Fitch Affirms Home Properties' IDR at 'BBB'; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed Home Properties, Inc. (Home Properties) as follows: --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) 'BBB'; --Bank credit facility 'BBB'; --Preferred securities 'BBB-'. Fitch has also assigned a 'BBB' rating to HME's exchangeable senior notes. The Rating Outlook is Stable. Fitch's ratings reflect positively on Home Properties portfolio of assets in strong East Coast markets, its capital improvement strategy, and the currently strong multifamily property fundamentals. The company's disciplined operating strategy is to acquire older class B/C B/C Because B/C Broadcast B/C Boundary Conditions B/C Biological & Chemical garden apartment communities and to upgrade/reposition them. This has successfully contributed to positive same store net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. growth. In the past year, the company has undertaken several initiatives to further improve revenues and lower operating costs. Home Properties exited its low-growth markets in Detroit and Upstate New York Upstate New York is the region of New York State north of the core of the New York metropolitan area. It has a population of 7,121,911 out of New York State's total 18,976,457. Were it an independent state, it would be ranked 13th by population. to turn its focus exclusively on high growth/high barrier to entry suburban markets along the East Coast. The company has also rolled out its Energy Reimbursement Program. This initiative to pass heating costs on to residents is expected to contribute to lower and more stable operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . Home Properties' financial profile further supports the ratings. Coverage ratios are consistent and solid for the rating category. Interest and fixed-charge coverage ratios measure 2.4 times (x) and 2.1x, respectively, for the most recent quarter and 2.3x and 2.0x, respectively, for the 12 months ending Sept. 30, 2006. Home Properties' leverage ratio is 58.2% for debt plus preferred stock to undepreciated book capital as of Sept. 30, 2006, which is somewhat high for the rating category but in line with other similarly rated multifamily REITs (real estate investment trusts). Fitch also looks favorably on the company's preference to wholly own properties, which provides transparency to its balance sheet and direct ownership control. The company engages in limited development activity, minimizing risk. The company's risk adjusted capital ratio is appropriate for the rating category at 1.2x. Fitch expects to continue to monitor the company's operating and financial performance and would look for the company to maintain current leverage levels as the company continues to reposition its portfolio via new acquisitions. An increase in unencumbered assets would reflect positively on the credit profile. Fitch acknowledges the benefits of the additional source of unsecured financing from the issuance of $200 million of exchangeable senior notes in October 2006. As of Sept. 30, 2006, approximately 13% of the company's assets were unencumbered; however, unsecured borrowing at that time was limited to only the amount drawn on the company's unsecured bank credit facility. As Home Properties repositions its portfolio and refinances debt, Fitch would look for a larger pool of unencumbered assets and additional unencumbered net operating income to cover the additional unsecured borrowing. Home Properties, Inc. is a $3.3 billion (undepreciated book value) equity REIT headquartered in Rochester, NY. The portfolio consists of class B/C garden apartments located primarily in suburban markets along the East Coast. As of Sept. 30, 2006, the company owned 39,309 apartment units in 137 communities. The company's largest holdings are in the suburban markets of New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. (27.0% NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics ), Washington, D.C. (23.6%), Philadelphia (15.2%), and Baltimore, Maryland (14.4%). Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria, and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance, and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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