hmedefa14a2008april16.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
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Preliminary
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Definitive
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Definitive
Additional Materials
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Soliciting
Material Pursuant to Rule 14a-11(c) or Rule
14a-12
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HOME
PROPERTIES, INC.
(Exact
name of Registrant as specified in its Charter)
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MARYLAND
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1-13136
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16-1455126
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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Of
incorporation)
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File
Number)
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Identification
Number)
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850
Clinton Square, Rochester, New York 14604
(Address
of principal executive offices)
(585)
546-4900
(Registrant's
telephone number, including area code)
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The
following e-mail was sent by Home Properties, Inc. to certain institutional
holders of its Common Stock beginning on April 15, 2008.
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To:
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[Institutional
Investors]
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From:
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Edward
Pettinella and David Gardner (Yvonne Wheeler)
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Subject:
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Help
with Home Properties Proxy
Vote
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A copy of
this e-mail and our 2008 Proxy Statement are attached for your
reference.
In
addition to election of directors and ratification of auditors, management has
proposed (Proposal #2) a new Stock Benefit Plan. As you are one of our larger
investors, we wanted to personally make sure you understood why the Board of
Directors and management feel that approval of this Plan is in the best
interests of the stockholders. While Glass Lewis has recommended a vote in favor
of this Plan, RiskMetrics has issued an analysis recommending a vote against the
Plan. The Plan fails the RiskMetrics tests solely because RiskMetrics does not
include our UPREIT Units with our common stock as outstanding
equity.
The
ability to issue equity grants is necessary in order for Home Properties to be
able to competitively attract and retain highly-qualified employees and
directors. Equity awards also provide an additional incentive for them to exert
their best efforts on behalf of the Company and closely align the interests of
employees and the Board with the interests of our stockholders. We do not have
sufficient shares left under our current plan to achieve these
objectives.
Home
Properties has a history of being very responsible in the issuance of equity
awards under its current plan. The Companys burn rate for equity awards for
2007, 2006 and 2005 was 1.45%, 1.53% and 1.47%, respectively. The burn rate is
calculated by dividing the total of options and restricted stock (with each
share of restricted stock being valued as 2.5 options) granted in each year by
the outstanding common shares and UPREIT Units for the related
year.
We know
that you are familiar with our UPREIT structure and its importance to the
success of Home Properties. Our UPREIT Units have been issued as purchase price
consideration to sellers of apartment communities we purchased. As a result of
receiving UPREIT Units, these sellers were able to defer the taxable gain they
otherwise would have incurred on the sale of their property, which contributed
to our ability to buy apartment communities that fit one of our core strategies
at favorable prices. We have made more use of the UPREIT Unit vehicle than
others in our peer group. With UPREIT Units comprising approximately 29% of our
equity capitalization as of December 31, 2007, we ranked second of all REITs for
use of this form of equity.
UPREIT
Units are exchangeable on a one-for-one basis into shares of Common Stock. The
exchange of an UPREIT Unit for Common Stock has no effect on diluted earnings
per share as unitholders and stockholders effectively share equally in the net
income of our operating partnership. In addition, holders of UPREIT Units
receive distributions in the same amount and at the same time that dividends are
paid to our stockholders. They are also allocated a pro-rata share of our
earnings, pari passu with the holders of Common Stock. UPREIT Units are like
Common Stock in substantially every way.
RiskMetrics
does not include UPREIT Units as part of Home Properties equity capitalization
in the two models they use to evaluate stock benefit plans. That is the only
reason we do not pass their models for recommending approval of the Plan. Their
first model is the burn-rate model, as described above, except our UPREIT Units
are not included in the denominator in the RiskMetrics model. With that model,
our three-year average burn rate of 2.15% is above the 2% threshold established
by RiskMetrics. As noted above, when UPREIT Units are included in the formula,
our three-year average burn rate of 1.48% passes the burn-rate analysis with
flying colors. In addition, to prove our commitment to continuing the reasonable
use of equity awards, we have committed in the proxy statement that the average
burn rate over the next three years will not exceed the 2% threshold (as
calculated using UPREIT Units in the denominator).
The other
model employed by RiskMetrics is the shareholder value transfer model. This
model estimates the cost of a proposed plan to stockholders as options are
exercised or stock restrictions lapse. RiskMetrics established a cap of 5% for
Home Properties. If UPREIT Units are not included in the formula, the cost of
our proposed Stock Benefit Plan as calculated by RiskMetrics is 6%, slightly
exceeding the threshold. If UPREIT Units are included in the formula, the Plan
cost is 4.13%, again well below the threshold.
We have
explained to RiskMetrics the comparability of our common stock and our UPREIT
Units and urged them not to penalize Home Properties for using UPREIT Units
rather than Common Stock as currency but have not been successful. For that
reason, we are asking you to affirm your support of our UPREIT structure and its
role in the success of Home Properties by encouraging your proxy group to vote
in favor of the proposed Stock Benefit Plan. If you would
prefer that we contact your proxy services team directly or if you have any
questions, please contact Ed at 585-246-4176 or David at 585-246-4113.
Otherwise, one of us will give you a telephone call shortly to see if you have
any questions or concerns.
Thank you
in advance for your support.
Edward J.
Pettinella
President
and Chief Executive Officer
David P.
Gardner
Executive
Vice President and Chief Financial Officer