By Alfred Branch, JR.

There is not much that makes Edward Pettinella, president and CEO of Home Properties, Inc. (NYSE: HME), uneasy. He has deftly navigated complex business deals and the challenges of operating in the public markets during his six years at the helm of the company.

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AGE: 55 years old FAMILY: Two sons EDUCATION: Geneseo State University, B.S. in Management; Syracuse University, MBA in Finance MOST RECENTLY READ BOOK: Jim Cramer's "Mad Money" MOST RECENTLY WATCHED MOVIE: The Departed FAVORITE SPORTS TEAM: University of Virginia's men's basketball team FAVORITE HOBBIES: Running, tennis, golf and family activities PROFESSIONAL ACTIVITIES: Board member for the National Multi Housing Council; audit committee member for the National Association of Real Estate Investment Trusts (NAREIT); council member for the Urban Land Institute COMMUNITY AFFILIATIONS: Chairman of the board for the United Way of Greater Rochester; audit committee member for the Lifetime Healthcare Companies; board member for Syracuse University's Whitman School of Management; vice chairman and board member, finance/audit committee for Rochester Business Alliance; past chairman of the board for Geneseo State University Foundation; past chairman of the board for YMCA of Greater Rochester; past board member of Rochester Downtown Development Corporation; past board member of the Memorial Art Gallery; past board member for the Visiting Nurse Service

What worries him? Basketball. Specifically, University of Virginia basketball games where his son, Ryan, is a power forward on the team. "No question about it, watching one of Ryan's games makes me nervous. It can be nerve-wracking, but I'm able to sit quietly through it," the father of two says.

When he's not watching a basketball game, Pettinella's own moves on the Home Properties court have led to impressive growth for the company, culminating in 2006 with a 51.6 percent jump in its stock price for the year. At press time, Home Properties' stock was trading at more than $60 per share with a market cap of $1.9 billion.

Portfolio got on the frontcourt with Pettinella to discuss Home Properties' acquisition strategy, development pipeline and long-term opportunities in the apartment sector.

Portfolio: Home Properties has launched a number of strategic initiatives over the last six years to burnish its image among shareholders and tenants. What steps have you taken to achieve this?

Pettinella: We have repositioned our portfolio away from just owning properties in the Northeast and Midwest and begun concentrating acquisitions in high growth metropolitan markets up and down the eastern seaboard. We now own 120 properties in Delaware, Florida, Illinois, Maine, Maryland, Massachusetts, New Jersey, New York, Ohio, Pennsylvania and Virginia.

We are also paying attention to the fundamentals within the marketplace. Occupancy rates are generally holding steady, and by repositioning its East Coast portfolio, Home Properties is better able to offer units in regions where job growth is increasing. The East could see 1.7 million new jobs in 2007.

Portfolio: Where do you see your growth opportunities in those regions, and what states are you eyeing for future expansion?

Pettinella: We intend to focus solely on growing the East Coast operation. Our growth has and continues to come from all of the major hubs we already have in place, like Boston, New York, Philadelphia, Baltimore, Washington D.C. and Southeast Florida.

Portfolio: How will that growth be achieved—acquisitions or development?

Pettinella: In 2007, the company plans on spending about $400 million for acquisitions, and we will continue to look at the East Coast. Over the next few years, we also hope to slowly expand our new development program, which we launched to help compete with the other top 12 apartment REITs, such as Archstone-Smith (NYSE: ASN) and BRE Properties, Inc. (NYSE: BRE), that already have development initiatives. Currently, the company is concentrating its development efforts in the Baltimore/Washington DC area.

Portfolio: After The Blackstone Group's $39 billion acquisition of Equity Office Properties, some analysts were saying no REITs were safe from large private investors taking them private. Do you think your company's sector will see more privatization, and have you entertained the idea for Home Properties?

Pettinella: It is clear that there is an extraordinary amount of capital in the marketplace right now. I believe there are a few other companies in the REIT sector that will decide this is the time to sell because of the unprecedented circumstances in our industry.

Home Properties' philosophy is to maximize returns to shareholders from our operating business as an on-going concern. Beyond that, the board of directors takes seriously its fiduciary responsibility to act in the best interests of shareholders and if a bona fide full value offer were presented, the board would carefully evaluate it and act in the best interest of the company and its stakeholders.

Portfolio: What challenges and opportunities do you see for the apartment sector through the end of 2007?

Pettinella: The apartment sector has enjoyed strong fundamentals over the past two years. The big question is how long this good environment will last. It is our feeling that the next two years will be very positive for our industry, especially if interest rates and the economy stay on course.

Portfolio: What are some initiatives Home Properties has taken to improve operating systems as well as services that you plan to provide residents?

Pettinella: Some back-office decisions surrounding our computer and operating systems have helped improve the bottom line. We have implemented MRI accounting software tools and switched to the Lease Rent Optimizer (LRO) to help streamline paper flow and improve our pricing mechanism. The moves could help add 5 cents per share to our FFO. In addition, we are building our Internet presence to help potential residents make the connection with an apartment.

Currently, we're the only company in the sector with a 24/7 call center, which we refer to as our contact center, and residents can do virtually all of their searching and research, in addition to reserving units, online.

We are also planning on enhancing our use of the Internet as a vehicle to aggressively communicate with prospective residents to lease apartments with Home Properties.

Portfolio: If you were on an investor road show, what would you tell a potential investor when asked about Home Properties' greatest attributes?

Pettinella: We have a strong reputation for completing acquisitions and doing what we say we will do. We are noted for being a strong property manager with major rehab skills in the C/B quality apartment sector. Home Properties has a huge focus on high-level customer service for our resident base.