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Home Properties Inc – ‘10-Q’ for 6/30/02

On: Wednesday, 8/14/02, at 5:59pm ET · For: 6/30/02 · Accession #: 923118-2-36 · File #: 1-13136

  As Of                Filer                Filing    For·On·As Docs:Size

 8/14/02  Home Properties Inc               10-Q        6/30/02    1:90K

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      28    237K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Exhibits and Reports or Form 8-K Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations 18-28 Management's Discussion and Analysis of Results of Operations and Financial Condition (Dollars in Thousands, Except Share and Per Share Data) Off-Balance Sheet Investments Quantitative and Qualitative Disclosures About Market Risk
1	1st Page - Filing Submission
2	Item 1. Financial Statements
"	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18-28
17	Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition (Dollars in Thousands, Except Share and Per Share Data)
18	Off-Balance Sheet Investments
25	Item 3. Quantitative and Qualitative Disclosures About Market Risk
26	Item 6. Exhibits and Reports or Form 8-K

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                       SECURITIES AND EXCHANGE COMMISSION                                                                 
                              WASHINGTON, DC 20549                                                                        

                                    FORM 10-Q                                                                             

        (Mark One)                                                                                                        
                                                                                                                          

                 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR                                                           
                  15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                           

                  For the quarterly period ended June 30, 2002                                                            

                                       OR                                                                                 

                 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR                                                          
                  15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                           

                         Commission File Number 1-13136                                                                   

                        HOME PROPERTIES OF NEW YORK, INC.                                                                 
             (Exact name of registrant as specified in its charter)                                                       

                               MARYLAND 16-1455126                                                                        
                               -------- ----------                                                                        
          (State or other jurisdiction of (IRS Employer Identification                                                    
                     incorporation or organization) Number)                                                               

                  850 Clinton Square, Rochester, New York 14604                                                           
               (Address of principal executive offices) (Zip Code)                                                        

                                 (585) 546-4900                                                                           
              (Registrant's telephone number, including area code)                                                        

                                       N/A                                                                                
                     (Former name, former address and former                                                              
                       year, if changed since last report)                                                                

Indicate by check mark whether  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 X NO ____                                                                           

Indicate the number of shares  outstanding  of each of the  issuer's  classes of                                          
common stock, as of the latest practicable date:                                                                          

    Class of Common Stock                        Outstanding at July 31, 2002                                             
    ---------------------                         ----------------------------                                            
      $.01 par value                                      26,256,205                                                      

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                        HOME PROPERTIES OF NEW YORK, INC.                                                                 

                                TABLE OF CONTENTS                                                                         

                                                                           PAGE                                           

        PART I.  FINANCIAL INFORMATION                                                                                    

    Item 1.  Financial Statements                                                                                         

             Consolidated Balance Sheets -                                                                                
                 June 30, 2002 (Unaudited) and December 31, 2001              3                                           

             Consolidated Statements of Operations (Unaudited) -                                                          
                  Six months ended June 30, 2002 and 2001                     4                                           

             Consolidated Statements of Operations (Unaudited) -                                                          
                 Three months ended June 30, 2002 and 2001                    5                                           

             Consolidated Statements of Comprehensive Income (Unaudited) -                                                
                 Six months ended June 30, 2002 and 2001                      6                                           

             Consolidated Statements of Comprehensive Income (Unaudited) -                                                
                 Three months ended June 30, 2002 and 2001                    7                                           

             Consolidated Statements of Cash Flows (Unaudited) -                                                          
                 Six months ended June 30, 2002 and 2001                      8                                           

             Notes to Consolidated Financial Statements (Unaudited)        9-17                                           

    Item 2.  Management's Discussion and Analysis of Financial                                                            
             Condition and Results of Operations                          18-28                                           

    Item 3.  Quantitative and Qualitative Disclosures About Market Risk      29                                           

   PART II.  OTHER INFORMATION                                                                                            

    Item 6.  Exhibits and Reports on Form 8-K                                30                                           

             Signatures                                                      31                                           

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                         PART I - FINANCIAL INFORMATION                                                                   
                          ITEM 1. FINANCIAL STATEMENTS                                                                    
                        HOME PROPERTIES OF NEW YORK, INC.                                                                 
                           CONSOLIDATED BALANCE SHEETS                                                                    
                       JUNE 30, 2002 AND DECEMBER 31, 2001                                                                
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                                          

                                                                                       2002               2001            
                                                                                       ----               ----            
                                                                                    (Unaudited)         (Note 1)          
ASSETS                                                                                                                    
Real estate:                                                                                                              
  Land                                                                             $   350,844        $   287,473         
  Buildings, improvements and equipment                                              2,029,406          1,847,605         
                                                                                     ---------        -----------         
                                                                                     2,380,250          2,135,078         
  Less:  accumulated depreciation                                                  (   225,029)       (   201,564)        
                                                                                   ------------       ------------        
         Real estate, net                                                            2,155,221          1,933,514         

Cash and cash equivalents                                                               12,739             10,719         
Cash in escrows                                                                         48,075             39,230         
Accounts receivable                                                                      9,304              8,423         
Prepaid expenses                                                                        11,048             17,640         
Investment in and advances to affiliates                                                36,934             42,870         
Deferred charges                                                                         6,740              5,279         
Other assets                                                                             6,664              6,114         
                                                                                 --------------     --------------        
         Total assets                                                               $2,286,725         $2,063,789         
                                                                                    ==========         ==========         

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                      
Mortgage notes payable                                                              $1,105,041        $   960,358         
Line of credit                                                                          58,000             32,500         
Accounts payable                                                                        19,570             21,838         
Accrued interest payable                                                                 6,102              5,782         
Accrued expenses and other liabilities                                                  12,019             13,180         
Security deposits                                                                       22,406             18,948         
                                                                                  ------------       ------------         

         Total liabilities                                                           1,223,138          1,052,606         
                                                                                    ----------         ----------         

Commitments and contingencies                                                                                             
Minority interest                                                                      338,381            341,854         
                                                                                   -----------       ------------         

8.36% Series B convertible cumulative preferred stock, liquidation preference of                                          
   $25.00 per share; no shares and 2,000,000 shares issued and outstanding                                                
   at June 30, 2002 and December 31, 2001, respectively, net of issuance costs                   -         48,733         
                                                                                 -----------------  -------------         
Stockholders' equity:                                                                                                     
   Convertible cumulative preferred stock, $.01 par value; 10,000,000 shares                                              
     authorized; 1,150,000 shares issued and outstanding                               114,000            114,000         
   Cumulative  redeemable  preferred  stock,  $.01 par value;  2,400,000 shares                                           
     issued and  outstanding  at June 30, 2002. No shares issued or outstanding                                           
     at December 31, 2001                                                               60,000                  -         
   Common stock, $.01 par value;  80,000,000 shares authorized;  26,208,927 and                                           
     24,010,855  shares  issued and  outstanding  at June 30, 2002 and December                                           
     31, 2001, respectively                                                                262                240         
   Excess  stock,  $.01 par  value;  10,000,000  shares  authorized;  no shares                                           
     issued or outstanding                                                                   -                  -         
   Additional paid-in capital                                                          623,473            572,273         
   Accumulated other comprehensive income                                                 (620)              (532)        
   Distributions in excess of accumulated earnings                                     (66,228)           (57,768)        
   Officer and director notes for stock purchases                                       (5,681)            (7,617)        
                                                                                 ---------------    ---------------       
         Total stockholders' equity                                                    725,206            620,596         
                                                                                  ------------       ------------         
         Total liabilities and stockholders' equity                                 $2,286,725         $2,063,789         
                                                                                    ==========         ==========         

The  accompanying  notes are an integral  part of these  consolidated  financial                                          
statements.                                                                                                               

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                        HOME PROPERTIES OF NEW YORK, INC.                                                                 

                      CONSOLIDATED STATEMENTS OF OPERATIONS                                                               
                 FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001                                                          
           (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                                     

                                                                                       2002              2001             
                                                                                       ----              ----             
Revenues:                                                                                                                 

  Rental income                                                                      $  182,949        $ 165,571          
  Property other income                                                                   6,146            6,160          
  Interest and dividend income                                                              795            2,017          
  Other income                                                                              581              926          
                                                                                  -------------    -------------          

Total revenues                                                                          190,471          174,674          
                                                                                     ----------       ----------          

Expenses:                                                                                                                 

  Operating and maintenance                                                              81,653           78,117          
  General and administrative                                                              5,921            4,968          
  Interest                                                                               37,042           31,491          
  Depreciation and amortization                                                          31,672           30,454          
                                                                                    -----------      -----------          

Total expenses                                                                          156,288          145,030          
                                                                                     ----------       ----------          

Income before gain (loss) on disposition of property, minority interest and                                               
discontinued operations                                                                  34,183           29,644          
Gain (loss) on disposition of property                                                     (402)          13,648          
                                                                                  --------------     -----------          
Income before minority interest and discontinued operations                              33,781           43,292          
Minority interest                                                                         8,299           14,368          
                                                                                   ------------      -----------          
Income before discontinued operations                                                    25,482           28,924          
Discontinued operations                                                                                                   
   Income from operations, net of $266 in 2002 and $379 in 2001,                                                          
   allocated to minority interest                                                           424              526          
   Gain on disposition of property, net of $1,672 allocated to minority                                                   
   interest                                                                               2,664                -          
                                                                                   ------------    -------------          

Net income                                                                               28,570           29,450          
Preferred dividends                                                                      (7,234)          (8,994)         
Premium on Series B preferred stock repurchase                                           (5,025)               -          
                                                                                    ------------   -------------          

Net income available to common shareholders                                           $  16,311       $   20,456          
                                                                                      =========       ==========          

Per share data:                                                                                                           

     Basic earnings per share data:                                                                                       
         Income before discontinued operations                                             $.52             $.92          
         Discontinued operations                                                            .12              .02          
                                                                                          -----            -----          
     Net income available to common shareholders                                           $.64             $.94          
                                                                                           ====             ====          

     Diluted earnings per share data:                                                                                     
         Income before discontinued operations                                             $.51             $.92          
         Discontinued operations                                                            .12              .02          
                                                                                          -----            -----          
     Net income available to common shareholders                                           $.63             $.94          
                                                                                           ====             ====          

  Weighted average number of shares outstanding                                                                           
         - Basic                                                                     25,451,169       21,796,234          
                                                                                     ==========       ==========          
         - Diluted                                                                   25,773,934       21,868,273          
                                                                                     ==========       ==========          

The  accompanying  notes are an integral  part of these  consolidated  financial                                          
statements.                                                                                                               

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                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                      CONSOLIDATED STATEMENTS OF OPERATIONS                                                               
                                 FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001                                        
                            (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                    

                                                                                       2002              2001             
                                                                                       ----              ----             
Revenues:                                                                                                                 

  Rental income                                                                     $    94,352      $    83,588          
  Property other income                                                                   3,566            3,242          
  Interest and dividend income                                                              422              839          
  Other income                                                                              293              616          
                                                                                  --------------   --------------         

Total revenues                                                                           98,633           88,285          
                                                                                   ------------     ------------          

Expenses:                                                                                                                 

  Operating and maintenance                                                              39,451           35,834          
  General and administrative                                                              2,822            2,636          
  Interest                                                                               18,973           15,961          
  Depreciation and amortization                                                          16,727           15,790          
                                                                                   ------------     ------------          

Total expenses                                                                           77,973           70,221          
                                                                                   ------------     ------------          

Income before gain (loss) on disposition of property, minority interest and                                               
discontinued operations                                                                  20,660           18,064          
Gain (loss) on disposition of property                                                                    13,648          
                                                                                  ------------      ------------          
                                                                                            (26)                          
Income before minority interest and discontinued operations                              20,634           31,712          
Minority interest                                                                         4,466           11,397          
                                                                                  -------------     ------------          
Income before discontinued operations                                                    16,168           20,315          
Discontinued operations                                                                                                   
   Income from operations, net of $111 in 2002 and $218 in 2001,                                                          
   allocated to minority interest                                                           181              303          
   Gain on disposition of property, net of $1,672 allocated to minority                                                   
   interest                                                                               2,729                -          
                                                                                  -------------    ----------------       

Net income                                                                               19,078           20,618          
Preferred dividends                                                                      (3,852)          (4,497)         
Premium on Series B preferred stock repurchase                                           (5,025)               -          
                                                                                   -------------   ----------------       

Net income available to common shareholders                                          $   10,201       $   16,121          
                                                                                     ==========       ==========          

Per share data:                                                                                                           

     Basic earnings per share data:                                                                                       
         Income before discontinued operations                                             $.28             $.73          
         Discontinued operations                                                            .11              .01          
                                                                                          -----            -----          
     Net income available to common shareholders                                           $.39             $.74          
                                                                                           ====             ====          

     Diluted earnings per share data:                                                                                     
         Income before discontinued operations                                             $.28             $.70          
         Discontinued operations                                                            .11              .01          
                                                                                          -----            -----          
     Net income available to common shareholders                                           $.39             $.71          
                                                                                           ====             ====          

  Weighted average number of shares outstanding                                                                           
         - Basic                                                                     26,053,314       21,774,074          
                                                                                     ==========       ==========          
         - Diluted                                                                   26,449,554       28,979,900          
                                                                                     ==========       ==========          

              The accompanying notes are an integral part of these consolidated financial statements.                     
                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                                                          
                                  FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001                                         
                                             (UNAUDITED, IN THOUSANDS)                                                    

                                                                                               2002          2001         
                                                                                               ----          ----         
Net income                                                                                   $28,570       $29,450        
Other comprehensive income:                                                                                               
   Cumulative effect of accounting change                                                          -          (339)       
   Change in fair value of hedge instruments                                                     (88)          (48)       
                                                                                           ----------  ------------       
   Other comprehensive loss, net of minority interest                                            (88)         (387)       
                                                                                           ----------   -----------       

Comprehensive income                                                                         $28,482       $29,063        
                                                                                             =======       =======        

The  accompanying  notes are an integral  part of these  consolidated  financial                                          
statements.                                                                                                               

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                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                                                          
                                 FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001                                        
                                             (UNAUDITED, IN THOUSANDS)                                                    

                                                                                             2002          2001           
                                                                                             ----          ----           
Net income                                                                                   $19,078       $20,618        
Other comprehensive income:                                                                                               
         Change in fair value of hedge instruments                                              (281)           64        
                                                                                           ----------  -----------        
         Other comprehensive (loss) income, net of minority interest                            (281)           64        
                                                                                           ----------  -----------        

Comprehensive income                                                                         $18,797       $20,682        
                                                                                             =======       =======        

The  accompanying  notes are an integral  part of these  consolidated  financial                                          
statements.                                                                                                               

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                                         HOME PROPERTIES OF NEW YORK, INC.                                                
                      CONSOLIDATED STATEMENTS OF CASH FLOWS                                                               
                                  FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001                                         
                                             (UNAUDITED, IN THOUSANDS)                                                    
                                                                                   2002           2001                    
                                                                                   ----           ----                    
Cash flows from operating activities:                                                                                     
   Net income                                                                    $  28,570      $  29,450                 
                                                                                 ---------      ---------                 
   Adjustments  to  reconcile  net income to net cash  provided by  operating                                             
     activities:                                                                                                          
     Equity in income of affiliates                                                    503             48                 
     Income allocated to minority interest                                          10,237         14,747                 
     Depreciation and amortization                                                  32,465         31,518                 
     Gain on disposition of property                                                (3,934)       (13,648)                
     Changes in assets and liabilities:                                                                                   
       Other assets                                                                  5,092          9,269                 
       Accounts payable and accrued liabilities                                        215         (1,958)                
                                                                               -----------     -----------                
   Total adjustments                                                                44,578         39,976                 
                                                                                 ---------      ---------                 
   Net cash provided by operating activities                                        73,148         69,426                 
                                                                                 ---------      ---------                 
Cash flows from investing activities:                                                                                     
   Purchase of properties, net of mortgage notes assumed and UPREIT    Units                                              
   issued                                                                         (166,865)       (42,757)                
   Additions to properties                                                         (53,087)       (53,821)                
   Proceeds from sale of properties                                                 40,173         38,195                 
   Advances to affiliates                                                           (4,621)        (7,120)                
   Payments on advances to affiliates                                               10,055          8,775                 
                                                                                 ---------     ----------                 
   Net cash used in investing activities                                          (174,345)       (56,728)                
                                                                                  ---------     ----------                
Cash flows from financing activities:                                                                                     
   Proceeds from sale of preferred stock, net of issuance costs of $1,902           58,098              -                 
   Proceeds from sale of common stock, net of issuance costs of $1,484                                                    
in 2002 and $81 in 2001                                                             39,292         26,725                 
   Repurchase of Series B preferred stock                                          (29,392)             -                 
   Purchase of treasury stock                                                            -        (20,621)                
   Purchase of UPREIT Units                                                              -        (11,899)                
   Proceeds from mortgage notes payable                                            104,330         65,636                 
   Payments on mortgage notes payable                                              (29,554)       (44,811)                
   Proceeds from line of credit                                                     78,000         32,000                 
   Payments on line of credit                                                      (52,500)             -                 
   Payments of deferred loan costs                                                  (1,949)          (486)                
   Additions to cash escrows, net                                                   (8,845)       (13,700)                
   Repayment of officer loans                                                        1,963              -                 
   Dividends and distributions paid                                                (56,226)       (51,674)                
                                                                                 ----------     ----------                
   Net cash provided by (used in) financing activities                             103,217        (18,830)                
                                                                                  --------      ----------                
Net increase (decrease) in cash                                                      2,020         (6,132)                
Cash and cash equivalents:                                                                                                
   Beginning of period                                                              10,719         10,449                 
                                                                                 ---------      ---------                 
   End of period                                                                  $ 12,739      $   4,317                 
                                                                                  ========      =========                 
Supplemental disclosure of non-cash investing and financing activities:                                                   
Mortgage loans assumed associated with property acquisitions                      $ 69,907       $ 30,250                 
Conversion of preferred to common stock                                             24,367              -                 
Exchange of UPREIT Units/partnership interest for common shares                      1,025            816                 
Fair value of hedge instruments                                                      1,054            666                 
Issuance of UPREIT Units associated with property and other acquisitions                 -         19,112                 
Notes issued in exchange for officer and director stock purchases                        -          1,965                 
Increase in real estate associated with the purchase of minority interest                                                 
UPREIT Units                                                                             -          1,666                 
Transfer of notes  receivable due from  affiliates in exchange for additional                                             
   equity in affiliates                                                                  -         23,699                 

The  accompanying  notes are an integral  part of these  consolidated  financial                                          
statements.                                                                                                               

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                        HOME PROPERTIES OF NEW YORK, INC.                                                                 

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                           
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                                      

1.       Unaudited Interim Financial Statements                                                                           

         The interim consolidated financial statements of Home Properties of New                                          
         York,  Inc.  (the  "Company")  have been  prepared in  accordance  with                                          
         generally   accepted   accounting   principles  for  interim  financial                                          
         information and the applicable  rules and regulations of the Securities                                          
         and Exchange Commission.  Accordingly, certain disclosures accompanying                                          
         annual  financial  statements  prepared in  accordance  with  generally                                          
         accepted accounting  principles are omitted. The year-end balance sheet                                          
         data  was  derived  from  audited  financial  statements,  but does not                                          
         include all  disclosures  required  by  generally  accepted  accounting                                          
         principles. In the opinion of management,  all adjustments,  consisting                                          
         solely  of  normal  recurring  adjustments,   necessary  for  the  fair                                          
         presentation of the consolidated  financial  statements for the interim                                          
         periods have been included.  The current period's results of operations                                          
         are not  necessarily  indicative  of results  which  ultimately  may be                                          
         achieved for the year. The interim  consolidated  financial  statements                                          
         and notes thereto should be read in conjunction  with the  consolidated                                          
         financial  statements and notes thereto  included in the Company's Form                                          
         10-K for the year ended December 31, 2001.                                                                       

2.       Organization and Basis of Presentation                                                                           

         Organization                                                                                                     
         The  Company  is  engaged  primarily  in  the  ownership,   management,                                          
         acquisition,  rehabilitation  and development of residential  apartment                                          
         communities in the  Northeastern,  Mid-Atlantic  and Midwestern  United                                          
         States.  As of June  30,  2002,  the  Company  operated  290  apartment                                          
         communities  with 50,537  apartments.  Of this total, the Company owned                                          
         145  communities  consisting of 40,408  apartments,  managed as general                                          
         partner  8,061  apartments,   and  fee  managed  2,068  apartments  for                                          
         affiliates and third parties.  The Company also fee manages 2.2 million                                          
         square feet of office and retail properties.                                                                     

         Basis of Presentation                                                                                            
         The accompanying consolidated financial statements include the accounts                                          
         of the  Company  and its  62.2%  (57.7% at June 30,  2001)  partnership                                          
         interest  in  the  Operating   Partnership.   Such  interest  has  been                                          
         calculated as the  percentage of  outstanding  common shares divided by                                          
         the total  outstanding  common shares and Operating  Partnership  Units                                          
         outstanding.  The remaining 37.8% (42.3% at June 30, 2001) is reflected                                          
         as Minority Interest in these consolidated  financial  statements.  For                                          
         financing purposes,  the Company has formed a limited liability company                                          
         (the  "LLC") and a  partnership  (the  "Financing  Partnership")  which                                          
         beneficially own certain apartment  communities  encumbered by mortgage                                          
         indebtedness. The LLC is wholly owned by the Operating Partnership. The                                          
         Financing  Partnership is owned 99.9% by the Operating  Partnership and                                          
         .1% by Home Properties  Trust, a wholly owned qualified REIT subsidiary                                          
         ("QRS") of the Company.  Investments  in entities where the Company has                                          
         the ability to exercise  significant  influence  over but does not have                                          
         financial  and  operating  control are  accounted  for using the equity                                          
         method.  All significant  intercompany  balances and transactions  have                                          
         been eliminated in these consolidated financial statements.                                                      

         Reclassifications                                                                                                
         Certain  reclassifications  have  been  made to the  2001  consolidated                                          
         financial statements to conform to the 2002 presentation.                                                        

         Change in Accounting Estimate                                                                                    
         During the first quarter of 2002, the Company completed a comprehensive                                          
         review of its real estate related useful lives for certain of its asset                                          
         classes.  As a result of this review,  the Company changed its estimate                                          
         of  the  remaining   useful  lives  for  its  buildings  and  apartment                                          
         improvements.                                                                                                    

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                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                           
                              (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                     

2.       Organization and Basis of Presentation (continued)                                                               

         Effective  January 1, 2002, the estimated  useful life of all buildings                                          
         has  been  extended  to 40  years  and  the  estimated  useful  life of                                          
         apartment  improvements  has been  changed  from 10 years to 20  years.                                          
         Certain  buildings had previously  been  depreciated  over useful lives                                          
         ranging from 30 to 40 years.  As a result of the change,  income before                                          
         discontinued  operations for the three and six-month periods ended June                                          
         30, 2002 increased approximately $1.6 and $3.2 million, respectively or                                          
         $.06 and $.13 per diluted share, respectively. The Company believes the                                          
         change reflects more  appropriate  remaining useful lives of the assets                                          
         based  upon the  nature  of the  expenditures  and is  consistent  with                                          
         prevailing industry practice.                                                                                    

         New Accounting Standards                                                                                         
         In April  2002,  the FASB  issued  Statement  of  Financial  Accounting                                          
         Standard  ("SFAS") No. 145 -- "Rescission of FASB Statements No. 4, 44,                                          
         and 64, Amendment of FASB Statement No. 13, and Technical  Corrections"                                          
         which  eliminates  the  requirement  to report  gains and  losses  from                                          
         extinguishment  of debt as extraordinary  unless they meet the criteria                                          
         of  APB  Opinion  30.  This   Statement   also  amends  other  existing                                          
         authoritative  pronouncements  to make various  technical  corrections,                                          
         clarify  meanings,   or  describe  their  applicability  under  changed                                          
         conditions.  The new standard becomes effective for the Company for the                                          
         year  ending  December  31,  2003.  The  Company  does not expect  this                                          
         pronouncement  to have a  material  impact on the  Company's  financial                                          
         position, results of operations, or cash flows.                                                                  

         In June 2002,  the FASB  issued  SFAS No. 146 -  "Accounting  for Costs                                          
         Associated with Exit or Disposal  Activities." This Statement  requires                                          
         the  recognition  of a liability for costs  associated  with an exit or                                          
         disposal  activity  to be  recorded  at fair value when  incurred.  The                                          
         company's  commitment  to a plan,  by itself  does not create a present                                          
         obligation  that meets the definition of a liability.  The new standard                                          
         becomes  effective  for exit and disposal  activities  initiated  after                                          
         December 31, 2002.  The Company does not expect this  pronouncement  to                                          
         have a material impact on the Company's financial position,  results of                                          
         operations, or cash flows.                                                                                       

3.       Earnings Per Common Share                                                                                        

         Basic earnings per share ("EPS") is computed as net income available to                                          
         common  shareholders  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,  warrants and the                                          
         conversion of any cumulative  convertible preferred stock. The exchange                                          
         of an Operating  Partnership  Unit for common stock will have no effect                                          
         on  diluted  EPS as  Unitholders  and  stockholders  effectively  share                                          
         equally  in the net  income of the  Operating  Partnership.  Net income                                          
         available  to  common  shareholders  is the same for both the basic and                                          
         diluted  calculation for the six and three-month periods ended June 30,                                          
         2002 and the six-month period ended June 30, 2001. Net income available                                          
         to common  shareholders  has been  adjusted  to reflect  the  dividends                                          
         related to the convertible  preferred stock that is considered dilutive                                          
         for the three-month period ended June 30, 2001.                                                                  

10-Q 10th Page of 28 TOC 1st Previous Next ↓Bottom Just 10th
                                             HOME PROPERTIES OF NEW YORK, INC.                                            

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                           
                              (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                     

3.       Earnings Per Common Share (continued)                                                                            

         The reconciliation of the basic weighted average shares outstanding and                                          
         diluted   weighted   average  shares   outstanding   for  the  six  and                                          
         three-months ended June 30, 2002 and 2001 is as follows:                                                         

                                                                     Six Months                   Three Months            
                                                                     ----------                   ------------            
                                                                2002           2001            2002           2001        
                                                                ----           ----            ----           ----        
          Basic weighted average number of shares                                                                         
           Outstanding                                         25,451,169     21,796,234      26,053,314     21,774,074   
          Effect of dilutive stock options                        322,765         72,039         396,240         93,445   
          Effect of convertible cumulative                                                                                
                                                                          ---                                             
            preferred stock                                                                                   7,112,381   
                                                            -------------- ------------------------------     ---------   
                                                                        -              -               -                  
                                                                        -              -  --           -                  
          Diluted weighted average number                                                                                 
            of shares outstanding                              25,773,934     21,868,273      26,499,554     28,979,900   
                                                               ==========     ==========      ==========     ==========   

         Unexercised  stock  options and warrants to purchase  2,401,648  shares                                          
         (net of 63,000 anti-dilutive  shares) of the Company's common stock are                                          
         dilutive  and  included in diluted  weighted  average  number of shares                                          
         outstanding as of June 30, 2002. Unexercised stock options and warrants                                          
         to purchase  1,173,960  shares of the  Company's  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                                          
         Company's stock during the six and  three-months  periods ended June 30                                          
         2001.  For the six and  three-months  periods  ended June 30,  2002 (as                                          
         applicable  and  on  a  weighted  average  basis),  the  1,945,580  and                                          
         1,448,343,  respectively,  of the  Series  B,  C,  D and E  Convertible                                          
         Cumulative  Preferred  Stock  (4,444,277  and  4,274,497  common  stock                                          
         equivalents,  respectively)  have an  antidilutive  effect  and are not                                          
         included in the  computation  of diluted EPS. In addition,  for the six                                          
         month period ended June 30, 2001, the 4,816,667 shares of the Series A,                                          
         B, C, D, and E Convertible Cumulative Preferred Stock (7,112,381 common                                          
         stock equivalents) on an as-converted basis have an antidilutive effect                                          
         and are not included in the computation of diluted EPS.                                                          

4.       Preferred Stock and Stockholders' Equity                                                                         

         On May  24,  2002,  the  Company  repurchased  the 1.0  million  shares                                          
         outstanding of its Series B Convertible  Cumulative  Preferred Stock at                                          
         an amount  equivalent  to 839,772  common  shares (as if the  preferred                                          
         shares had been  converted).  The  Company  repurchased  the shares for                                          
         $29,392,  equal to the  $35.00  common  stock  trading  price  when the                                          
         transaction  was  consummated.  A premium of $5,025 was incurred on the                                          
         repurchase and has been  reflected as a charge to net income  available                                          
         to common shareholders in the consolidated statement of operations.                                              

         On February 4, 2002, 1.0 million of the Series B Convertible Cumulative                                          
         Preferred  Shares were  converted  into 839,771 shares of common stock.                                          
         The conversion had no effect on the reported results of operations.                                              

         On February 28, 2002, the Company closed on two common equity offerings                                          
         totaling  704,602 shares of the Company's  common stock,  at a weighted                                          
         average  price of $30.99 per share,  resulting  in net  proceeds to the                                          
         Company of $21.8 million.                                                                                        

10-Q 11th Page of 28 TOC 1st Previous Next ↓Bottom Just 11th
                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                           
                              (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                     

4.       Preferred Stock and Stockholders' Equity (continued)                                                             

         On March 18, 2002,  the Company  issued  2,400,000  shares of its 9.00%                                          
         Series F Cumulative  Redeemable  Preferred  Stock  ("Series F Preferred                                          
         Shares"), with a $25.00 liquidation preference per share. This offering                                          
         generated net proceeds of approximately  $58 million.  The net proceeds                                          
         were used to fund the Series B  preferred  stock  repurchase,  property                                          
         acquisitions,  and property upgrades. The Series F Preferred Shares are                                          
         redeemable  by the  Company at anytime on or after  March 25, 2007 at a                                          
         redemption price of $25.00 per share, plus any accumulated, accrued and                                          
         unpaid dividends.  Each Series F Preferred share will receive an annual                                          
         dividend  equal  to  9.00%  of the  liquidation  preference  per  share                                          
         (equivalent to a fixed annual amount of $2.25 per share).                                                        

5.       Other Income                                                                                                     

         Other income for the six and three-months  ended June 30, 2002 and 2001                                          
is summarized as follows:                                                                                                 
                                                                   Six Months                   Three Months              
                                                                   ----------                   ------------              
                                                              2002           2001           2002           2001           
                                                              ----           ----           ----           ----           
          Management fees                                     $969           $983           $473           $508           
          Other                                                115             (9)            62              -           
          Management Companies                                (503)           (48)          (242)           108           
                                                               -----           ----          -----          ----          
                                                              $581           $926           $293           $616           
                                                              ====           ====           ====           ====           

         Certain  property  management,  leasing and development  activities are                                          
         performed  by Home  Properties  Management,  Inc.  and Home  Properties                                          
         Resident Services, Inc. (the "Management Companies"). Both are Maryland                                          
         corporations and, effective January 1, 2001, have elected to convert to                                          
         taxable REIT  subsidiaries  under the Tax Relief Extension Act of 1999.                                          
         Effective  March 1, 2001,  the Company  recapitalized  Home  Properties                                          
         Resident Services, Inc. by contributing $23.7 million of loans due from                                          
         affiliated    partnerships   to   equity.    Simultaneous    with   the                                          
         recapitalization, the Company increased its effective economic interest                                          
         from 95% to 99% diluting the economic  interest  held by certain of the                                          
         Company's inside directors.  The Operating  Partnership owns non-voting                                          
         common stock in the Management  Companies  which entitles the Operating                                          
         Partnership  to receive  95% and 99% of the  economic  interest in Home                                          
         Properties  Management,  Inc. and Home  Properties  Resident  Services,                                          
         respectively.                                                                                                    

         The Company's share of income from the Management Companies for the six                                          
         and three months ended June 30, 2002 and 2001 is summarized as follows:                                          

                                                                    Six Months                  Three Months              
                                                                    ----------                  ------------              
                                                                2002           2001          2002          2001           
                                                                ----           ----          ----          ----           
          Management fees                                      $1,417         $1,692          $751          $868          
          Interest income                                         377            758           187           480          
          Miscellaneous                                            33             13            16            12          
          General and administrative                           (1,742)        (1,396)         (925)         (739)         
          Interest expense                                       (386)          (839)         (173)         (382)         
          Other expense                                          (199)          (284)         (100)         (130)         
                                                               -------         ------       -------        ------         
          Net (loss) income                                     ($500)          ($56)        ($244)         $109          
                                                                ------         ------        ------         ----          
          Company's share                                       ($503)          ($48)        ($242)         $108          
                                                                ======         ======        ======         ====          

10-Q 12th Page of 28 TOC 1st Previous Next ↓Bottom Just 12th
                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                           
                              (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                     

5.       Other Income (continued)                                                                                         

         The general and  administrative  expenses  reflected above represent an                                          
         allocation  of  direct  and  indirect  costs  incurred  by the  Company                                          
         estimated by  management to be  associated  with the  operations of the                                          
         Management Companies.                                                                                            

6.       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 stand-alone basis is less                                          
         than 10% of the  revenues,  profit or loss,  and assets of the combined                                          
         reported operating segments.  The operating segments are aggregated and                                          
         segregated as Core and Non-core properties.                                                                      

         Non-segment   revenue  to   reconcile   total   revenue   consists   of                                          
         unconsolidated  management and interest income.  Non-segment  assets to                                          
         reconcile to total assets  include cash and cash  equivalents,  cash in                                          
         escrows,  accounts  receivable,  prepaid  expenses,  investments in and                                          
         advances to affiliates, deferred charges and other assets.                                                       

         Core properties  consist of all apartment  communities  which have been                                          
         owned more than one full calendar year. Therefore,  the Core Properties                                          
         represent  communities owned as of January 1, 2001. Non-core properties                                          
         consist of apartment  communities  acquired  during 2001 and 2002, such                                          
         that full year comparable operating results are not available.                                                   

         The accounting policies of the segments are the same as those described                                          
         in Notes 1 and 2 of the Company's Form 10-K.                                                                     

         The Company assesses and measures segment  operating results based on a                                          
         performance measure referred to as Funds from Operations  ("FFO").  FFO                                          
         is generally  defined as net income (loss),  before gains (losses) from                                          
         the  sale  of   property,   extraordinary   items,   plus  real  estate                                          
         depreciation including adjustments for unconsolidated  partnerships and                                          
         joint ventures.  This presentation excludes the dividends on the Series                                          
         F Preferred  Stock and assumes the conversion of dilutive  common stock                                          
         equivalents and convertible preferred stock. FFO for both the three and                                          
         six-month  periods  ended June 30, 2002 adjusts for the add back of the                                          
         premium  on the  Series  B  preferred  stock  repurchase.  FFO is not a                                          
         measure of operating results or cash flows from operating activities as                                          
         measured by  generally  accepted  accounting  principles  and it is not                                          
         indicative  of cash  available  to fund cash  needs and  should  not be                                          
         considered an alternative to cash flows as a measure of liquidity.  All                                          
         REITs may not be using the same  definition  for FFO.  During 2002, the                                          
         Company  reclassified  certain property related operating expenses from                                          
         General and  Administrative  to Operating and  Maintenance  which would                                          
         impact the segment  contribution of FFO. This  reclassification is also                                          
         reflected in the 2001 presentation.                                                                              

10-Q 13th Page of 28 TOC 1st Previous Next ↓Bottom Just 13th
                                             HOME PROPERTIES OF NEW YORK, INC.                                            

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                           
                              (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                     

6.       Segment Reporting (continued)                                                                                    

         The  revenues,  profit  (loss),  and assets for each of the  reportable                                          
         segments  are  summarized  as  follows  as  of  and  for  the  six  and                                          
         three-month periods ended June 30, 2002, and 2001.                                                               

                                                                        Six Months                  Three Months          
                                                                        ----------                  ------------          
                                                                    2002          2001          2002           2001       
                                                                    ----          ----          ----           ----       
         Revenues                                                                                                         
         Apartments owned                                                                                                 
           Core properties                                           $167,507     $160,426      $ 84,699       $ 81,109   
           Non-core properties                                         21,588       11,305        13,219          5,721   
         Reconciling items                                              1,376        2,943           715          1,455   
                                                                  -----------  -----------   -----------     ----------   
         Total Revenue                                               $190,471     $174,674      $ 98,633       $ 88,285   
                                                                     ========     ========      ========       ========   
         Profit (loss)                                                                                                    
         Funds from operations:                                                                                           
         Apartments owned                                                                                                 
           Core properties                                          $  94,098    $  87,631      $ 49,932       $ 47,148   
           Non-core properties                                         13,344        5,983         8,535          3,848   
         Reconciling items                                              1,376        2,943           715          1,455   
                                                                  -----------  -----------   -----------     ----------   
         Segment contribution to FFO                                 $108,818    $  96,557      $ 59,182       $ 52,451   
         General & administrative expenses                             (5,921)      (4,968)       (2,822)        (2,636)  
         Interest expense                                             (37,042)     (31,491)      (18,973)       (15,961)  
         Depreciation of unconsolidated affiliates                        437          203            65             99   
         Non-real estate depreciation/amortization                       (403)        (311)         (190)          (161)  
         Redeemable preferred dividend                                 (1,455)           -        (1,350)             -   
         Income from discontinued operations before minority                                                              
         interest,  depreciation  and  gain on  disposition  of                                                           
         property                                                       1,027        1,661           366            906   
                                                                     --------     --------     ---------      ---------   
         Funds from Operations                                         65,461       61,651        36,278         34,698   
         Depreciation - apartments owned                              (31,606)     (30,899)      (16,611)       (16,014)  
         Depreciation of unconsolidated affiliates                       (437)        (203)          (65)           (99)  
         Redeemable preferred dividend                                  1,455            -         1,350              -   
         Gain (loss) on disposition of properties                        (402)      13,648           (26)        13,648   
         Income from discontinued operations before minority                 )                                            
         interest and gain on disposition of property                    (690         (905)         (292)          (521)  
         Minority interest                                             (8,299)     (14,368)       (4,466)       (11,397)  
                                                                     ---------     --------      --------       --------  
         Income before discontinued operations                      $  25,482    $  28,924     $  16,168      $  20,315   
                                                                    =========    =========     =========      =========   

         Assets - As of June 30, 2002 and December 31, 2001 Apartments owned:                                             
           - Core                                                                             $1,692,838      $1,712,745  
           - Non-core                                                                            462,383         220,769  
         Reconciling items                                                                       131,504         130,275  
                                                                                            ------------    ------------  
         Total Assets                                                                         $2,286,725      $2,063,789  
                                                                                              ==========      ==========  

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                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                           
                              (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                     

7.       Pro Forma Condensed Financial Information                                                                        

         The Company  acquired  twelve  apartment  communities  ("2002  Acquired                                          
         Communities")  with  2,384  units  in  four  transactions   during  the                                          
         six-month  period  ended  June  30,  2002.  The  total  purchase  price                                          
         (including  closing costs) of $232.6 million  equates to  approximately                                          
         $98 per unit.  Consideration for the communities included $82.9 million                                          
         of cash on hand,  $69.9 million of assumed  debt,  $58 million from the                                          
         Company's  line of credit  and $21.8  million  of cash  raised  through                                          
         common and preferred equity offerings.                                                                           

         In  addition,  during  the first two  quarters,  the  Company  sold ten                                          
         apartment  communities ("2002 Disposed Properties") having 983 units in                                          
         seven  unrelated  transactions  as  part of its  strategic  disposition                                          
         program.  The total  sales  price of $42.3  million  equates to $43 per                                          
         unit.  A gain on sale  of  approximately  $4.3  million,  prior  to the                                          
         allocation of minority interest, has been recorded in relation to these                                          
         sales and is reflected in discontinued operations.                                                               

         The  following  proforma  information  was  prepared as if (i) the 2002                                          
         transactions   related  to  the   acquisition  of  the  "2002  Acquired                                          
         Communities"   had   occurred  on  January  1,  2001,   (ii)  the  2001                                          
         transactions  related to the acquisition of four apartment  communities                                          
         in four separate  transactions  had occurred on January 1, 2001,  (iii)                                          
         the  disposition  of the "2002  Disposed  Properties"  had  occurred on                                          
         January 1, 2001, (iv) the 2001 transactions  related to the disposition                                          
         of four apartment communities in two separate transactions had occurred                                          
         on January 1, 2001 and (v) the 2002 Series F Preferred  Share  offering                                          
         and the two common  equity  offerings  had occurred on January 1, 2001.                                          
         The  proforma  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 the beginning of 2001, nor does it                                          
         purport to  represent  the results of  operations  for future  periods.                                          
         Adjustments to the proforma  condensed combined statement of operations                                          
         for the six-months ended June 30, 2002 and 2001, consist principally of                                          
         providing net operating activity and recording  interest,  depreciation                                          
         and amortization from January 1, 2001 to the acquisition date.                                                   
                                                                 For the Six-Months Ended                                 
                                                                                 June 30,                                 
                                                                        2002                 2001                         
                                                                        ----                 ----                         

Total revenues                                                       $198,208             $191,288                        
Net Income                                                             25,081               23,176                        
Net income available to common shareholders                            16,602               11,482                        

Per common share data:                                                                                                    
Net income available to common shareholders                                                                               
    Basic                                                               $0.65                $0.51                        
    Diluted                                                             $0.64                $0.51                        

Weighted average number of shares outstanding:                                                                            
    Basic                                                          25,676,953           22,500,836                        
    Diluted                                                        25,999,718           22,572,875                        

10-Q 15th Page of 28 TOC 1st Previous Next ↓Bottom Just 15th
                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                           
                              (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                     

8.       Derivative Financial Instruments                                                                                 

         The  Company  has four  interest  rate swaps that  effectively  convert                                          
         variable  rate  debt to  fixed  rate  debt.  As of June 30,  2002,  the                                          
         aggregate  fair value of the  Company's  interest rate swaps was $1,054                                          
         prior to the allocation of minority interest and is included in accrued                                          
         expenses and other liabilities in the consolidated  balance sheets. For                                          
         the six and three-months ending June 30, 2002, as the critical terms of                                          
         the  interest  rate  swaps  and  the  hedged  items  are the  same,  no                                          
         ineffectiveness   was  recorded  in  the  consolidated   statements  of                                          
         operations.  All components of the interest rate swaps were included in                                          
         the assessment of hedge  effectiveness.  The fair value of the interest                                          
         rate swaps is based upon the  estimate  of amounts  the  Company  would                                          
         receive or pay to terminate the contract at the  reporting  date and is                                          
         estimated using interest rate market pricing models.                                                             

9.       Disposition of Property and Discontinued Operations                                                              

         The Company adopted the provisions of SFAS No. 144, "Accounting for the                                          
         Impairment or Disposal of Long-Lived Assets" effective January 1, 2002.                                          
         This  standard  addresses  financial  accounting  and reporting for the                                          
         impairment or disposal of long-lived  assets. It also retains the basic                                          
         provisions  for  presenting   discontinued  operations  in  the  income                                          
         statement  but  broadened the scope to include a component of an entity                                          
         rather than a segment of a business.  Pursuant to the  definition  of a                                          
         component of an entity in the SFAS, assuming no significant  continuing                                          
         involvement,  the sale of an apartment  community  is now  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.                                                            

         Included  in  discontinued  operations  for the  six  and  three-months                                          
         periods ended June 30, 2002 are ten apartment  community  dispositions.                                          
         The  operations  of these  ten  properties  have  been  reflected  on a                                          
         comparative  basis for the six and three-months  periods ended June 30,                                          
         2001. For purposes of the  discontinued  operations  presentation,  the                                          
         Company  only  includes  interest  expense   associated  with  specific                                          
         mortgage  indebtedness of the properties that are sold or classified as                                          
         held for sale. As of June 30, 2002, there were no properties classified                                          
         as held for sale.                                                                                                

         During  the  first  two  quarters,   the  Company  sold  ten  apartment                                          
         communities having 983 units in seven unrelated transactions as part of                                          
         its  strategic  disposition  program.  The total  sales  price of $42.3                                          
         million equates to $43 per unit. A gain on sale of  approximately  $4.3                                          
         million,  prior  to the  allocation  of  minority  interest,  has  been                                          
         recorded in relation to these sales and is  reflected  in  discontinued                                          
         operations.                                                                                                      

         In connection with the Company's  strategic asset disposition  program,                                          
         management is constantly  reevaluating the performance of its portfolio                                          
         on  a  property-by-property  basis.  The  Company  from  time  to  time                                          
         determines that it is in the best interest of the Company to dispose of                                          
         assets that have  reached  their  potential  or are less  efficient  to                                          
         operate due to their size or remote location and reinvest such proceeds                                          
         in higher performing assets located in targeted  geographic markets. It                                          
         is possible that the Company will sell such properties at a loss.                                                

10-Q 16th Page of 28 TOC 1st Previous Next ↓Bottom Just 16th
                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                                           
                              (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                     

9.       Disposition of Property and Discontinued Operations (continued)                                                  
         ---------------------------------------------------------------                                                  

         The operating  results of  discontinued  operations  are  summarized as                                          
         follows as of and for the six and  three-months  periods ended June 30,                                          
         2002, and 2001.                                                                                                  

                                                                Six Months                       Three                    
                                                                                                 Months                   
                                                           2002           2001            2002            2001            
                                                        -----------    ------------    ------------    -----------        
                                                        -----------    ------------    ------------    -----------        
         Revenues:                                                                                                        
            Rental Income                                      $1,848         $3,576          $  529          $1,800      
            Property other income                                  59            116              26              67      
                                                        -----------    ------------    ------------    -----------        
                                                        -----------    ------------    ------------    -----------        
         Total Revenues                                         1,907          3,692             555           1,867      

                  Operating and Maintenance                       714          1,759              36             808      
                                                        -----------    ------------    ------------    -----------        
                                                        -----------    ------------    ------------    -----------        

         Net Operating Income                                   1,193          1,933             519           1,059      

            Interest expense                                      166            272             153             153      
            Depreciation and amortization                         337            756              74             385      
                                                        -----------    ------------    ------------    -----------        
                                                        -----------    ------------    ------------    -----------        

         Income from discontinued operations before                                                                       
            minority interest and gain on disposition                                                                     
            of property                                           690            905             292            521       
         Minority interest                                        266            379             111            218       
                                                        -----------    ------------    ------------    -----------        
                                                        -----------    ------------    ------------    -----------        

         Income from discontinued operations before                                                                       
            gain on disposition of property                       424           526              181            303       

         Gain on disposition of property, net of                                                                          
            minority interest                                   2,664             -            2,729              -       
                                                        -----------    ------------    ------------    -----------        
                                                        -----------    ------------    ------------    -----------        

         Income from discontinued operations                   $3,088        $  526           $2,910         $  303       
                                                        ===========    ============    ============    ===========        

10.      Contingency                                                                                                      

         The Company had recently  undergone a state tax audit whereby the state                                          
         has assessed taxes of $469 for the 1998 and 1999 tax years under audit.                                          
         If the state's  position is applied to all tax periods through June 30,                                          
         2002, the assessment would be approximately  $1.4 million.  The Company                                          
         believes that the  assessment and the state's  underlying  position for                                          
         the tax periods 1998 through  2000 are neither  supportable  by the law                                          
         nor consistent with previously  provided  interpretative  guidance from                                          
         the office of the State Secretary of Revenue.  The Company has filed an                                          
         appeal to the Commonwealth Court in the state for the 1998 and 1999 tax                                          
         years.  There have been no further  proceedings to date and the Company                                          
         intends to  vigorously  contest the  assessments.  The Company has been                                          
         advised that it has meritorious  positions for its previous tax filings                                          
         for the years 1998,  1999, and 2000.  However,  the Company has accrued                                          
         approximately  $590 as of June 30, 2002 for estimated costs  associated                                          
         with this matter.                                                                                                

10-Q 17th Page of 28 TOC 1st Previous Next ↓Bottom Just 17th
                                             HOME PROPERTIES OF NEW YORK, INC.                                            

                                        ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS                                      
                                      OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION                                    
                                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                 

The following  discussion  should be read in conjunction  with the  accompanying                                          
consolidated financial statements and notes thereto.                                                                      

Forward-Looking Statements                                                                                                

This  discussion  contains  forward-looking  statements.  Although  the  Company                                          
believes expectations reflected in such forward-looking  statements are based on                                          
reasonable  assumptions,  it can give no assurance that its expectations will be                                          
achieved.  Factors  that may cause  actual  results  to differ  include  general                                          
economic and local real estate conditions, the weather and other conditions that                                          
might  affect  operating  expenses,   the  timely  completion  of  repositioning                                          
activities within anticipated  budgets,  the actual pace of future  acquisitions                                          
and continued access to capital to fund growth.                                                                           

Liquidity and Capital Resources                                                                                           

The Company's  principal  liquidity  demands are expected to be distributions to                                          
the common and preferred  stockholders  and Operating  Partnership  Unitholders,                                          
capital improvements and repairs and maintenance for the properties, acquisition                                          
of additional properties, property development and debt repayments.                                                       

The Company intends to meet its short-term  liquidity  requirements  through net                                          
cash flows  provided by operating  activities  and its unsecured line of credit.                                          
The Company  considers  its ability to generate  cash to be adequate to meet all                                          
operating  requirements and make distributions to its stockholders in accordance                                          
with the  provisions of the Internal  Revenue  Code,  as amended,  applicable to                                          
REITs.                                                                                                                    

As of June 30, 2002, the Company had an unsecured line of credit from M & T Bank                                          
of $100 million with an outstanding balance of $58 million. Borrowings under the                                          
line  of  credit  bear  interest  at  1.25%  over  the  one-month   LIBOR  rate.                                          
Accordingly,  increases in interest  rates will increase the Company's  interest                                          
expense and as a result  will effect the  Company's  results of  operations  and                                          
financial  condition.  The line of credit  expires on  September  1,  2002.  The                                          
Company is evaluating alternatives to replace or extend the line of credit after                                          
September 1, 2002.                                                                                                        

To the  extent  that  the  Company  does not  satisfy  its  long-term  liquidity                                          
requirements  through net cash flows  provided by operating  activities  and its                                          
credit facility, it intends to satisfy such requirements through the issuance of                                          
UPREIT units,  proceeds from the Dividend  Reinvestment Plan ("DRIP"),  proceeds                                          
from the sale of properties, long term secured or unsecured indebtedness, or the                                          
issuance of additional equity securities. As of June 30, 2002, the Company owned                                          
18 properties with 3,564 apartment units, which were unencumbered by debt.                                                

In May,  1998,  the  Company's  Form S-3  Registration  Statement  was  declared                                          
effective  relating to the  issuance  of up to $400  million of shares of common                                          
stock and other securities.  The available balance on the shelf at June 30, 2002                                          
is $144.4 million.                                                                                                        

On September 30, 1999, the Company completed the sale of $50 million of Series B                                          
Preferred Stock in a private transaction with GE Capital. The Series B Preferred                                          
Stock  carried  an annual  dividend  rate  equal to the  greater of 8.36% or the                                          
actual  dividend  paid on the  Company's  common shares into which the preferred                                          
shares could be converted.  The stock had a liquidation preference of $25.00 per                                          
share,  a  conversion  price of  $29.77  per  share,  and a  five-year,  no-call                                          
provision. On February 4, 2002, 1.0 million of the Series B Preferred Stock were                                          
converted into 839,771  shares of common stock.  The conversion had no effect on                                          
the reported results of operations.  On May 24, 2002 the Company repurchased the                                          
remaining 1.0 million shares outstanding of its Series B Convertible  Cumulative                                          
Preferred  Stock at an amount  equivalent  to 839,772  common  shares (as if the                                          
preferred  shares had been  converted).  The Company  repurchased the shares for                                          
$29,392, equal to the $35.00 common stock trading price when the transaction was                                          
consummated.  A premium of $5,025 was  incurred on the  repurchase  and has been                                          
reflected  as a charge to net income  available to common  shareholders'  in the                                          
consolidated statement of operations.                                                                                     

In May and June, 2000, the Company completed the sale of $60 million of Series C                                          
Preferred  Stock in a private  transaction  with  affiliates of Prudential  Real                                          
Estate Investors  ("Prudential"),  Teachers Insurance and Annuity Association of                                          
America  ("Teachers"),  affiliates  of AEW Capital  Management  and Pacific Life                                          
Insurance Company.  The Series C Preferred Stock carries an annual dividend rate                                          
equal to the  greater  of 8.75% or the  actual  dividend  paid on the  Company's                                          
common shares into which the preferred shares can be converted.  The stock has a                                          
conversion price of $30.25 per share and a five-year, no-call provision. As part                                          
of the Series C Preferred  Stock  transaction,  the Company also issued  240,000                                          
warrants to purchase  common shares at a price of $30.25 per share,  expiring in                                          
five years.                                                                                                               

In June,  2000,  the  Company  completed  the sale of $25  million  of  Series D                                          
Preferred  Stock in a private  transaction  with The  Equitable  Life  Assurance                                          
Society of the United  States.  The Series D Preferred  Stock  carries an annual                                          
dividend rate equal to the greater of 8.775% or the actual  dividend paid on the                                          
Company's  common shares into which the preferred  shares can be converted.  The                                          
stock  has a  conversion  price  of  $30  per  share  and a  five-year,  no-call                                          
provision.                                                                                                                

In December,  2000,  the Company  completed  the sale of $30 million of Series E                                          
Preferred  Stock in a private  transaction,  again with affiliates of Prudential                                          
and Teachers. The Series E Preferred Stock carries an annual dividend rate equal                                          
to the  greater of 8.55% or the actual  dividend  paid on the  Company's  common                                          
shares  into  which  the  preferred  shares  can be  converted.  The stock has a                                          
conversion  price of $31.60 per share and a  five-year,  no-call  provision.  In                                          
addition,  as part of the Series E  Preferred  Stock  transaction,  the  Company                                          
issued  warrants  to  purchase  285,000  common  shares at a price of $31.60 per                                          
share, expiring in five years.                                                                                            

On February 28, 2002, the Company closed on two common equity offerings totaling                                          
704,602  shares of the Company's  common stock,  at a weighted  average price of                                          
$30.99 per share, resulting in net proceeds to the Company of $21.8 million.                                              

In March,  2002,  the  Company  issued  2,400,000  shares of its 9.00%  Series F                                          
Cumulative  Redeemable  Preferred  Stock ("Series F Preferred  Shares"),  with a                                          
$25.00 liquidation preference per share. This offering generated net proceeds of                                          
approximately  $58  million.  The net  proceeds  were used to fund the  Series B                                          
preferred stock repurchase,  property  acquisitions,  and property upgrades. The                                          
Series F Preferred  Shares are  redeemable by the Company at anytime on or after                                          
March 25, 2007 at a redemption price of $25.00 per share,  plus any accumulated,                                          
accrued and unpaid  dividends.  Each Series F  Preferred  share will  receive an                                          
annual  dividend  equal  to  9.00%  of  the  liquidation  preference  per  share                                          
(equivalent to a fixed annual amount of $2.25 per share).                                                                 

The  issuance  of  UPREIT  Units for  property  acquisitions  continues  to be a                                          
significant source of capital.  During 2001, 520 apartment units in two separate                                          
transactions  were  acquired for a total cost of $33 million  using UPREIT Units                                          
valued at  approximately  $19 million,  with the balance paid in cash or assumed                                          
debt.                                                                                                                     

During 2001, $32 million of common stock was issued under the Company's DRIP. An                                          
additional  $14.2  million has been raised  through the DRIP program  during the                                          
first six months of 2002.                                                                                                 

The DRIP was amended,  effective April 10, 2001, in order to reduce management's                                          
perceived  dilution from issuing new shares at or below the underlying net asset                                          
value.  The discount on reinvested  dividends  and optional  cash  purchases was                                          
reduced  from  3% to 2%.  The  maximum  monthly  investment  (without  receiving                                          
approval  from the  Company)  was reduced  from $5 thousand to $1  thousand.  As                                          
expected,  these  changes  significantly  reduced  participation  in  the  plan.                                          
Management will continue to monitor the relationship between the Company's stock                                          
price and estimated net asset value. During times when this difference is small,                                          
management has the flexibility to issue waivers to DRIP  participants to provide                                          
for  investments in excess of the $1 thousand  maximum  monthly  investment.  In                                          
connection  with the  announcement of the February,  2002 dividend,  the Company                                          
announced such waivers will be considered beginning with the March 2002 optional                                          
cash  purchase,  as  management  believes  the stock is  trading at or above its                                          
estimate of net asset value.  For the  three-month  period ended March 31, 2002,                                          
the  Company  granted  53  waivers  for  purchases  aggregating  a total of $3.9                                          
million. No waivers were granted during the second quarter.                                                               

10-Q 18th Page of 28 TOC 1st Previous Next ↓Bottom Just 18th
The Company's Board of Directors approved a stock repurchase program under which                                          
the Company may  repurchase up to 1.0 million shares of its  outstanding  common                                          
stock.  The  Board's  action  did not  establish  a target  price or a  specific                                          
timetable for  repurchase.  On October 24, 2000,  the Board approved a 1,000,000                                          
share increase in  management's  authorization  to buy back  outstanding  common                                          
stock. On May 1, 2001, the Board approved an additional 1,000,000-share increase                                          
in  management's  authorization  to buy back the  Company's  outstanding  common                                          
stock.  During 2001, the Company  repurchased  754,000 shares and 436,700 UPREIT                                          
Units at a cost of $20.6  million and $11.9  million,  respectively.  During the                                          
first six  months of 2002,  no shares or UPREIT  Units were  repurchased  by the                                          
Company. Authorization to repurchase 1,135,800 shares of common stock and UPREIT                                          
Units remains at June 30, 2002.                                                                                           

As of June 30, 2002,  the weighted  average rate of interest on mortgage debt is                                          
7.28% and the weighted average maturity is approximately 9 years.  Approximately                                          
99.4% of the debt is fixed rate. This limits the exposure to changes in interest                                          
rates, minimizing the effect on results of operations and financial condition.                                            

Off-Balance Sheet Investments                                                                                             

The  Company  has  investments  in and  advances  to  approximately  132 limited                                          
partnerships where the Company acts as the managing general partner. The Company                                          
accounts for these investments on the equity method of accounting, recording its                                          
share  of the net  income  or loss  based  upon  the  terms  of the  partnership                                          
agreement.  To the extent that it is determined that the limited partners cannot                                          
absorb their share of the losses,  if any,  the general  partner will record the                                          
limited partners share of such losses.                                                                                    

The Company  has  guaranteed  the low income  housing tax credits to the limited                                          
partners for a period of five years in 42  partnerships  totaling  approximately                                          
$48.5 million.  Such guarantee requires the Company to operate the properties in                                          
compliance  with  Internal  Revenue Code  Section 42 for 15 years.  In addition,                                          
acting as the general partner in certain partnerships,  the Company is obligated                                          
to advance funds to meet partnership  operating deficits.  However, such funding                                          
requirements  in some  partnerships  cease  after  a  five-year  period.  Should                                          
operating  deficits  continue  to  occur,  the  Company  would  determine  on an                                          
individual  partnership  basis if it is in the best  interest  of the Company to                                          
continue to fund these deficits.                                                                                          

These  partnerships  are  funded  with  non-recourse  financing.  The  Company's                                          
proportionate share of non-recourse financing was $6.6 million at June 30, 2002.                                          
The Company has guaranteed a total of $603 of debt  associated with two of these                                          
partnerships.  In addition, the Company, including the Management Companies, has                                          
provided  loans and advances to certain of the  partnerships  aggregating  $23.2                                          
million at June 30, 2002.  The Company  assesses the  financial  status and cash                                          
flow of each of the  partnerships  at each balance sheet date in order to assess                                          
recoverability of its investment in and advances to these affiliates.                                                     

The  Company  believes  the  properties  operations  conform  to the  applicable                                          
requirements  as set  forth  above  and do not  anticipate  any  payment  on the                                          
guarantees described above.                                                                                               

Acquisitions and Dispositions                                                                                             

During the second quarter of 2002, the Company  acquired six communities  with a                                          
total of 1,353 apartment units. Five of these communities, comprising 657 units,                                          
represented the purchase of the remaining communities in the 11-property Holiday                                          
Portfolio on Long Island,  New York.  The  remaining 696 units  represented  the                                          
acquisition of the Company's first property in suburban  Boston,  Massachusetts.                                          
Total  consideration  for the six  communities  was  $132.3  million,  including                                          
closing  costs,  or an average of $97,800 per unit.  The weighted  average first                                          
year cap rate on the acquisitions closed in the second quarter of 2002 is 7.6%.                                           

Also during the second quarter of 2002, the Company sold four communities with a                                          
total of 644 units located in Upstate New York,  Maryland,  and Pennsylvania for                                          
total  consideration  of $28.4 million or an average of $44,100 per unit. A gain                                          
on sale of  approximately  $4.4  million,  prior to the  allocation  of minority                                          
interest,  was reported in the second  quarter and is reflected in  discontinued                                          
operations. The weighted average first year cap rate on these sales is 9.6%.                                              

10-Q 19th Page of 28 TOC 1st Previous Next ↓Bottom Just 19th
In connection with the Company's strategic asset disposition program, management                                          
is   constantly   reevaluating   the   performance   of  its   portfolio   on  a                                          
property-by-property  basis. The Company from time to time determines that it is                                          
in the best interest of the Company to dispose of assets that have reached their                                          
potential or are less efficient to operate due to their size or remote  location                                          
and  reinvest  such  proceeds in higher  performing  assets  located in targeted                                          
geographic markets. It is possible that the Company will sell such properties at                                          
a loss.                                                                                                                   

Capital Improvements                                                                                                      

The  Company  has a policy  to  capitalize  costs  related  to the  acquisition,                                          
development, rehabilitation, construction 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/ bath cabinets,  new roofs,  site  improvements  and various                                          
exterior building  improvements.  Non- recurring  upgrades include,  among other                                          
items: community centers, new windows, and kitchen/ bath apartment upgrades. The                                          
Company capitalizes interest and certain internal personnel costs related to the                                          
communities under rehabilitation and construction.                                                                        

The  Company  estimates  that on an  annual  basis  $525  per  unit is  spent on                                          
recurring  capital  expenditures.  During the three and six month  periods ended                                          
June 30, 2002, approximately $131 and $262 per unit was estimated to be spent on                                          
recurring  capital  expenditures,  respectively.  The table below summarizes the                                          
actual total capital improvements incurred by major categories for the three and                                          
six-month  periods ended June 30, 2002 and 2001 and an estimate of the breakdown                                          
of  total  capital  improvements  by  major  categories  between  recurring  and                                          
non-recurring,  revenue  generating  capital  improvements  for  the  three  and                                          
six-month periods ended June 30, 2002 as follows:                                                                         

                                 For the three-month period ended                                                         
                                             June 30                                                                      
                                        (in thousands,  except                                                            
                                  per unit data)                                                                          
                                              2002                                           2001                         
                    --------------------------------------------------------------  -----------------------               
                    --------------------------------------------------------------                                        
                    Recurring           Non-Recurring       Total                     Total                               
                                                             Capital                 Capital                              
                     Cap Ex  Per Unit(a)  Cap Ex  Per       ImprovemenPer Unit(a)  ImprovementsPer Unit(a)                
                                                   Unit(a)                                                                
New Buildings       $        $          1,547     $39      $1,547     $ 39            $ 1,074      $ 30                   

Major building                                                                                                            
improvements        902      22         4,338     110       5,240     132               6,375       179                   

Roof replacements   345      9          1,475     37        1,820     46                  877        25                   

Site improvements   331      8          3,603     91        3,934     99                3,329        93                   

Apartment upgrades  651      16         7,522     190       8,173     206              10,064       282                   

Appliances          541      14         520       13        1,061     27                1,220        34                   

Carpeting/Flooring 1,698    43         1,029     26         2,727     69                2,537        71                   

HVAC/Mechanicals     500      13         2,830     71        3,330     84                2,826        79                  

Miscellaneous        222      6          929       23        1,151     29                  783        22                  
                    ----     --         ----      ---       ------    ---                 ---        --                   
Totals            $5,190    $131       $23,793   $600     $ 28,983  $ 731              $28,085      $815                  

(a)           Calculated using the weighted average number of units outstanding,                                          
              including 35,204 core units,  2001 acquisition  units of 2,820 and                                          
              2002 acquisition  units of 1,638 for the  three-months  ended June                                          
              30, 2002 and 35,204 core units and 2001 acquisition units of 2,820                                          
              for the three-months ended June 30, 2001.                                                                   

10-Q 20th Page of 28 TOC 1st Previous Next ↓Bottom Just 20th
                                or the six-month period ended June                                                        
                               F                30                                                                        
                                        (in thousands,  except                                                            
                                   er unit data)                                                                          
                                  p           2002                                           2001                         
                    --------------------------------------------------------------  -----------------------               
                    --------------------------------------------------------------                                        
                    Recurring           Non-Recurring       Total                     Total                               
                                                             Capital                 Capital                              
                     Cap Ex  Per Unit(a)  Cap Ex  Per       ImprovemenPer Unit(a)  ImprovementsPer Unit(a)                
                                                   Unit(a)                                                                
New Buildings                            $                                                                                
                    $        $          3,157     $         $         $                 1,885  $                          
                    -        -                    81        3,157     81           $                 53                   
Major       building                                                                                                      
improvements        1,776    46         8,382     215       10,158    261              11,970       338                   

Roof replacements                                                                                                         
                    679      17         1,415     36        2,094     53                1,424        40                   
Site improvements                                                                                                         
                    650      17         4,941     127       5,591     144               4,711       133                   
Apartment upgrades                                                                                                        
                    1,281    33         14,119    362       15,400    395              16,919       477                   
Appliances                                                                                                                
                    1,064    27         941       24        2,005     51                2,210        62                   
Carpeting/Flooring                                                                                                        
                    3,342    86         1,629     41        4,971     127               4,632       131                   
HVAC/Mechanicals                                                                                                          
                    984      25         4,006     103       4,990     128               4,937       139                   
Miscellaneous                                                                                                             
                    -------------------------------------------------------------                                         
                    437      11         1,789     46        2,225     57                1,707        48                   
                    ----     ---        ------    ---       ------    ---        ---    -----        --                   
Totals               $        $          $         $         $         $                       $                          
                    =======  =========  ========  ========= =====================   ------------                          
                    10,213   262        23,793    1,035     50,592    1,297        $   50,395     1,421                   
                    =======  ====       =======   ======    =======   ======       -   ------     -----                   

(a)           Calculated using the weighted average number of units outstanding,                                          
              35,204  core  units,  2001  acquisition  units of  2,820  and 2002                                          
              acquisition  units of 1,000 for the  three-months  ended  June 30,                                          
              2002 and 35,204 core units and 2001 acquisition units of 2,820 for                                          
              the three-months ended June 30, 2001.                                                                       

The  schedule  below  summarizes  the  breakdown of total  capital  improvements                                          
between core and non-core as follows:                                                                                     

                                                 For the  three-month  period                                             
                                          ended June 30,                                                                  
                                                  (in  thousands,   except                                                
                                               er unit data)                                                              
                                              p           2002                                       2001                 
                             -------------------------------------------------------------- ---------------------         
                             -------------------------------------------------------------- ---------------------         
                              Recurring          Non-recurring          Total                  Total                      
                                                                       Capital                Capital                     
                               Cap Ex   Per Unit   Cap Ex   Per Unit ImprovementsPer Unit   ImprovementsPer Unit          
                               ------   --------   ------   -------- --------------------   --------------------          
                              $                   $                                                                       
     Core Communities         ,607       $        9,793     $        $           $               29,049 $                 
                             4          131      1          562      24,400      693        $               815           
     2002         Acquisition                                                                                             
     Communities             214        131      1,095      668      1,309       799                  -       -           
     2001         Acquisition                                                                                             
                             -------------------------------------------------------------                                
     Communities             369        131      2,905      1,030    3,274       1,161               36       -           
                             ----       ----     ------     ------   ------      ------   ---        --       -           
     Sub-total                                                                                                            
                             5,190      131      23,793     600      28,983      731             29,085     815           
     2002            Disposed                                                                                             
     Communities             53         131      518        1,276    571         1,406              496   1,222           
     2001            Disposed                                                                                             
     Communities             -          -        -          -        -           -                1,515   2,971           
     Corporate         office                                                                                             
                             -------------------------------------------------------------                                
     expenditures (1)        -          -        -          -        637         -                  315       -           
                             -          -        -          -        ----        -        ---       ---       -           
                              $                   $                                                                       
                              ,243       $        4,311     $        $           $          $    31,411 $                 
                             ======     ================    ==============================  -=   ------ -                 
                             5          131      2          607      30,191      738                        851           
                             =          ====     =          ====     =======     ====     ===               ---           

                                                 For  the  six-month   period                                             
                                          ended June 30,                                                                  
                                                  (in  thousands,   except                                                
                                               er unit data)                                                              
                                              p           2002                                       2001                 
                             -------------------------------------------------------------- ---------------------         
                             -------------------------------------------------------------- ---------------------         
                              Recurring          Non-recurring          Total                  Total                      
                                                                       Capital                Capital                     
                               Cap Ex   Per Unit   Cap Ex   Per Unit ImprovementsPer Unit   ImprovementsPer Unit          
                               ------   --------   ------   -------- --------------------   --------------------          
                              $                   $                                                                       
     Core Communities         ,213       $        4,717     $        $            $              50,359                   
                             9          262      3          986      43,930      1,248      $             1,421           
     2002         Acquisition                                                                                             
     Communities             262        262      1,073      1,073    1,335       1,335                -       -           
     2001         Acquisition                                                                                             
                             -------------------------------------------------------------                                
     Communities             738        262      4,589      1,627    5,327       1,889               36       -           
                             ----       ----     ------     ------   ------      ------     -        --       -           
     Sub-total                                                                                                            
                             10,213     262      40,379     1,035    50,592      1,297           50,395   1,421           
     2002            Disposed                                                                                             
     Communities             131        262      456        908      587         1,170              811   1,617           
     2001            Disposed                                                                                             
     Communities             -          -        -          -        -           -                2,261   3,080           

     Corporate         office                                         ,908                                                
                             -          ----------          ---------------      --------- -----------                    
     expenditures (1)        -          -        -          -        1           -                  354       -           
                             -          -        -          -        -           -        - -       ---       -           
                              $                   $          $                                                            
                              0,344      $        0,835     1,033    $            $              53,821 $                 
                             =======    ================    ======   ====================        ------ -                 
                             1          262      4                   53,087      1,295      $             1,458           
                             =          ====     =                   =======     ======     -             -----           

(1) No distinction is made between recurring and non-recurring  expenditures for                                          
corporate office.                                                                                                         

10-Q 21st Page of 28 TOC 1st Previous Next ↓Bottom Just 21st
Contractual Obligations and Other Commitments                                                                             

The primary  obligations of the Company relate to its mortgage notes payable and                                          
its borrowings  under the line of credit.  The Company's  mortgage notes payable                                          
and line of  credit  outstanding  at June 30,  2002 and  December  31,  2001 are                                          
summarized as follows (in thousands):                                                                                     
                                                                                           December 31,                   
                                                                      June 30, 2002               2001                    
                                                                      -------------    -------    ----                    

Fixed rate mortgage notes payable                                        $1,098,886            $954,203                   
Variable rate mortgage notes payable                                          6,155               6,155                   
                                                                     --------------         -----------                   
Total mortgage notes payable                                              1,105,041             960,358                   
Variable rate line of credit facility                                        58,000              32,500                   
                                                                      -------------          ----------                   
Total mortgage notes payable and line of credit facility                 $1,163,041            $992,858                   
                                                                         ==========            ========                   

Mortgage notes payable are  collateralized by certain apartment  communities and                                          
mature at various  dates from August,  2002  through  June,  2036.  The weighted                                          
average  interest rate of the Company's  variable rate notes and credit facility                                          
was 3.25% and 3.27% at June 30, 2002 and December 31,  2001,  respectively.  The                                          
weighted  average  interest rate of the Company's fixed rate notes was 7.28% and                                          
7.27% at June 30, 2002 and December 31, 2001, respectively.                                                               

The  Company  has a  non-cancelable  operating  ground  lease  for  one  of  its                                          
properties.  The lease  expires May 1, 2020,  with options to extend the term of                                          
the lease for two successive terms of twenty-five years each. The lease provides                                          
for contingent rental payments based on certain variable factors.                                                         

As  discussed  in the section  entitled  "Off-Balance  Sheet  Investments,"  the                                          
Company  has the  following  guarantees  or  commitments  relating to its equity                                          
method  partnership  investments:  a)  guarantee  for a  total  of  $603 of debt                                          
associated  with two  partnerships,  b) guarantee of the low income  housing tax                                          
credits to the limited  partners  for a period of five years in 42  partnerships                                          
totaling approximately $48.5 million, and c) the Company is obligated to advance                                          
funds to meet  partnership  operating  deficits  for certain  partnerships.  The                                          
Company   believes  the   properties   operations   conform  to  the  applicable                                          
requirements  as set forth  above and do not  anticipate  any  payment  on these                                          
guarantees.                                                                                                               

Results of Operations                                                                                                     

Comparison of six months ended June 30, 2002 to the same period in 2001                                                   

The Company had 123  apartment  communities  with 35,204  units which were owned                                          
during the  six-month  periods  being  presented  (the "Core  Properties").  The                                          
Company acquired an additional 22 apartment  communities with 5,204 units during                                          
2001 and 2002 (the  "Acquired  Communities").  In  addition,  the  Company  also                                          
disposed  of 24  properties  with a total of 3,838  units  during 2001 and 2002.                                          
These dispositions, excluding the ten property dispositions that occurred during                                          
2002,  classified as  discontinued  operations both in 2002 and 2001, are herein                                          
referred  to as the  Disposed  Communities.  The  inclusion  of  these  Acquired                                          
Communities,   net  of  Disposed   Communities,   generally  accounted  for  the                                          
significant changes in operating results for the six-months ended June 30, 2002.                                          

A  summary  of the Core  Properties  net  operating  income  is as  follows  (in                                          
thousands):                                                                                                               
                                               Six Months                                 Three Months                    
                                -----------------------------------------  ---------------------------                    
                                     2002            2001         % Chg         2002             2001         % Chg       
                                     ----            ----         -----         ----             ----         -----       
Rental income                       $161,416        $154,588       4.4%         $81,537          $78,040       4.5%       
Property other income                  6,091           5,838       4.3%           3,162            3,069       3.0%       
                                  ----------      ----------      -----       ---------        ---------      -----       
Total income                         167,507         160,426       4.4%          84,699           81,109       4.4%       
Operating and                                                                                                             
  maintenance                        (73,409)        (72,795)       (0.8%)      (34,767)         (33,961)      (2.4%)     
                                   ----------      ----------       ------     ---------         --------      ------     
Net operating income               $  94,098       $  87,631       7.4%         $49,932          $47,148       5.9%       
                                   =========       =========      =====         =======          =======      =====       

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Of the  $17,378  increase  in rental  income,  $10,550  is  attributable  to the                                          
Acquired Communities, net of Disposed Communities. The balance of this increase,                                          
which is from the Core  Properties,  was the  result of an  increase  of 7.4% in                                          
weighted  average rental rates,  offset by a decrease in occupancy from 94.2% to                                          
91.6%.                                                                                                                    

Property  other income,  which  consists  primarily of income from  operation of                                          
laundry  facilities,  late  charges,  administrative  fees,  garage and  carport                                          
charges,  net profits from corporate  apartments,  cable  revenue,  pet charges,                                          
miscellaneous  charges  to  residents  and  equity in  earnings  of the  general                                          
partnership interests decreased by a net amount of $14. Of this decrease $348 is                                          
attributable to the Disposed  Communities and $564 is attributable to a decrease                                          
in earnings from the general partnership interests.  These decreases were offset                                          
by  increases  attributable  to the  Acquired  Communities  of  $645  and  $253,                                          
representing a 4.3% increase for the Core Properties.                                                                     

Interest  and  dividend  income  decreased  $1,222  due to  decreased  levels of                                          
financing to affiliates.                                                                                                  

Other  income,   which  reflects  the  net  contribution   from  management  and                                          
development  activities after allocating  certain overhead and interest expense,                                          
decreased by $345 due primarily to an increase in the Company's  share of losses                                          
from the Management Companies.                                                                                            

Of the  $3,536  increase  in  operating  and  maintenance  expenses,  $7,874  is                                          
attributable  to  the  Acquired  Communities  offset  by a  decrease  of  $4,952                                          
attributable  to  Disposed  Communities.   The  balance,  a  $614  increase,  is                                          
attributable  to the Core  Properties  and is  primarily  due to a reduction  in                                          
natural gas  utility  expenses  offset by an  increase  in taxes  related to the                                          
accrual for the state tax contingency.                                                                                    

General and  administrative  expense  increased in 2002 by $953, or 19%. General                                          
and administrative expenses as a percentage of total revenues were 3.1% for 2002                                          
as  compared to 2.8% for 2001.  The  increase  can be  attributed  to  increased                                          
acquisition  related expenses as well as incentive  compensation  costs.  During                                          
2002, the Company  reclassified certain property related operating expenses from                                          
General and Administrative to Operating and Maintenance, on a comparative basis.                                          

Interest  expense  increased  $5,551 due to the  increase  in the amount of debt                                          
outstanding.                                                                                                              

Depreciation  and  amortization  increased $1,218 due to the depreciation on the                                          
Acquired Communities and the additions to the Core Properties.  This increase is                                          
net of the effect of the change in accounting estimate made by management in the                                          
first quarter  related to certain  depreciable  lives of real estate and related                                          
assets.  The  change  reduced  the  depreciation   expense  for  the  period  by                                          
approximately  $5.2 million.  The Company expects this change in useful lives to                                          
increase net income by approximately $10.3 million in 2002 over 2001.                                                     

The $402  loss on  disposition  of  property  primarily  relates  to  additional                                          
expenses  incurred in the first  quarter of 2002 for a sale which  closed in the                                          
fourth  quarter of 2001.  These costs  represent a change in estimate from those                                          
accrued at the time of sale.                                                                                              

Minority interest  decreased $6,069 primarily due to the decrease in the gain on                                          
disposition of property when compared to the previous period.                                                             

The Company adopted the provisions of Statement of Financial Accounting Standard                                          
No. 144 (SFAS), "Accounting for the Impairment or Disposal of Long-Lived Assets"                                          
effective  January 1, 2002.  This standard  addresses  financial  accounting and                                          
reporting for the impairment or disposal of long-lived  assets.  It also retains                                          
the basic  provisions  for  presenting  discontinued  operations  in the  income                                          
statement  but  broadened  the scope to include a component of an entity  rather                                          
than a segment of a business.  Pursuant to the  definition  of a component of an                                          
entity in the SFAS, assuming no significant continuing involvement,  the sale of                                          
an apartment community is now 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.                                                            

10-Q 23rd Page of 28 TOC 1st Previous Next ↓Bottom Just 23rd
Included in discontinued operations for the six-month period ended June 30, 2002                                          
are ten apartment community dispositions. The operations of these ten properties                                          
have been reflected on a comparative basis for the period ended June 30, 2001.                                            

Of the $880  decrease in net income,  $4,539 is  attributable  to an increase in                                          
income  before gain (loss) on  disposition  of property,  minority  interest and                                          
discontinued  operations  offset by the lower  gains on sale of  property in the                                          
second  quarter of 2002 as  compared to 2001 after the  allocation  of income to                                          
minority interest.                                                                                                        

Comparison of the three months ended June 30, 2002 to the same period in 2001.                                            

Of the $10,764 increase in rental income, $7,267 is attributable to the Acquired                                          
Communities, net of Disposed Communities. The balance of this increase, which is                                          
from the Core  Properties,  was the result of an  increase  of 6.7% in  weighted                                          
average rental rates, offset by a decrease in occupancy from 94.2% to 92.2%.                                              

Property  other income,  which  consists  primarily of income from  operation of                                          
laundry  facilities,  late  charges,  administrative  fees,  garage and  carport                                          
charges,  net profits from corporate  apartments,  cable  revenue,  pet charges,                                          
miscellaneous  charges  to  residents  and  equity in  earnings  of the  general                                          
partnership  interests  increased by $324. Of this increase $375 is attributable                                          
to the  Acquired  Communities,  $93  represents  a 3.0%  increase  for the  Core                                          
Properties,  and $24 is attributable to an increase in earnings from the general                                          
partnership interests. These increases were offset by a decrease attributable to                                          
the Disposed Communities of $168.                                                                                         

Interest and dividend income decreased $417 due to decreased levels of financing                                          
to affiliates.                                                                                                            

Other  income,   which  reflects  the  net  contribution   from  management  and                                          
development  activities after allocating  certain overhead and interest expense,                                          
decreased by $323 due primarily to an increase in the Company's  share of losses                                          
from the Management Companies.                                                                                            

Of the  $3,617  increase  in  operating  and  maintenance  expenses,  $4,392  is                                          
attributable  to the  Acquired  Communities  offset  by an  decrease  of  $1,581                                          
attributable  to  Disposed  Communities.   The  balance,  a  $806  increase,  is                                          
attributable to the Core Properties and is primarily due to an increase in taxes                                          
related to the  accrual  for the state tax  contingency,  and  personnel  costs,                                          
offset by a reduction in natural gas utility expenses.                                                                    

General and administrative expense increased in 2002 by $186, or 7%. General and                                          
administrative  expenses as a percentage of total revenues were  consistent over                                          
the same periods representing 2.9% for 2002 as compared to 3.0% for 2001. During                                          
2002, the Company  reclassified certain property related operating expenses from                                          
General and Administrative to Operating and Maintenance, on a comparative basis.                                          

Interest  expense  increased  $3,012 due to the  increase  in the amount of debt                                          
outstanding.                                                                                                              

Depreciation  and  amortization  increased $937 due to the  depreciation  on the                                          
Acquired Communities and the additions to the Core Properties.  This increase is                                          
net of the effect of the change in accounting estimate made by management in the                                          
first quarter  related to certain  depreciable  lives of real estate and related                                          
assets.  The  change  reduced  the  depreciation   expense  for  the  period  by                                          
approximately  $2.6 million.  The Company expects this change in useful lives to                                          
increase net income by approximately $10.3 million in 2002 over 2001.                                                     

Minority interest  decreased $6,931 primarily due to the decrease in the gain on                                          
disposition of property when compared to the previous period.                                                             

The Company adopted the provisions of Statement of Financial Accounting Standard                                          
No. 144 (SFAS), "Accounting for the Impairment or Disposal of Long-Lived Assets"                                          
effective  January 1, 2002.  This standard  addresses  financial  accounting and                                          
reporting for the impairment or disposal of long-lived  assets.  It also retains                                          
the basic  provisions  for  presenting  discontinued  operations  in the  income                                          
statement  but  broadened  the scope to include a component of an entity  rather                                          
than a segment of a business.  Pursuant to the  definition  of a component of an                                          
entity in the SFAS, assuming no significant continuing involvement,  the sale of                                          
an apartment community is now 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.                                                            

Included in discontinued  operations for the  three-month  period ended June 30,                                          
2002 are four  apartment  community  dispositions.  The operations of these four                                          
properties have been reflected on a comparative  basis for the period ended June                                          
30, 2001.                                                                                                                 

Of the $1,540  decrease in net income,  $2,596 is attributable to an increase in                                          
income  before gain (loss) on  disposition  of property,  minority  interest and                                          
discontinued  operations  offset by the lower  gains on sale of  property in the                                          
second  quarter of 2002 as  compared to 2001 after the  allocation  of income to                                          
minority interest.                                                                                                        

Funds From Operations                                                                                                     

Management  considers funds from operations ("FFO") to be an appropriate measure                                          
of performance of an equity REIT. FFO is generally  defined as net income (loss)                                          
before gains  (losses) from the sale of property and business and  extraordinary                                          
items, before minority interest in the Operating  Partnership,  plus real estate                                          
depreciation. This presentation excludes the dividends on the Series F Preferred                                          
Stock and assumes  the  conversion  of dilutive  common  stock  equivalents  and                                          
convertible  preferred stock. FFO for both the three and six-month periods ended                                          
June 30, 2002  adjusts for the add back of the premium on the Series B preferred                                          
stock  repurchase.  Management  believes  that in  order to  facilitate  a clear                                          
understanding of the combined historical  operating results of the Company,  FFO                                          
should  be  considered  in  conjunction  with net  income  as  presented  in the                                          
consolidated  financial  statements  included  elsewhere  herein.  FFO  does not                                          
represent cash generated from operating  activities in accordance with generally                                          
accepted  accounting  principles  and  is not  necessarily  indicative  of  cash                                          
available to fund cash needs. Cash provided by operating  activities was $73,148                                          
and $69,426 for the six-month period ended June 30, 2002 and 2001, respectively.                                          
Cash used in investing  activities  was  $174,345 and $56,728 for the  six-month                                          
period ended June 30, 2002 and 2001,  respectively.  Cash  provided by and (used                                          
in) financing  activities  was $103,217 and  ($18,830) for the six-month  period                                          
ended June 30, 2002 and 2001,  respectively.  FFO should not be considered as an                                          
alternative  to net income as an indication of the Company's  performance  or to                                          
cash flow as a measure of liquidity.                                                                                      

The calculation of FFO for the three-months ended June 30, 2002 and 2001 are presented below (in thousands):              
                                                                             Six-months                  Three-months     
                                                                    June 30        June 30         June 30      June 30   
                                                                        2002            2001          2002          2001  
                                                                        ----            ----          ----          ----  

Net income available to common shareholders                           $16,311         $20,456        $10,201      $16,121 
Convertible preferred dividends                                         5,779           8,994          2,502        4,497 
Series B preferred stock redemption                                     5,025               -          5,025            - 
Minority interest                                                       8,299          14,368          4,466       11,397 
Minority interest - income from discontinued operations                   266             379            111          218 
Depreciation from real property                                        31,606          30,899         16,611       16,014 
Depreciation from real property from unconsolidated entities              437             203             65           99 
(Gain) loss on disposition of property                                    402         (13,648)            26      (13,648)

(Gain) loss on disposition of discontinued operations                  (2,664)                 -      (2,729)           - 
                                                                    ----------     -------------   ----------           - 
FFO                                                                   $65,461         $61,651        $36,278      $34,698 
                                                                      =======         =======        =======      ======= 
Weighted average common shares/units outstanding:                                                                         
     - Basic                                                          41,422.5        37,522.7       42,013.0     37,461.8
     - Diluted                                                        46,384.0        44,707.1       46,664.5     44,661.2

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.                                                                                                              

Covenants                                                                                                                 

In connection with the issuance of the Series F Preferred  Stock, the Company is                                          
required to maintain for each fiscal  quarterly  period a fixed charge  coverage                                          
ratio, as defined in the Series F Cumulative  Redeemable Preferred Stock Article                                          
Supplementary,  of  1.75  to  1.0.  The  fixed  charge  coverage  ratio  and the                                          
components  thereof do not represent a measure of cash  generated from operating                                          
activities in accordance with generally accepted  accounting  principles and are                                          
not necessarily  indicative of cash available to fund cash needs.  Further, this                                          
ratio should not be  considered  as an  alternative  measure to net income as an                                          
indication  of the  Company's  performance  or of  cash  flow  as a  measure  of                                          
liquidity.  The  calculation of the fixed charge coverage ratio for the two most                                          
recent quarters since the issuance of the Series F Preferred Stock are presented                                          
below (in thousands):                                                                                                     

                                                                                      Three-months                        
                                                                                 June 30        March 31                  
                                                                                   2002           2002                    
                                                                                   ----           ----                    

   EBITDA                                                                                                                 
        Total revenues                                                          $98,633          $92,397                  
        Net operating income from discontinued operations                           519              382                  
        Operating and maintenance                                               (39,451)         (42,469)                 
        General and administrative                                               (2,822)          (3,099)                 
                                                                               ---------        ---------                 
                                                                                $56,879          $47,211                  
   Fixed Charges                                                                                                          
        Interest expense                                                        $18,973          $18,026                  
        Interest expense on discontinued operations                                 153               56                  
        Preferred dividends                                                       3,852            3,382                  
        Capitalized interest                                                        269              230                  
                                                                              ---------        ---------                  
                                                                                $23,247          $21,694                  

   Times Coverage ratio:                                                           2.45             2.18                  

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.                                                                                                  

Historically,  real estate has been subject to a wide range of cyclical economic                                          
conditions, which affect various real estate sectors and geographic regions with                                          
differing  intensities and at different  times. In 2001 and continuing into 2002                                          
many regions of the United States have  experienced  varying degrees of economic                                          
recession  and  certain  recessionary  trends,  such as the  cost  of  obtaining                                          
sufficient property and liability insurance coverage, short-term interest rates,                                          
and a temporary  reduction in  occupancy.  In light of this, we will continue to                                          
review our business  strategy  however,  we believe that given our property type                                          
and the  geographic  regions in which we are located,  we do not  anticipate any                                          
changes in our strategy or material effects in financial performance.                                                     

Declaration of Dividend                                                                                                   

On August 5, 2002,  the  Company  declared a dividend  of $.60 per share for the                                          
period from April 1, 2002 to June 30, 2002.  This is the equivalent of an annual                                          
distribution  of $2.40 per share.  The  dividend  is payable  August 29, 2002 to                                          
shareholders of record on August 19, 2002.                                                                                

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On August 5, 2002 the Company  also  declared a regular  dividend of $0.5625 per                                          
share on its Series F Cumulative  Redeemable  Preferred  Stock,  for the quarter                                          
ending  August 31,  2002.  The  dividend on the  preferred  shares is payable on                                          
September 3, 2002, to  shareholders  of record on August 19, 2002. This dividend                                          
is equivalent to an annualized rate of $2.25 per share.                                                                   

On June 12, 2002,  the Company  declared a dividend of $0.38125 per share on its                                          
Series F Cumulative  Redeemable  Preferred  Stock,  payable on June 28, 2002, to                                          
shareholders  of record on June 18, 2002. This dividend  represents  payment for                                          
the 61-day stub period from April 1, 2002 through May 31, 2002 and is equivalent                                          
to an annualized rate of $2.25 per share.                                                                                 

Subsequent Events                                                                                                         

On  August  6,  2002 the  Board of  Directors  increased  its  authorization  to                                          
2,000,000  shares to  repurchase  its common stock or UPREIT units in connection                                          
with the Company's stock repurchase program. The shares/units may be repurchased                                          
through open market or privately  negotiated  transactions  at the discretion of                                          
Company  management.  The Board's action does not establish a target stock price                                          
or a specific timetable for share repurchase.                                                                             

On August 9, 2002 the Company sold Carriage Hill Apartments located in Richmond,                                          
Virginia.  The total sales price of $41.6 million equated to $63 per unit. Total                                          
gain on sale of this transaction is expected to be approximately $5 million.                                              

Contingency                                                                                                               

The  Company  had  recently  undergone  a state tax audit  whereby the state has                                          
assessed  taxes of $469 for the 1998 and  1999 tax  years  under  audit.  If the                                          
state's  position  is applied to all tax  periods  through  June 30,  2002,  the                                          
assessment  would be approximately  $1.4 million.  The Company believes that the                                          
assessment and the state's underlying  position for the tax periods 1998 through                                          
2000 are neither  supportable by the law nor consistent with previously provided                                          
interpretative  guidance from the office of the State Secretary of Revenue.  The                                          
Company has filed an appeal to the Commonwealth  Court in the state for the 1998                                          
and 1999 tax  years.  There  have been no  further  proceedings  to date and the                                          
Company  intends to  vigorously  contest the  assessments.  The Company has been                                          
advised that it has  meritorious  positions for its previous tax filings for the                                          
years 1998, 1999, and 2000. However, the Company has accrued  approximately $590                                          
as of June 30, 2002 for estimated costs associated with this matter.                                                      

New Accounting Standards                                                                                                  

In April 2002,  the FASB  issued  Statement  of  Financial  Accounting  Standard                                          
("SFAS") No. 145 -- "Rescission of FASB Statements No. 4, 44, and 64,  Amendment                                          
of FASB  Statement  No. 13, and  Technical  Corrections"  which  eliminates  the                                          
requirement  to  report  gains  and  losses  from   extinguishment  of  debt  as                                          
extraordinary  unless they meet the  criteria of APB Opinion 30. This  Statement                                          
also  amends  other  existing  authoritative   pronouncements  to  make  various                                          
technical  corrections,  clarify meanings, or describe their applicability under                                          
changed  conditions.  The new standard becomes effective for the Company for the                                          
year ending December 31, 2003. The Company does not expect this pronouncement to                                          
have  a  material  impact  on  the  Company's  financial  position,  results  of                                          
operations, or cash flows.                                                                                                

In June 2002,  the FASB issued SFAS No. 146 - "Accounting  for Costs  Associated                                          
with Exit or Disposal  Activities." This statement requires the recognition of a                                          
liability for costs associated with an exit or disposal  activity to be recorded                                          
at fair value when incurred.  The company's commitment to a plan, by itself does                                          
not create a present  obligation  that meets the definition of a liability.  The                                          
new standard becomes effective for exit and disposal activities  initiated after                                          
December 31,  2002.  The Company  does not expect this  pronouncement  to have a                                          
material impact on the Company's financial position,  results of operations,  or                                          
cash flows.                                                                                                               

10-Q 25th Page of 28 TOC 1st Previous Next ↓Bottom Just 25th
                                         HOME PROPERTIES OF NEW YORK, INC.                                                

                                       ITEM 3. QUANTITATIVE AND QUALITATIVE                                               
                          DISCLOSURES ABOUT MARKET RISK                                                                   

The  Company's  primary  market risk exposure is interest rate risk. At June 30,                                          
2002 and December  31, 2001,  approximately  99% and 96%,  respectively,  of the                                          
Company's debt bore interest at fixed rates with a weighted  average maturity of                                          
approximately 9 and 10 years, respectively, and a weighted average interest rate                                          
of approximately 7.28% and 7.27%,  respectively.  The remainder of the Company's                                          
debt bears  interest  at  variable  rates with a weighted  average  maturity  of                                          
approximately  1 year and a weighted  average  interest rate of 3.10% and 3.27%,                                          
respectively,  at June 30, 2002 and  December  31,  2001.  The Company  does not                                          
intend to utilize  variable rate debt to acquire  properties  in the future.  On                                          
occasion,  the  Company  may  assume  variable  rate debt in  connection  with a                                          
property  acquisition.  The Company  believes,  however,  that in no event would                                          
increases in interest expense as a result of inflation  significantly impact the                                          
Company's distributable cash flow.                                                                                        

At June 30, 2002 and December 31, 2001, the interest rate risk on $35 million of                                          
such variable rate debt has been mitigated through the use of interest rate swap                                          
agreements  (the  "Swaps")  with major  financial  institutions.  The Company is                                          
exposed to credit risk in the event of non-performance by the counter-parties to                                          
the Swaps.  The Company  believes it mitigates  its credit risk by entering into                                          
these Swaps with major financial institutions.  The Swaps effectively convert an                                          
aggregate  of $35 million in variable  rate  mortgages  to fixed rates of 5.91%,                                          
7.66%, 8.22% and 8.40%.                                                                                                   

At June 30, 2002 and December 31, 2001,  the fair value of the  Company's  fixed                                          
rate debt, including the $35 million which was swapped to a fixed rate, amounted                                          
to a liability of $1.12 billion and $958 million compared to its carrying amount                                          
of $1.09 billion and $960 million,  respectively.  The Company  estimates that a                                          
100 basis point  decrease in market  interest  rates at June 30, 2002 would have                                          
changed the fair value of the Company's  fixed rate debt to a liability of $1.19                                          
billion.                                                                                                                  

The Company intends to  continuously  monitor and actively manage interest costs                                          
on its debt  portfolio  and may enter  into swap  positions  based  upon  market                                          
fluctuations.  In  addition,  the  Company  believes  that it has the ability to                                          
obtain  funds  through  additional  equity  offerings  or the issuance of UPREIT                                          
Units.  Accordingly,  the  cost  of  obtaining  such  interest  rate  protection                                          
agreements in relation the Company's  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. As of June                                          
30, 2002, the Company had no other material exposure to market risk.                                                      

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                           PART II - OTHER INFORMATION                                                                    

                                         HOME PROPERTIES OF NEW YORK, INC.                                                

Item 6.  Exhibits and Reports or Form 8-K                                                                                 

(a)      Exhibits:  None                                                                                                  

(b)      Reports on Form 8-K:                                                                                             

         -        Form 8-K was filed on August 13, 2002,  date of report  August                                          
                  9, 2002,  with respect to Items 7 and 9 disclosures  regarding                                          
                  the Registrant's  press release announcing its results for the                                          
                  second  quarter of 2002 and the second  quarter 2002  investor                                          
                  conference call.                                                                                        

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                                   SIGNATURES                                                                             

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the                                          
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the                                          
undersigned thereunto duly authorized.                                                                                    

                                            HOME PROPERTIES OF NEW YORK, INC.                                             
                                            ---------------------------------                                             
                                            (Registrant)                                                                  

                                            Date:    August 14, 2002                                                      
                                                     --------------------------------------------                         

                                            By:      /s/ Norman P. Leenhouts                                              
                                                     -----------------------------------------------------                
                                                     Norman P. Leenhouts                                                  
                                                     Chairman and                                                         
                                                     Co-Chief Executive Officer                                           

                                            Date:    August 14, 2002                                                      
                                                     --------------------------------------------                         

                                            By:      /s/ David P. Gardner                                                 
                                                     -----------------------------------------------------                
                                                     David P. Gardner                                                     
                                                     Senior Vice President and                                            
                                                     Chief Financial Officer                                              

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                                                                                                           31 of 31       
                                   SIGNATURES                                                                             

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the                                          
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the                                          
undersigned thereunto duly authorized.                                                                                    

                                            HOME PROPERTIES OF NEW YORK, INC.                                             
                                            ---------------------------------                                             
                                            (Registrant)                                                                  

                                            Date:    August 14, 2002                                                      
                                                     --------------------------------------------                         

                                            By:      /s/ Norman P. Leenhouts                                              
                                                     -----------------------------------------------------                
                                                     Norman P. Leenhouts                                                  
                                  Chairman and                                                                            
                                                     Co-Chief Executive Officer                                           

                                            Date:    August 14, 2002                                                      
                                                     --------------------------------------------                         

                                            By:      /s/ David P. Gardner                                                 
                                                     -----------------------------------------------------                
                                                     David P. Gardner                                                     
                                                     Senior Vice President and                                            
                                                     Chief Financial Officer

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	5/1/20	21
	3/25/07	11	17
	12/31/03	9	24	10-K, 11-K, 8-K, 8-K/A
	12/31/02	9	24	10-K, 11-K, 8-K
	9/3/02	24
	9/1/02	17
	8/31/02	24
	8/29/02	23		4, 4/A
	8/19/02	23	24	4
Filed on:	8/14/02	27	28	8-K
	8/13/02	26		4, 8-K
	8/9/02	24	26	8-K
	8/6/02	24
	8/5/02	23	24	4
	7/31/02	1
For Period End:	6/30/02	1	25
	6/28/02	24		11-K
	6/18/02	24
	6/12/02	24
	5/31/02	24
	5/24/02	10	17
	4/1/02	23	24
	3/31/02	17		10-Q
	3/18/02	11		8-K
	2/28/02	10	17	8-K
	2/4/02	10	17	4, 4/A
	1/1/02	9	23
	12/31/01	3	25	10-K405, 11-K, 8-K, DEF 14A
	6/30/01	2	23	10-Q, 4
	5/1/01	18
	4/10/01	17
	3/1/01	11
	1/1/01	11	14
	10/24/00	18
	9/30/99	17		10-Q
				List all Filings

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Filing Submission 0000923118-02-000036 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Home Properties Inc – ‘10-Q’ for 6/30/02

On: Wednesday, 8/14/02, at 5:59pm ET · For: 6/30/02 · Accession #: 923118-2-36 · File #: 1-13136

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Dates Referenced Herein and Documents Incorporated by Reference

Quarterly Report — Form 10-Q
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