Home Properties Acquires Two Apartment Communities in New Jersey

    Business Editors/Real Estate Writers

    ROCHESTER, N.Y.--(BUSINESS WIRE)--March 31, 2005--Home Properties, Inc. (NYSE:HME) announced that on March 1, 2005 it acquired two apartment communities in New Jersey with a total of 346 units. With these purchases, Home Properties now owns 15 apartment communities in New Jersey containing 3,772 units.
    "The suburban New York City region was Home Properties' largest and best-performing market in 2004, contributing 24% to the Company's net operating income," said Edward J. Pettinella, Home Properties President and Chief Executive Officer. "We will continue to acquire more properties in New Jersey, Long Island and the lower Hudson Valley where we currently own a total of 44 apartment communities containing more than 8,000 apartments."
    Hackensack Gardens (198 units) is located in Hackensack in Bergen County, approximately six miles from New York City. The total purchase price of $13 million, including closing costs, equates to approximately $65,500 per apartment unit. Consideration included the assumption of $4.9 million in mortgage debt, with a weighted average interest rate of 5.26%, and $8.0 million of Operating Partnership (OP) units in Home Properties, L.P. The OP units are exchangeable for shares of HME common stock on a one-for-one basis. For purposes of determining the number of OP units issued, a value of $39.25 per unit was set when the transaction was negotiated. The property is currently 94.9% occupied with monthly rents averaging $754.
    Built in 1948, Hackensack Gardens consists of 16 two-story buildings on approximately eight acres. Buildings are of wood frame construction on concrete basement foundations with brick veneers and hip roofs. All units are individually metered for electric. Hot water baseboard heat is provided by central gas-fired boilers. The unit mix consists of 100 one-bedroom units and 98 two-bedroom units. The average apartment size is 636 square feet.
    The property is subject to the City of Hackensack's rent control regulations, which allow for an annual 5% increase on renewals (4% for seniors) with rent decontrol when apartments are vacated. In its first year of ownership, Home Properties expects to spend approximately $1.6 million to correct deferred maintenance, improve the property's curb appeal, and upgrade signage, landscaping, building systems and common areas. The Company plans to replace all casement windows, upgrade electrical systems, add through-the-wall air conditioners to each apartment, replace entry door canopies and apartment entry doors, repave all driveways and parking lots, replace sidewalks and add three picnic areas within one year of closing. When all property-wide improvements described have been completed, individual apartments will be upgraded as they become decontrolled to include new six-panel interior doors, mini blinds, kitchen cabinets and appliances, resurfaced bathtubs and ceramic wall tile, and new toilets, sinks, vanities and medicine cabinets. The strategy is to upgrade every apartment upon turnover. During the first few years of ownership, the Company expects to spend a total of approximately $1.9 million in improvements and upgrades. Management anticipates a 5.3% weighted average first year capitalization rate on this acquisition, increasing to 7.2% upon stabilization. (The return is calculated after allocating 3.0% of rental revenues for management and overhead expenses and before normalized capital expenditures of approximately $525 per unit annually.)
    Barrington Gardens (148 units) is located in Matawan, in Monmouth County, just south of exit 120 of the Garden State Parkway, with easy access to Newark, New York City and Atlantic Ocean beaches. The total purchase price of $7.4 million, including closing costs, equates to approximately $50,200 per apartment unit. The transaction consisted of an outstanding mortgage in the amount of $3.0 million, which was satisfied at closing, and OP units. The outstanding mortgage was replaced with a new mortgage of $4.5 million, which has a three-year term, a variable rate of LIBOR plus 165 basis points and can be prepaid without penalty. Consideration also included $4.4 million of OP units at a value of $41.25 per unit. The property is 95.1% occupied with monthly rents averaging $754.
    Built in 1973, Barrington Gardens consists of 13 two-story buildings on approximately nine acres. Buildings are of wood frame construction with concrete block foundations, full or partial basements and pitched roofs. Exteriors are brick veneer with some aluminum siding and wood trim. All units are individually metered for electric. Each apartment has electric baseboard heat and two sleeve air conditioners. The unit mix consists of 120 one-bedroom and 28 two-bedroom units, each with private entry. The average apartment size is 922 square feet. Amenities include an outdoor swimming pool and play area.
    Home Properties expects to spend approximately $2.0 million during the first few years of operation to improve curb appeal, signage and landscaping, correct deferred maintenance, upgrade building systems and common areas, replace all windows and entry doors, repave driveways and parking lots, upgrade kitchens and baths, and add six-panel interior doors and mini blinds. Management anticipates a 7.1% weighted average first year capitalization rate on this acquisition, increasing to 7.9% upon stabilization. (The return is calculated after allocating 3.0% of rental revenues for management and overhead expenses and before normalized capital expenditures of approximately $525 per unit annually.)

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

    Home Properties is the sixth largest publicly traded apartment company in the United States. A real estate investment trust with operations in selected Northeast, Midwest, Mid-Atlantic and Southeast Florida markets, the Company owns, operates, acquires and rehabilitates apartment communities. Currently, Home Properties operates 165 communities containing 47,274 apartment units. Of these, 42,326 units in 153 communities are owned directly by the Company; 2,139 units are partially owned and managed by the Company as general partner, and 2,809 units are managed for other owners. For more information, visit Home Properties' Web site at www.homeproperties.com.

--30--RG/ny*

CONTACT: Home Properties, Inc. David P. Gardner, 585-246-4113 or Charis W. Warshof, 585-295-4237

KEYWORD: NEW YORK NEW JERSEY INDUSTRY KEYWORD: REAL ESTATE BUILDING/CONSTRUCTION MERGERS/ACQ SOURCE: Home Properties, Inc.

Copyright Business Wire 2005