Home Properties Reports Second Quarter 2008 Results

FFO Per Share Exceeds Wall Street's Mean Estimate by Four Cents
ROCHESTER, N.Y.--(Business Wire)--
Home Properties (NYSE:HME) today released financial results for
the second quarter ending June 30, 2008. All results are reported on a
diluted basis.

"Results in 2008 continued to be strong, with second quarter Funds
from Operations per share up 5.4% from the prior year quarter," said
Home Properties President and CEO Edward J. Pettinella. "Net Operating
Income growth of 4.3% in the second quarter compared to last year was
even higher than year-over-year growth in the first quarter. Occupancy
was the highest it has been since 2000. Although we expect growth to
moderate in the second half of the year, our geographic footprint and
business niche will continue to position us well defensively in a
weaker economic environment."

Earnings per share ("EPS") for the quarter ended June 30, 2008 was
$0.28, compared to $0.26 for the quarter ended June 30, 2007. The
increase is primarily attributable to a $1.3 million (after the
allocation of minority interest), or $0.05 per share, increase in
income from continuing operations, partially offset by $1.1 million
(after the allocation of minority interest), or $0.04 per share,
decrease in the income from discontinued operations in the current
quarter. EPS for the six months ended June 30, 2008 was $1.08,
compared to $0.41 for the six months ended June 30, 2007. The
year-over-year increase of $0.67 per share is primarily attributable
to the impact of the current year first quarter gain on sale of real
estate.

For the quarter ended June 30, 2008, Funds From Operations ("FFO")
was $40.9 million, or $0.90 per share, compared to $40.5 million, or
$0.85 per share, for the quarter ended June 30, 2007. This result
exceeded analysts' mean estimate, as reported by Thomson, by $0.04,
and equates to a 5.4% increase from the prior year. FFO for the six
months ended June 30, 2008 was $1.69 per share, compared to $1.58 in
the year-ago period. Excluding the effects of the $1.9 million charge
related to the Series F Preferred Share redemption in the first
quarter of 2007, Operating FFO for the six months ended June 30, 2007
was $1.62. A reconciliation of GAAP net income to FFO is included in
the financial data accompanying this news release.

Second Quarter Operating Results

For the second quarter of 2008, same-property comparisons (for 110
"Core" properties containing 35,188 apartment units owned since
January 1, 2007) reflected an increase in total revenue of 2.8%,
compared to the same quarter a year ago. Net operating income ("NOI")
increased by 4.3% from the second quarter of 2007. Property level
operating expenses increased by 0.6% for the quarter, primarily due to
increases in water and sewer expense, real estate taxes, and trash
removal costs, which were partially offset by a reduction in repairs
and maintenance.

Average physical occupancy for the Core properties was 95.1%
during the second quarter of 2008, compared to 95.0% during the second
quarter of 2007. Average monthly rental rates, including utility
reimbursements, increased 3.0% compared to the year-ago period. The
3.0% increase in rental rates, less a 0.5% decrease in economic
occupancy, produced 2.5% growth in rental revenue. Increases in other
income increased growth in total property revenue to 2.8%.

On a sequential basis, compared to the 2008 first quarter results
for the Core properties, base rental revenue (excluding utility
reimbursement) was up 1.0% in the second quarter of 2008, expenses
were down 9.0%, and net operating income was up 6.2%. Average physical
occupancy increased 0.2% to 95.1% and total revenue, including utility
reimbursements, was 0.4% lower. The rental revenue decrease in the
second quarter compared to the first quarter was due to the typical
seasonality from lower heating cost reimbursements. The expense
decrease represented typical seasonality from lower natural gas and
snow removal costs realized between the first and second quarters.

Physical occupancy for the 1,733 apartment units
acquired/developed between January 1, 2007 and June 30, 2008 (the
"Recently Acquired Communities") averaged 93.7% during the second
quarter of 2008.

Year-to-Date Operating Results

For the six months ended June 30, 2008, same-property comparisons
for the Core properties reflected an increase in total revenue of
3.2%, resulting in a 4.1% increase in net operating income compared to
the first six months of 2007. Property level operating expenses
increased by 1.8%, primarily due to increases in property insurance,
real estate taxes, and trash removal costs, which were partially
offset by a reduction in natural gas heating costs, repairs and
maintenance, and snow removal expense.

Average physical occupancy for the Core properties was 95.0%
during the first six months of 2008, up from 94.7% a year ago, with
average monthly rents, including utility reimbursements, rising 3.0%.

Dispositions

There were no dispositions during the 2008 second quarter. Amounts
included in discontinued operations are the residual settlement items
associated with first quarter 2008 dispositions.

During the first quarter of 2008, the Company closed on three
separate sale transactions, with a total of 598 units, for $64.5
million. A gain on sale of $30.0 million, before the allocation of
minority interest, was recorded in the first quarter related to these
sales. The weighted cap rate for these dispositions was 6.25%.

Capital Markets Activities

As of June 30, 2008, the Company's ratio of debt-to-total market
capitalization was 50.5% (based on the June 30, 2008 closing stock
price of $48.06 to determine equity value), with $75.5 million
outstanding on its $140 million revolving credit facility and $4.8
million of unrestricted cash on hand. The ratio would have been 46.7%
based on today's closing stock price of $56.00. Total debt of $2.2
billion was outstanding, at rates of interest averaging 5.4% and with
staggered maturities averaging approximately seven years.
Approximately 94.1% of total indebtedness is at fixed rates. Interest
coverage averaged 2.5 times during the second quarter and the fixed
charge ratio averaged 2.3 times for the quarter.

The Company did not repurchase any common shares during the second
quarter of 2008. As of June 30, 2008, the Company has Board
authorization to buy back up to 2,291,160 additional shares of its
common stock or Operating Partnership Units.

Outlook

For 2008, the Company has increased the midpoint of its prior
guidance to $3.41 while tightening the range of FFO per share to $3.37
to $3.45 from $3.33 to $3.45. The new range will produce FFO per share
growth of 5.2% to 7.7% when compared to 2007 results. This guidance
range reflects management's current assessment of economic and market
conditions.

The guidance for the balance of 2008 is: Third quarter $0.85 to
$0.89; fourth quarter $0.83 to $0.87.

Supplemental Information

The Company produces supplemental information that provides
details regarding property operations, other income, acquisitions,
sales, geographic market breakdown, debt and new development. The
supplemental information is available via the Company's Web site,
e-mail or facsimile upon request.

Second Quarter Conference Call

The Company will conduct a conference call and simultaneous
Webcast tomorrow at 11:00 AM Eastern Time to review and comment on the
information reported in this release. To listen to the call, please
dial 800-266-2145 (International 212-676-5362). A replay of the call
will be available through August 12, 2008, by dialing 800-633-8284 or
402-977-9140 and entering 21354476. The Company webcast, which
includes a slide presentation, will be available, live at 11:00 AM and
archived by 1:00 PM, through the "Investors" section of the Web site,
homeproperties.com, on the Investor Relations home page.

Third Quarter Earnings Release and Conference Call

The Company expects to release third quarter 2008 results after
the close of the market on November 5, 2008 followed by a conference
call and Webcast on November 6, 2008 at 11:30 AM Eastern Time. The
dial-in numbers will be the same as for the second quarter conference
call listed above. The replay code will be 2134477.

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 and new
development activities within anticipated budgets, the actual pace of
future acquisitions and dispositions, and continued access to capital
to fund growth.

Home Properties is a publicly traded apartment real estate
investment trust that owns, operates, develops, acquires and
rehabilitates apartment communities primarily in selected Northeast,
Mid-Atlantic and Southeast Florida markets. Currently, Home Properties
operates 118 communities containing 38,071 apartment units. Of these,
36,921 units in 116 communities are owned directly by the Company; 868
units are partially owned and managed by the Company as general
partner, and 282 units are managed for other owners. For more
information, visit Home Properties' Web site at homeproperties.com.

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*T
Avg.
Physical
Second Quarter 2Q 2008 vs. 2Q 2007 %
Results: Occupancy(a) 2Q 2008 Growth
--------------------- ------------ ------- ---------------------------
Average
Monthly Base
Rent / Rental Total Total
2Q 2Q Occ
2008 2007 Unit Rates Revenue Expense NOI
------ ----- ------- ------ ------- ------- ----
Core Properties(b) 95.1% 95.0% $1,131 3.0% 2.8% 0.6% 4.3%
Acquisition
Properties(c) 93.7% NA $1,026 NA NA NA NA
------ ----- ------- ------ ------- ------- ----
TOTAL PORTFOLIO 95.0% 95.0% $1,126 NA NA NA NA

Avg.
Physical
YTD '08 vs. YTD '07 %
Year-To-Date Results: Occupancy(a) YTD '08 Growth
--------------------- ------------ ------- ---------------------------
Average
Monthly Base
Rent / Rental Total Total
YTD YTD Occ
'08 '07 Unit Rates Revenue Expense NOI
------ ----- ------- ------ ------- ------- ----
Core Properties(b) 95.0% 94.7% $1,126 2.8% 3.2% 1.8% 4.1%
Acquisition
Properties(c) 94.2% NA $1,023 NA NA NA NA
------ ----- ------- ------ ------- ------- ----
TOTAL PORTFOLIO 94.9% 94.7% $1,121 NA NA NA NA
*T

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(a) Average physical occupancy is defined as total possible rental
income, net of vacancy expense, as a percentage of total possible
rental income. Total possible rental income is determined by
valuing occupied units at contract rates and vacant units at
market rents.
(b) Core Properties includes 110 properties with 35,188 apartment
units owned throughout 2007 and 2008.
(c) Acquisition Properties consist of 6 properties with 1,733
apartment units acquired/developed subsequent to January 1, 2007.
*T

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

Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Rental income $118,208 $114,720 $235,263 $225,406
Property other income 10,350 9,561 22,521 19,974
Interest income 20 83 140 1,290
Other income 86 58 278 833
--------- --------- --------- ---------
Total revenues 128,664 124,422 258,202 247,503
--------- --------- --------- ---------
Operating and maintenance 51,717 50,486 108,115 103,737
General and administrative 6,620 5,953 12,840 11,471
Interest 28,838 30,239 58,914 59,114
Depreciation and amortization 28,826 27,071 57,265 53,406
--------- --------- --------- ---------
Total expenses 116,001 113,749 237,134 227,728
--------- --------- --------- ---------
Income from operations 12,663 10,673 21,068 19,775
Minority interest in Operating
Partnership (3,747) (3,065) (6,218) (4,763)
--------- --------- --------- ---------
Income from continuing
operations 8,916 7,608 14,850 15,012
--------- --------- --------- ---------
Discontinued operations
Income (loss) from
operations, net of minority
interest (9) 1,209 (915) 2,208
Gain (loss) on disposition
of property, net of
minority interest (1) (115) 21,070 (248)
--------- --------- --------- ---------
Discontinued operations (10) 1,094 20,155 1,960
--------- --------- --------- ---------
Net Income 8,906 8,702 35,005 16,972
Preferred dividends - - - (1,290)
Redemption of preferred stock - - - (1,902)
--------- --------- --------- ---------
Net income available to common
shareholders $ 8,906 $ 8,702 $ 35,005 $ 13,780
========= ========= ========= =========
Reconciliation from net income
available to common
shareholders to Funds From
Operations:
Net income available to common
shareholders $ 8,906 $ 8,702 $ 35,005 $ 13,780
Real property depreciation and
amortization 28,207 28,094 56,158 55,170
Minority interest 3,747 3,065 6,218 4,763
Minority interest - income
(loss) from discontinued
operations (4) 487 (381) 889
(Gain) loss on disposition of
property, net of minority
interest 1 115 (21,070) 248
Loss from early extinguishment
of debt in connection with
sale of real estate - - 1,384 -
--------- --------- --------- ---------
FFO - basic (1) $ 40,857 $ 40,463 $ 77,314 $ 74,850
========= ========= ========= =========
*T

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(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. In 2008, the Company added back debt extinguishment
costs which were incurred as a result of repaying property
specific debt triggered upon sale as a gain or loss on sale of
the property. Because of the limitations of the FFO definition as
published by NAREIT as set forth above, the Company has made
certain interpretations in applying the definition. The Company
believes all adjustments not specifically provided for are
consistent with the definition. Other similarly titled measures
may not be calculated in the same manner.
*T

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

Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
FFO - basic $ 40,857 $ 40,463 $ 77,314 $ 74,850
Preferred dividends -
convertible preferred
stock (2) - - - -
---------- ---------- ---------- ----------
FFO - diluted $ 40,857 $ 40,463 $ 77,314 $ 74,850
========== ========== ========== ==========

FFO - basic $ 40,857 $ 40,463 $ 77,314 $ 74,850
Preferred dividends -
convertible preferred
stock (2) - - - -
Redemption of Series F
Preferred stock - - - 1,902
---------- ---------- ---------- ----------
FFO - operating (4) $ 40,857 $ 40,463 $ 77,314 $ 76,752
========== ========== ========== ==========

FFO - basic $ 40,857 $ 40,463 $ 77,314 $ 74,850
Preferred dividends -
convertible preferred
stock (2) - - - -
Recurring non-revenue
generating capital
expenses (7,197) (7,256) (14,437) (14,329)
---------- ---------- ---------- ----------
AFFO (5) $ 33,660 $ 33,207 $ 62,877 $ 60,521
========== ========== ========== ==========

FFO - operating $ 40,857 $ 40,463 $ 77,314 $ 76,752
Recurring non-revenue
generating capital
expenses (7,197) (7,256) (14,437) (14,329)
---------- ---------- ---------- ----------
AFFO - operating $ 33,660 $ 33,207 $ 62,877 $ 62,423
========== ========== ========== ==========
Weighted average
shares/units outstanding:
Shares - basic 31,642.0 33,255.9 31,927.9 33,161.4
Shares - diluted 32,111.8 33,985.3 32,342.1 33,959.0
Shares/units - basic (3) 44,960.3 46,713.0 45,306.7 46,581.8
Shares/units - diluted
(3) 45,430.2 47,442.4 45,720.8 47,379.3
Per share/unit:
Net income - basic $ 0.28 $ 0.26 $ 1.10 $ 0.42
Net income - diluted $ 0.28 $ 0.26 $ 1.08 $ 0.41
FFO - basic $ 0.91 $ 0.87 $ 1.71 $ 1.61
FFO - diluted $ 0.90 $ 0.85 $ 1.69 $ 1.58
Operating FFO - diluted,
before preferred stock
redemption (4) $ 0.90 $ 0.85 $ 1.69 $ 1.62
AFFO (5) $ 0.74 $ 0.70 $ 1.38 $ 1.28
Operating AFFO - before
preferred stock
redemption (4) (5) $ 0.74 $ 0.70 $ 1.38 $ 1.32
Common Dividend paid $ 0.66 $ 0.65 $ 1.32 $ 1.30
*T

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(2) There was no convertible preferred stock outstanding during the
periods presented.
(3) 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.
(4) Operating FFO is defined as FFO as computed in accordance with
NAREIT definition, adjusted for the addback of real estate
impairment charges and preferred stock redemption costs. This is
presented for a consistent comparison of how NAREIT defined FFO
in 2003.
(5) Adjusted Funds From Operations ("AFFO") is defined as gross FFO
less an annual reserve for anticipated recurring, non-revenue
generating capitalized costs of $780 and $760 per apartment unit
in 2008 and 2007, respectively. The resulting sum is divided by
the weighted average shares/units on a diluted basis to arrive at
AFFO per share/unit.
*T

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*T
HOME PROPERTIES, INC.
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands - Unaudited)

June 30, December
2008 31, 2007
----------- -----------
Land $ 506,088 $ 510,120
Construction in progress, including land 83,688 54,069
Buildings, improvements and equipment 3,127,033 3,115,966
----------- -----------
3,716,809 3,680,155
Accumulated depreciation (589,905) (543,917)
----------- -----------
Real estate, net 3,126,904 3,136,238

Cash and cash equivalents 4,827 6,109
Cash in escrows 29,225 31,005
Accounts receivable 10,826 11,109
Prepaid expenses 10,063 15,560
Deferred charges 11,468 12,371
Other assets 3,963 4,031
----------- -----------
Total assets $3,197,276 $3,216,423
=========== ===========
Mortgage notes payable $1,944,469 $1,986,789
Exchangeable senior notes 200,000 200,000
Line of credit 75,500 2,500
Accounts payable 19,978 18,616
Accrued interest payable 10,723 10,984
Accrued expenses and other liabilities 27,766 27,586
Security deposits 21,878 22,826
----------- -----------
Total liabilities 2,300,314 2,269,301

Minority interest 266,202 279,061
Stockholders' equity 630,760 668,061
----------- -----------
Total liabilities and stockholders' equity $3,197,276 $3,216,423
=========== ===========

Total shares/units outstanding:
Common stock 31,844.4 32,600.6
Operating partnership units 13,261.2 13,446.9
----------- -----------
45,105.6 46,047.5
=========== ===========
*T

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

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