Home Properties Reports Revised Fourth Quarter and Year-End 2004 Resul

    Business Editors

    ROCHESTER, N.Y.--(BUSINESS WIRE)--March 16, 2005--Home Properties (NYSE:HME) today released final financial results for the fourth quarter and year ending December 31, 2004, which were revised from results originally released on March 3, 2005. These final results also were filed yesterday with the Securities and Exchange Commission on Form 10-K. The revision is due solely to a $3.8 million charge in settlement of a lawsuit, previously reported on March 9, 2005, which reduced earnings per share and Funds From Operations per share by $0.08 from the previously-reported results. All results are reported on a diluted basis. Previously released earnings news release tables and supplemental reports which changed as a result of the subsequent charge are attached and include: Summary Consolidated Statements of Operations, Summary Consolidated Balance Sheets, Net Asset Value Calculation and Reconciliation of FIN 46 Consolidation-Balance Sheet.
    Earnings per share ("EPS") for the quarter ended December 31, 2004 was $0.69 compared to $0.27 for the quarter ended December 31, 2003, an increase of 152%, primarily attributable to the significant gain on disposition of property that was recognized in 2004, compared to 2003. EPS for the three months ended December 31, 2004 for income from continuing operations was $0.14, compared to $0.19 for the year-ago period. EPS for the year ended December 31, 2004 was $1.18, compared to $1.03 for the year ended December 31, 2003, or an increase of 14.9%, primarily attributable to the gain on disposition of property as described above. Income from continuing operations EPS for the year ended December 31, 2004 was $0.85, compared to $0.86 for the year ended December 31, 2003.
    For the quarter ended December 31, 2004, Funds From Operations ("FFO") was $32.1 million, or $0.64 per share, compared to $31.4 million, or $0.64 per share, for the quarter ended December 31, 2003.
    For the year ended December 31, 2004, FFO was $127.0 million, or $2.54 per share, compared to $132.8 million, or $2.77 per share, a 4.4% decrease in total FFO from the prior year and an 8.4% decrease on a per-share basis. The results for 2004 include an impairment charge of $9.9 million, or $0.20 per share, related to the sale of affordable limited partnerships recorded in the third quarter, and a $1.1 million impairment charge, or $0.02 per share, recorded in the second quarter related to the sale of an apartment community. Consistent with the Securities and Exchange Commission's guidance on non-GAAP financial measures recently adopted by NAREIT, FFO has not been adjusted to add back these impairment charges as it would have been under the prior definition of FFO. From an Operating FFO perspective, excluding the $9.9 million and $1.1 million impairment charges in 2004, FFO for 2004 would have been $138.0 million, or $2.76 per share. This represents a 3.9% increase in total FFO from the prior year and a 0.4% decrease on a per-share basis. A reconciliation of GAAP net income to FFO is included in the financial data accompanying this press release.
    This press 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, 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 dispositions, and continued access to capital to fund growth.
    Home Properties is the sixth largest publicly traded apartment real estate investment trust in the United States. The Company owns, operates, acquires and rehabilitates apartment communities in selected Northeast, Midwest, Mid-Atlantic and Southeast Florida markets. Currently, Home Properties operates 163 communities containing 46,928 apartment units. Of these, 41,980 units in 151 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.

HOME PROPERTIES, INC. SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data - Unaudited)

Three Months Ended Year Ended December 31 December 31 ------------------------------------ 2004 2003 2004 2003 ------------------------------------ Rental income $112,206 $102,709 $436,724 $400,178 Other income - property related 5,260 3,875 18,299 14,910 Interest and dividend income 32 114 480 516 Other income 859 1,077 2,827 4,426 ------------------------------------ Total revenues 118,357 107,775 458,330 420,030 ------------------------------------ Operating and maintenance 52,227 46,745 202,479 181,773 General and administrative 9,482 8,236 23,978 22,607 Interest 23,891 20,992 90,506 84,368 Depreciation and amortization 23,729 20,116 89,929 76,206 Impairment of assets held as General Partner - 110 1,116 2,518 ------------------------------------ Total expenses 109,329 96,199 408,008 367,472 ------------------------------------ Income from operations 9,028 11,576 50,322 52,558 Equity in earnings (losses) of unconsolidated affiliates - ( 395) ( 538) ( 1,892) ------------------------------------ Income before minority interest and discontinued operations 9,028 11,181 49,784 50,666 Minority interest in Operating Partnership ( 2,281) ( 3,121)( 13,637)( 13,965) ------------------------------------ Income from continuing operations 6,747 8,060 36,147 36,701 ------------------------------------ Discontinued operations Income (loss) from operations, net of minority interest 509 372 ( 154) 2,507 Gain (loss) on disposition of property, net of minority Interest 17,722 2,244 11,417 2,599 ------------------------------------ Discontinued operations 18,231 2,616 11,263 5,106 ------------------------------------ Income before loss on disposition of property 24,978 10,676 47,410 41,807 Gain (loss) on disposition of property, net of minority interest - ( 7) ( 67) ( 9) ------------------------------------

Income before cumulative effect of change in accounting principle 24,978 10,669 47,343 41,798 Cumulative effect of change in accounting principle, net of minority interest - - ( 321) - ------------------------------------ Net Income 24,978 10,669 47,022 41,798 Preferred dividends ( 1,898) ( 1,984) ( 7,593)( 11,340) ------------------------------------ Net income available to common shareholders $23,080 $8,685 $39,429 $30,458 ==================================== Reconciliation from net income available to common shareholders to Funds From Operations: Net income available to common shareholders $23,080 $8,685 $39,429 $30,458 Preferred dividends - convertible preferred stock 548 634 2,194 5,939 Real property depreciation and amortization 23,441 20,246 91,008 77,135 Real property depreciation - unconsolidated - 604 556 2,442 Impairment on general partnership investment - real estate - - 945 1,785 Impairment of real property - - - 423 Loss on disposition of property - 181 50 260 Minority Interest 2,281 3,121 13,637 13,965 Minority Interest - income from discontinued operations 238 190 ( 80) 1,385 Gain on disposition of discontinued operations (17,531) ( 2,244)( 21,143) ( 2,599) Loss from early extinguishment of debt in connection with sale of real estate 36 - 36 1,610 Cumulative effect of change in accounting principle - - 321 - ------------------------------------ FFO (1) $32,093 $31,417 $126,953 $132,803 ==================================== Weighted average shares/units outstanding: Shares - basic 33,172.7 31,337.8 32,911.9 29,208.2 Shares - diluted 33,670.2 31,886.5 33,314.0 29,575.7 Shares/units - basic(2) 48,767.3 47,336.7 48,675.0 45,276.7 Shares/units - diluted(2) 50,098.2 47,885.3 49,077.1 47,873.8 Per share/unit: Net income - basic $.70 $.28 $1.20 $1.04 Net income - diluted $.69 $.27 $1.18 $1.03 FFO - basic(3) $.65 $.65 $2.56 $2.80 FFO - diluted(4) $.64 $.64 $2.54 $2.77 Operating FFO - diluted, before real estate impairments(5) $2.76 AFFO(6) $.53 $.53 $2.10 $2.32 Operating AFFO - before real estate impairments(5) $2.32 Common Dividend paid $.63 $.62 $2.49 $2.45

(1) Pursuant to the revised definition of Funds From Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), FFO is defined as net income (computed in accordance with accounting principles generally accepted in the United States of America ("GAAP")) excluding gains or losses from disposition of property, minority interest and extraordinary items plus depreciation from real property. This presentation assumes the conversion of dilutive common stock equivalents and convertible preferred stock. Other similarly titled measures may not be calculated in the same manner.

(2) Basic includes common stock outstanding plus operating partnership units in Home Properties, L.P., which can be converted into shares of common stock. Diluted includes additional common stock equivalents.

(3) FFO for the three months ended December 31, as computed for basic is gross FFO of $32,093 and $31,417 in 2004 and 2003, respectively, less convertible preferred dividends of $548 and $634 in 2004 and 2003, respectively. FFO for the year-ended December 31, as computed for basic is gross FFO of $126,953 and $132,803 in 2004 and 2003, respectively, less convertible preferred dividends of $2,194 and $5,939 in 2004 and 2003, respectively.

(4) FFO for the three months ended December 31, as computed for diluted is equal to basic FFO of $31,545 in 2004 and $30,783 in 2003. The Series D (in 2004) and Series C - E (in 2003) are anti-dilutive for the quarters ended December 31, 2004 and 2003, respectively, and therefore the FFO for basic and diluted is the same for both quarters. FFO for the year-ended December 31, as computed for diluted is equal to basic FFO of $124,759 in 2004 and $126,864 in 2003 plus the Series C - E convertible preferred dividend of $5,939 in 2003. Series D is anti-dilutive for the year ended December 31, 2004 therefore the FFO for basic and diluted is the same.

(5) Operating FFO is defined as FFO as computed in accordance with NAREIT definition, adjusted for the add back of real estate impairment charges. This is presented for a consistent comparison of how NAREIT defined FFO in 2003. There is no difference between FFO and Operating FFO for the fourth quarter of 2004 and 2003, or the full year 2003. Operating FFO for the full year 2004 is FFO of $126,953 plus real estate impairment charges of $11,017, totaling $137,970. The diluted shares/units used for this calculation is 49,910.50. The AFFO for the full year 2004 has also been recalculated as described above to arrive at Operating AFFO.

(6) Adjusted Funds From Operations ("AFFO") is defined as gross FFO less an annual reserve for anticipated recurring, non-revenue generating capitalized costs of $525 per apartment unit. AFFO is computed by reducing gross FFO for each period by the share of annual reserve for each period of: $5,610 for fourth quarter 2004; $5,443 for fourth quarter 2003; $22,166 for the year-ended December 31, 2004; and $21,782 for the year-ended December 31, 2003. The resulting sum is divided by the weighted average shares/units on a diluted basis to arrive at AFFO per share/unit.

HOME PROPERTIES, INC. SUMMARY CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data - Unaudited)

December December 31, 2004 31, 2003 ---------------------- Land $402,620 $387,655 Buildings, improvements and equipment 2,642,570 2,365,337 Real estate held for sale or disposal, net 78,711 - ---------------------- 3,123,901 2,752,992 Accumulated depreciation ( 405,919) ( 330,062) ---------------------- Real estate, net 2,717,982 2,422,930 Cash and cash equivalents 7,925 5,103 Cash in escrows 43,883 39,660 Accounts receivable 6,664 4,437 Prepaid expenses 18,224 18,184 Investment in and advances to affiliates - 5,253 Deferred charges 13,778 9,057 Other assets 8,340 8,693 ---------------------- Total assets $2,816,796 $2,513,317 ====================== Mortgage notes payable $1,644,722 $1,380,696 Line of credit 58,000 - Accounts payable 24,600 13,178 Accrued interest payable 8,876 7,013 Accrued expenses and other liabilities 26,750 18,959 Security deposits 22,651 21,664 ---------------------- Total liabilities 1,785,599 1,441,510 Minority interest 310,775 330,544 Stockholders' equity 720,422 741,263 ---------------------- Total liabilities and stockholders' equity $2,816,796 $2,513,317 ====================== Total shares/units outstanding: Common stock 32,625.4 31,966.2 Operating partnership units 15,591.3 15,974.7 Series D convertible cumulative preferred stock* 833.3 833.3 ---------------------- 49,050.0 48,774.2

*Potential common shares

Home Properties, Inc. NAV calculation as of December 31, 2004

Net Asset Value Calculation Based on properties wholly owned - before FIN 46 adjustment

Cap Rate (after 3% G & A, before capital expenditures) 6.75% 7.00% 7.25% ---------------------------

4th QTR 2004 ----------------------------------- Rent 112,206 112,206 112,206 Property other income 5,260 5,260 5,260 Operating & maintenance expense (52,227) ( 52,227) (52,227) --------------------------------- Property NOI 65,239 65,239 65,239 Adjustment for 4th QTR acquisitions - - - --------------------------------- Effective 4th QTR "run rate" 65,239 65,239 65,239

Annualized (for 4th qtr seasonality) 25.0% 260,956 260,956 260,956 NOI growth for next 12 months @ 4% 10,438 10,438 10,438 --------------------------------- Adjusted NOI 271,394 271,394 271,394 - Real estate value using above cap rate 4,020,655 3,877,061 3,743,369 Balance sheet adjustments before FIN 46R ----------------------------------- Cash 7,269 7,269 7,269 Other assets 82,455 82,455 82,455 Less: Deferred charges (9,918) (9,918) (9,918) Intangible (505) (505) (505) --------------------------------- Gross value 4,099,956 3,956,362 3,822,670 Less liabilities & perpetual preferred stock (1,764,993)(1,764,993)(1,764,993) --------------------------------- Net Asset Value $2,334,963 $2,191,369 $2,057,677 =================================

Per share/unit - fully diluted $47.60 $44.68 $41.95 ================================= 49,050.0 shares

---------------------------------------------------------------------- Economic CAP rate (after cap ex reserve of $525 per unit) 6.20% 6.43% 6.66%

---------------------------------------------------------------------- Adjustment for Acquisitions ---------------------------

Property Units Region Price Date ----------------------------------------------------------------------

None during fourth quarter

---------------------------------------------------------------------- # of Initial days Unleveraged Quarterly Missing Property Return NOI Quarter Adj ----------------------------------------------------------------------

None during fourth quarter

----------------------------------------------------------------------

Reconciliation to financial statements: Other O & M Rent Income Expense --------------------------------- Per financial statement 112,206 5,260 (52,227) Less results from properties not wholly owned but consolidated due to FIN 46R - - - Add back properties classified as discontinued operations still owned at December 31, 2004: - - - ---------------------------------

Proper run rate before acquisitions 112,206 5,260 (52,227) =================================

Operating expenses now include a charge for G & A, so NAV calculation does not need additional allocation.

Home Properties, Inc. December 31, 2004 Supplemental Information

Consolidation Summary of the Balance Sheet as of December 31, 2004 (in thousands, except share and per share data)

December December 31, 31, 2004 Effect of 2004 (before FIN FIN 46 (as 46) Consolidation reported) ------------------------------------ ASSETS Real estate: Land $402,620 $402,620 Buildings, improvements and equipment 2,642,570 2,642,570 Real estate held for sale or disposal, net - 78,711 78,711 ------------------------------------ 3,045,190 78,711 3,123,901 Less: accumulated depreciation ( 405,919) - ( 405,919) ------------------------------------ Real estate, net 2,639,271 78,711 2,717,982 Cash and cash equivalents 7,269 656 7,925 Cash in escrows 39,528 4,355 43,883 Accounts receivable 6,198 466 6,664 Prepaid expenses 18,057 167 18,224 Investment in and advances to affiliates 431 ( 431) - Deferred charges 9,918 3,860 13,778 Other assets 8,323 17 8,340 ------------------------------------ Total assets $2,728,995 $87,801 $2,816,796 ==================================== LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes payable $1,567,085 $77,637 $1,644,722 Line of credit 58,000 - 58,000 Accounts payable 24,057 543 24,600 Accrued interest payable 7,539 1,337 8,876 Accrued expenses and other liabilities 26,194 556 26,750 Security deposits 22,118 533 22,651 ------------------------------------ Total liabilities 1,704,993 80,606 1,785,599 ------------------------------------ Commitments and contingencies Minority interest 303,259 7,516 310,775 ------------------------------------ Stockholders' equity: Cumulative redeemable preferred stock, $.01 par value; 2,400,000 shares issued and outstanding at September 30, 2004 60,000 - 60,000 Convertible cumulative preferred stock, $.01 par value; 10,000,000 shares authorized; 250,000 shares issued and outstanding at September 30, 2004 25,000 - 25,000 Common stock, $.01 par value; 80,000,000 shares authorized; 32,625,413 shares issued and outstanding at December 31, 2004 326 - 326 Excess stock, $.01 par value; 10,000,000 shares authorized; no shares issued or outstanding - - - Additional paid-in capital 807,212 - 807,212 Accumulated other comprehensive income (loss) ( 362) - ( 362) Distributions in excess of accumulated earnings ( 171,433) ( 321) ( 171,754) Officer and director notes for stock purchases - - - ------------------------------------ Total stockholders' equity 720,743 ( 321) 720,422 ------------------------------------ Total liabilities and stockholders' equity $2,728,995 $87,801 $2,816,796 ====================================

--30--RG/ny*

CONTACT: Home Properties David P. Gardner, Executive Vice President and Chief Financial Officer 585-246-4113 Charis W. Warshof, Vice President, Investor Relations 585-295-4237

KEYWORD: NEW YORK INDUSTRY KEYWORD: REAL ESTATE BUILDING/CONSTRUCTION EARNINGS SOURCE: Home Properties

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