reflecting the stability of our solid geographic markets and middle-market apartment properties, even in a challenging operating environment," said Edward J. Pettinella, President and CEO. "Our number one ranking in same-unit net operating income growth in the apartment sector results from a continued focus on managing rents to optimize occupancy and revenue, while also controlling costs and refining operations to ensure excellent future results despite continued weakness in the economy."

Earnings per share ("EPS") for the quarter ended September 30, 2009 was $0.16, compared to $0.21 for the quarter ended September 30, 2008. The $0.05 decrease in EPS is primarily attributable to a generally weaker operating environment. EPS for the nine months ended September 30, 2009 was $0.67, compared to $1.27 for the nine months ended September 30, 2008. The year-over-year decrease of $0.60 per share is primarily attributable to a $21.8 million decrease in income from discontinued operations, of which $16.4 million was due to a decrease in gain on disposition of property. The sale of seven properties in the first quarter of 2008 produced a gain of $29.8 million. Three properties were sold in the first quarter of 2009 for a gain of $13.5 million. The $5.4 million balance of the $21.8 million decrease in income from discontinued operations included $4.7 million attributable to prepayment penalties incurred as a result of the sale of the 2009 properties.

For the quarter ended September 30, 2009, Funds From Operations ("FFO") was $37.0 million, or $0.81 per share, compared to $38.3 million, or $0.84 per share, for the quarter ended September 30, 2008. Third quarter 2009 FFO of $0.81 per share was $0.04 above the midpoint of the guidance range provided by management and $0.03 above analysts' mean estimate, as reported by Thomson, and equates to a 3.2% decrease from the prior year. FFO for the nine months ended September 30, 2009 was $2.45 per share, compared to $2.50 in the year-ago period. A reconciliation of GAAP net income to FFO is included in the financial data accompanying this news release.

Third Quarter Operating Results

For the third quarter of 2009, same-property comparisons (for 104 "Core" properties containing 35,360 apartment units owned since January 1, 2008) reflected a decrease in total revenues of 0.2% compared to the same quarter a year ago. Net operating income ("NOI") decreased by 0.5% from the third quarter of 2008. Property level operating expenses increased by 0.2% for the quarter, primarily due to increases in personnel costs and real estate taxes, which were partially offset by a reduction in natural gas heating costs, repairs and maintenance, property insurance and property management G&A costs.

Average physical occupancy for the Core properties was 95.1% during the third quarter of 2009, compared to 95.0% during the third quarter of 2008. Average monthly rental rates decreased 0.5% compared to the year-ago period to $1,132.

On a sequential basis, compared to the 2009 second quarter results for the Core properties, total revenue was down 0.3% in the third quarter of 2009, expenses were up 0.6%, and net operating income was down 0.9%. Average physical occupancy remained steady at 95.1%.

Physical occupancy for the 1,029 net apartment units acquired/developed between January 1, 2008 and September 30, 2009 (the "Recently Acquired Communities") averaged 93.3% during the third quarter of 2009, at average monthly rents of $1,166.

Year-to-Date Operating Results

For the nine months ended September 30, 2009, same-property comparisons for the Core properties reflected an increase in total revenue of 0.4% and expenses of 1.5%, resulting in a 0.4% decrease in net operating income compared to the first nine months of 2008. Property level operating expenses increased primarily due to increases in repairs and maintenance, personnel and real estate taxes, which were partially offset by a reduction in advertising, property insurance and property management G&A costs.

Average physical occupancy for the Core properties was 94.9% during the first nine months of 2009, down from 95.0% a year ago, with average monthly base rents rising 0.6%.

Dispositions

Subsequent to the end of the quarter, on October 1, 2009, the Company sold a property located in the Philadelphia region with a total of 432 units for $30.0 million. A gain on sale of approximately $7.3 million will be recorded in the fourth quarter of 2009 related to this sale. The weighted average first year cap rate projected on this disposition is 8.4% (after a 3% management fee but before allowance for capital expenditures).

Capital Markets Activities

As of September 30, 2009, the Company's ratio of debt-to-total market capitalization was 54.6% (based on a September 30, 2009 stock price of $43.09 to determine equity value), with $71.5 million outstanding on its $175.0 million revolving credit facility and $6.9 million of unrestricted cash on hand. Total debt of $2.3 billion was outstanding, at rates of interest averaging 5.6% and with staggered maturities averaging approximately six years. Approximately 93.0% of total indebtedness is at fixed rates. Interest coverage averaged 2.2 times during the quarter, and the fixed charge ratio averaged 2.1 times for the quarter.

The Company did not repurchase any of its common shares during the third quarter. As of September 30, 2009, the Company has Board authorization to buy back up to approximately 2.3 million additional shares of its common stock or Operating Partnership Units, although it has no current plans to do so.

Outlook

For 2009, the Company has increased its guidance based only on higher third quarter results compared to the prior range of guidance and now expects FFO per share to be between $3.18 and $3.24 per share versus the previous range of $3.10 to $3.22. This guidance range reflects management's current assessment of economic and market conditions for the balance of the year.

The guidance for the balance of 2009 is reaffirmed without change, with the fourth quarter range expected to be $0.73 to $0.79 per share.

Supplemental Information

The Company produces supplemental information that includes details regarding property operations, other income, acquisitions, sales, market geographic breakdown, debt and new development.