SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
June 29, 2006
HOME PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 1-13136 No. 16-1455126
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
850 Clinton Square, Rochester, New York 14604
www.homeproperties.com
(Address of principal executive offices and internet site)
(585) 546-4900
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
HOME PROPERTIES, INC.
CURRENT REPORT
ON FORM 8-K
Item 2.01. Completion of Acquisition or Disposition of Assets
-------------------------------------------------------------
Home Properties, Inc. (the "Company") conducts its business through Home
Properties, L.P., a New York limited partnership (the "Operating Partnership").
On June 29, 2006, the Operating Partnership sold its interests in several of its
limited liability company subsidiaries, each of which owned one of nineteen
apartment communities listed below (the "Disposition Properties") in one
transaction. Each of the Disposition Properties was located in Southeast
Michigan (Wayne, Oakland and Macomb counties). The sale was consummated pursuant
to an Agreement for Purchase and Sale of Interests between Home Properties,
L.P., Home Properties WMF I, LLC and The Lightstone Group, LLC dated April 26,
2006 and later amended (the "Sale Agreement"). The gross sales price for the
Disposition Properties was $230,000,000. No debt was assumed by the purchaser.
The interests in the entities owning the Disposition Properties were sold to
affiliates of The Lightstone Group, LLC, a New Jersey limited liability company,
which is an independent, unaffiliated third party to the Company. The aggregate
sale price for the communities was determined based on arms-length negotiations
between the parties.
Number Age Year
Community of Units in Years Acquired
Canterbury Square 336 33 1997
Carriage Hill 168 39 1998
Carriage Park 256 38 1998
Charter Square 492 34 1997
Cherry Hill Club Apartments 165 33 1998
Cherry Hill Village 224 39 1998
Deerfield Woods Apartments 144 29 2000
Fordham Green 146 29 1997
Greentrees 288 34 1997
Hampton Court Apartments 182 33 2000
Kingsley 328 35 1997
Macomb Manor Apartments 217 36 2000
Oak Park 298 50 1997
Scotsdale 376 30 1997
Southpointe Square 224 34 1997
Springwells Park 303 64 1999
Stephenson House 128 38 1997
The Lakes Apartments 434 18 1999
Woodland Gardens 337 39 1997
Total Units 5,046
The Disposition Properties were all of the Operating Partnership's communities
in the Southeast Michigan market, which constituted 11.6% (in terms of number of
apartment units) of the Operating Partnership's overall owned communities as of
March 31, 2006. The Disposition Properties are a mix of garden and townhome
style apartment communities with a combined total of 5,046 units. The age of the
communities range between 18 and 64 years and were acquired by the Operating
Partnership between the years 1997 and 2000.
A number of the Disposition Properties were acquired in tax-deferred
transactions in which interests in the Operating Partnership were issued in
exchange for the Disposition Properties ("UPREIT Transactions") and pursuant to
which the Operating Partnership agreed not to sell such properties for a certain
period of time if such a sale would create taxable income to the former owners.
To avoid the creation of taxable income to the former owners, the Operating
Partnership will need to complete tax deferred exchanges for certain of the
Disposition Properties ("UPREIT Disposition Properties"). It has, therefore,
assigned certain of its rights under the Sale Agreement relating to the UPREIT
Disposition Properties to a qualified intermediary which will hold the net sale
proceeds from the sale of the UPREIT Disposition Properties in escrow until the
exchanges are completed or the Operating Partnership has determined that it will
not be able to complete exchanges in connection with the UPREIT Disposition
Properties and will instead indemnify the affected former owners from their tax
liability if required under the original agreements. If the Operating
Partnership is not able to acquire any replacement properties in addition to
those it already has acquired, the Operating Partnership expects that the
maximum liability for those indemnifications would be approximately $2.2 million
in the aggregate.
Of the purchase price to be paid by the purchasers, approximately $41 million
will be held in escrow by the qualified intermediary as described above and
approximately $76 million will be used to pay off the existing financing on the
Disposition Properties (including interest and prepayment penalties). A portion
of the purchase price ($1,261,500), represents a payment to the Operating
Partnership for services to be rendered under a Post-Closing Consultation
Agreement pursuant to which the Operating Partnership agreed to assist with the
transition of management of the Disposition Properties after closing.
The Sale Agreement contained representations and warranties by the Operating
Partnership which are customary for transactions involving the sale of entity
interests where the entities own real estate assets. The Sale Agreement provides
that the representations and warranties survive the closing for a period of six
months; provided that the Operating Partnership's liability for breach of
representation or warranty and responsibility for pre-closing liabilities may
not exceed $2,000,000. The Operating Partnership retains responsibility for any
litigation matters which arise from occurrences prior to closing. As with any
sold real estate assets, the Operating Partnership also retains responsibility
for environmental matters, if any, under state and federal law. Any such pending
matters are not material.
The aggregate impact of this disposition on the Company's financial condition at
March 31, 2006 is reflected in the accompanying pro forma consolidated balance
sheet. The results of operations for the three months ended March 31, 2006 and
2005 and the years ended December 31, 2005, 2004, and 2003 are included in
previously filed financial statements of the Company as detailed in Item 9.01
below. The pro forma financial information should be read in conjunction with
the Company's consolidated financial statements and related footnote disclosures
as filed in the Company's quarterly report on Form 10-Q for the quarterly period
ended March 31, 2006 and in the Company's annual report on Form 10-K for the
year ended December 31, 2005.
Item 9.01. Financial Statements and Exhibits.
---------------------------------------------
b. Pro forma financial information:
The pro forma financial information listed below for Home Properties, Inc.
is included with this Form 8-K.
The pro forma consolidated balance sheet of Home Properties, Inc. presented
herein reflects the disposition of assets described above as if it had
occurred as of March 31, 2006.
(1) Unaudited pro forma consolidated balance sheet of the Company at March
31, 2006.
(2) The pro forma consolidated statements of operations of Home
Properties, Inc. for the three months ended March 31, 2006 and 2005
are not included in this Form 8-K. This pro forma financial
information is not presented in this Form 8-K as the impact of the
apartment community sale had been fully reflected as discontinued
operations under SFAS No. 144 in the consolidated statements of
operations of the Registrants for the periods discussed above.
(3) The pro forma consolidated statement of operations of Home Properties,
Inc. for the years ended December 31, 2005, 2004 and 2003 are not
included in this Form 8-K. This pro forma financial information is not
presented in this Form 8-K as the impact of the apartment community
sale had been fully reflected as discontinued operations under SFAS
No. 144 in the consolidated statements of operations of the
Registrants for the periods discussed above.
c. Exhibits
Exhibit 10.1 Agreement for Purchase and Sale of Interests Southeast
Michigan Portfolio, dated April 26, 2006, together with Second
Amendment thereto (First Amendment superceded).
Exhibit 99.1 Press Release dated June 29, 2006.
HOME PROPERTIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2006
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Adjust-
Historical ments(1) Pro Forma
---------- ---------- ---------
ASSETS
Real estate:
Land $ 401,756 - $ 401,756
Construction in progress 8,657 - 8,657
Buildings, improvements and equipment 2,723,546 (51) (1) 2,723,495
Real estate held for sale, net 225,756 (221,512) (1) 4,244
---------- --------- ----------
3,359,715 (221,563) 3,138,152
Less: accumulated depreciation (470,691) 36 (1) (470,655)
---------- --------- ----------
Real estate, net 2,889,024 (221,527) 2,667,497
Cash and cash equivalents 7,426 2,142 (5) 9,568
Cash in escrows 36,060 41,174 (3) 77,234
Accounts receivable 6,522 - 6,522
Prepaid expenses 16,183 - 16,183
Deferred charges 11,845 (196) (1) 11,649
Other assets 10,341 (76) (1) 10,265
Other assets held for sale 3,574 (3,481) (1) 93
---------- --------- ----------
Total assets $2,980,975 ($181,964) $2,799,011
========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $1,801,230 - $1,801,230
Line of credit 65,000 (31,000) (4) 34,000
Accounts payable 19,520 (1,488) (1) 18,032
Accrued interest payable 8,540 - 8,540
Accrued expenses and other liabilities 23,934 2,170 (1) 26,104
Security deposits 21,583 - 21,583
Liabilities held for sale 74,845 (74,762) (1)(2) 83
---------- --------- ----------
Total liabilities 2,014,652 (105,080) 1,909,572
---------- --------- ----------
Commitments and contingencies
Minority interest 314,695 40 (6) 314,735
---------- --------- ----------
Stockholders' equity:
Cumulative redeemable preferred stock,
$.01 par value; 2,400,000 shares
issued and outstanding at
March 31, 2006 and December 31, 2005. 60,000 - 60,000
Common stock, $.01 par value;
80,000,000 shares authorized;
30,011,428 and 31,184,256 shares
issued and outstanding at
March 31, 2006 and
December 31, 2005 (7). 316 (16) (4) 300
Excess stock, $.01 par value;
10,000,000 shares authorized;
no shares issued or outstanding - - -
Additional paid-in capital 783,959 (76,984) (4)(7) 706,975
Accumulated other comprehensive income 289 - 289
Distributions in excess of
accumulated earnings (192,936) 76 (6) (192,860)
---------- --------- ----------
Total stockholders' equity 651,628 (76,924) 574,704
---------- --------- ----------
Total liabilities and
stockholders' equity $2,980,975 ($181,964) $2,799,011
========== ========= ==========
HOME PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2006
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA
(1) The pro forma adjustments reflect the impact of the sale of the Disposition
Properties discussed in Item 2.01, as if it had occurred as of March 31,
2006. The pro forma sale adjustments include the disposal of the assets
related to the nineteen communities and 1 regional office. Deferred charges
reflect losses related to the write-off of unamortized deferred loan costs
on debt discharged ($196). Other pro forma adjustments relate to other
assets held for sale (real estate taxes, insurance, prepaid rents, security
deposits), accounts payable and accrued expenses for the tax
indemnification.
(2) These pro forma adjustments reflect a reduction in debt for mortgage
principal repaid in connection with the property sales ($73,135).
(3) These pro forma adjustments reflect an increase in Cash in escrows for a
1031 Exchange ($41,174).
(4) These pro forma adjustments reflect the utilization of the remaining
assumed net cash proceeds from the property sales to reduce outstanding
borrowings under the Company's line of credit facilities ($31,000) and to
repurchase common stock ($77,000).
(5) These pro forma adjustments reflect an increase in Cash and cash
equivalents for a residual amount after satisfying the assumptions in Notes
(2), (3) and (4).
(6) These pro forma adjustments to Distributions in excess of accumulated
earnings reflect the estimated net gain on the Disposition Properties of
$4,611, plus income from discontinued operations of $756, offset by losses
related to the prepayment of debt of $3,004 and the tax indemnification of
$2,247. The minority interest adjustment represents 34.78% of the pro forma
net profit of $116.
(7) These pro forma adjustments reflect the utilization of the remaining
assumed net cash proceeds from the property sale to repurchase common stock
as described in footnote 4 above ($77,000 / $50.87/share = 1,513,662
shares).
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, INC.
---------------------
(Registrant)
Date: June 30, 2006
By: /s/ Edward J. Pettinella
-------------------------------------
Edward J. Pettinella
President and Chief Executive Officer
Date: June 30, 2006
By: /s/ David P. Gardner
-------------------------------------
David P. Gardner
Executive Vice President and
Chief Financial Officer