Correction: Fitch Rates Home Properties Preferred Stock Offering 'BBB-'.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 18, 2002

(This is an amended version of a release issued Friday 3/15, containing revised rating information on the unsecured bank credit facility rating).

Fitch Ratings has assigned its 'BBB-' rating to a proposed offering of series F perpetual preferred stock by Home Properties of New York, Inc. (Home). Proceeds will be used to repay bank borrowings and fund future acquisitions. Fitch also affirmed its 'BBB-' rating for Home's (NYSE:HME) outstanding $140 million convertible preferred stock. Additionally, Fitch has affirmed its 'BBB' ratings for the unsecured bank credit facility of the company's operating partnership, Home Properties of New York, L.P. The Rating Outlook is Stable.

Home Properties of New York, Inc. (Home) is a $2.4 billion (total market capitalization) equity REIT that, as of Dec. 31, 2001, owned a portfolio of 39,007 apartment units in 143 communities. The portfolio is located primarily in suburban markets of the Northeast, Midwest and Mid-Atlantic regions, with market concentrations in Baltimore (16% of total units), Philadelphia (16%), Detroit (15%) and Washington DC/Northern Virginia (11%).

Fitch's ratings reflect positively on Home's geographic diversification, focus on markets with above-average barriers to new supply but slower economic growth, absence of development risk, and consistent operating and financial performance. Additional credit strengths include Home's successful execution of property acquisitions and renovations and ability to issue additional common and preferred equity. Ratings concerns include a substantially encumbered portfolio, near-term succession of senior management, and funding requirements associated with an active acquisition strategy and renovations of older communities.

Home's strategy continues to focus on older, Class B garden apartment properties that are acquired well below replacement cost, and often in portfolio acquisitions. Potential concerns associated with Home's older property age of approximately 30 years are largely mitigated by the company's program of upgrading and repositioning properties immediately following acquisition, and location of properties in submarkets where land scarcity creates significant barriers to new construction. Although Home's post-acquisition renovation of unit interiors and common areas can incur costs ranging between $3,000 to $10,000 per unit, and require approximately five years to complete, capex programs continue to achieve high returns on incremental investment, drive sector-leading operating performance, and mitigate potential concerns regarding deferred maintenance. Management anticipates returns on incremental investments that exceed returns on acquisitions, bringing total returns in line with yields for new development. Fitch considers risk associated with the long-term ownership of these properties to be somewhat less than for new apartment development, owing to Home's ability to manage both the timing and expenditures associated with unit renovations. However, renovation programs may also affect Home's renter profile, resulting in a shift away from older residents who have contributed to a below-average rate of resident turnover.

Fitch maintains a Negative Outlook for property market fundamentals in the multi-family sector due to the recession's negative impact on demand and competition from newly completed properties-conditions which continue to pressure multifamily operator's rent and occupancy levels. Relative to its peers in the multifamily REIT sector, Home has experienced a similar reduction in occupancy, to 92.5% during the fourth quarter of 2001 from 94.7% one year prior. But in contrast to many of its peers, Home continues to experience positive rent growth, driven in part by more aggressive management and leasing of recently acquired properties, with same-store revenues up 3% during the fourth quarter 2001, after adjustment for returns on post-acquisition capex, and the negative impact of occupancy declines. Just as apartments were generally the first property sector to be negatively impacted by the current economic slowdown, due largely to shorter lease terms and more frequent rent adjustments and lease expirations, Fitch anticipates that multi-family will likely be among the first property types to recover from the current recession.

Home Properties' balance sheet and financial protection measures are satisfactory for the rating category. As of year-end 2001, debt leverage was a moderate 45% of undepreciated book capital (41% at market), with preferred stock representing another 7% of the capital structure (not including the proposed offering). Home's debt financing strategy is focused almost exclusively on mortgage debt, which has an average maturity of more than 10 years. While prepayment penalties, a limited number of unencumbered properties, and sale lockout agreements reduce Home's ability to mortgage or sell assets as a means to generate liquidity for debt repayment or preferred stock redemption, Home's low 40% mortgage-to-value ratio is considered by Fitch to provide adequate liquidity relative to refinancing needs, given the depth of the lending market for multi-family properties. Fitch does not expect that Home will pursue an unsecured financing strategy, but if the company were to incur more substantial levels of unsecured debt without unencumbering a majority of assets, Fitch's preferred stock and bank line ratings would be negatively impacted.

Over the past four years, the company has consistently produced interest coverage in the low 3 times (x) range and fixed charge coverage in the low 2x range (after adjustment for recurring capital expenditures). Notwithstanding Fitch's expectation for continued performance at or above these levels, the Fitch ratings assign considerable benefit to covenants within Home's perpetual and certain convertible preferred securities that require the company to maintain 1.75x EBITDA coverage of total fixed charges including interest, capitalized interest, and preferred distributions. Home's ability to maintain or enhance current fixed charge coverage is also enhanced by potential conversion of the outstanding $140 million series B-E convertible preferred stock.

Fitch expects that Home's funding strategies for ongoing renovations and future acquisitions will continue to be balanced between debt and equity sources, as demonstrated by the recent issuance of $22 million of common equity, and previous issuance of common units to partially fund portfolio acquisitions. Additional sources of liquidity include full availability under the company's $100 million unsecured revolver (pro forma the current preferred stock offering) and management's projected $50 million to $100 million in asset sales during 2002.