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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

         (Mark One)

                 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
                     15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2003

                                       OR

                 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
                     15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 1-13136

                        HOME PROPERTIES OF NEW YORK, INC.
             (Exact name of registrant as specified in its charter)

            MARYLAND                                        16-1455126
(State or other jurisdiction of                    (IRS Employer Identification
 incorporation or organization)                               Number)

                  850 Clinton Square, Rochester, New York 14604
               (Address of principal executive offices) (Zip Code)

                                 (585) 546-4900
              (Registrant's telephone number, including area code)

                                       N/A
                     (Former name, former address and former
                       year, if changed since last report)

Indicate by check mark whether  registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                  YES   X     NO
                                      -----      -----


Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).

                                  YES   X     NO
                                      -----      -----

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

Class of Common Stock                            Outstanding at July 31, 2003
    $.01 par value                                        28,963,842


                        HOME PROPERTIES OF NEW YORK, INC.

                                TABLE OF CONTENTS


                                                                              PAGE
                                                                              ----

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets -
             June 30, 2003 (Unaudited) and December 31, 2002                     3

         Consolidated Statements of Operations (Unaudited) -
             Six months ended June 30, 2003 and 2002                             4

         Consolidated Statements of Operations (Unaudited) -
             Three months ended June 30, 2003 and 2002                           5

         Consolidated Statements of Comprehensive Income (Unaudited) -
             Six months ended June 30, 2003 and 2002                             6

         Consolidated Statements of Comprehensive Income (Unaudited) -           7
             Three months ended June 30, 2003 and 2002

         Consolidated Statements of Cash Flows (Unaudited) -                     8
             Six months ended June 30, 2003 and 2002

         Notes to Consolidated Financial Statements (Unaudited)               9-22

Item 2.  Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                       33-36

Item 3.  Quantitative and Qualitative Disclosures About Market Risk             37

Item 4.  Controls and Procedures                                                38

PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K                                       39

         Signatures                                                          40-45


                         PART I - FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS
                        HOME PROPERTIES OF NEW YORK, INC.
                           CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 2003 AND DECEMBER 31, 2002
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                                                              2003               2002
                                                                                              ----               ----
                                                                                       (Unaudited)            (Note1)
ASSETS
Real estate:
  Land                                                                                    $384,270           $376,998
  Buildings, improvements and equipment                                                  2,277,499          2,220,280
                                                                                        ----------         ----------
                                                                                         2,661,769          2,597,278
  Less:  accumulated depreciation                                                         (292,780)          (257,284)
                                                                                        ----------         ----------
         Real estate, net                                                                2,368,989          2,339,994

Cash and cash equivalents                                                                    6,710              8,782
Cash in escrows                                                                             43,989             45,735
Accounts receivable                                                                          6,746              7,576
Prepaid expenses                                                                            11,054             19,046
Investment in and advances to affiliates                                                    10,525             19,475
Deferred charges                                                                             8,794              9,093
Other assets                                                                                 7,569              6,565
                                                                                        ----------         ----------
         Total assets                                                                   $2,464,376         $2,456,266
                                                                                        ==========         ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable                                                                  $1,318,111         $1,300,807
Line of credit                                                                              39,000             35,000
Accounts payable                                                                            14,447             19,880
Accrued interest payable                                                                     7,009              6,612
Accrued expenses and other liabilities                                                      14,981             12,412
Security deposits                                                                           22,222             22,252
                                                                                        ----------         ----------
         Total liabilities                                                               1,415,770          1,396,963
                                                                                        ----------         ----------

Commitments and contingencies
Minority interest                                                                          328,258            333,061
Stockholders' equity:
   Cumulative redeemable preferred stock, $.01 par value; 3,000,000
     shares authorized; 2,400,000 shares issued and outstanding at
     June 30, 2003 and December 31, 2002                                                    60,000             60,000
   Convertible cumulative preferred stock, $.01 par value; 10,000,000 shares
authorized; 750,000 and 1,086,800 shares issued and outstanding at
June 30, 2003 and December 31, 2002, respectively                                           74,000            107,680
   Common stock, $.01 par value; 80,000,000 shares authorized; 28,867,094 and
     27,027,003 shares issued and outstanding at June 30, 2003 and December
     31, 2002, respectively                                                                    289                270
   Excess stock, $.01 par value; 10,000,000 shares authorized; no shares
     issued or outstanding                                                                       -                  -
   Additional paid-in capital                                                              697,718            649,489
   Accumulated other comprehensive income                                                    (880)              (972)
   Distributions in excess of accumulated earnings                                       (110,208)           (89,452)
   Officer and director notes for stock purchases                                            (571)              (773)
                                                                                        ----------         ----------
         Total stockholders' equity                                                        720,348            726,242
                                                                                        ----------         ----------
         Total liabilities and stockholders' equity                                     $2,464,376         $2,456,266
                                                                                        ==========         ==========

The accompanying notes are an integral part of these consolidated financial statements.


                        HOME PROPERTIES OF NEW YORK, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
           (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                                                             2003              2002
                                                                                             ----              ----
Revenues:
   Rental income                                                                         $206,240          $177,971
   Property other income                                                                    7,808             6,615
   Interest and dividend income                                                               299               795
   Other income                                                                             2,321             1,084
                                                                                       ----------        ----------
         Total Revenues                                                                   216,668           186,465
                                                                                       ----------        ----------

Expenses:
   Operating and maintenance                                                               95,812            79,755
   General and administrative                                                               9,701             5,921
   Interest                                                                                42,934            36,713
   Prepayment penalty                                                                       1,349                 -
   Depreciation and amortization                                                           38,524            30,703
   Impairment of real property                                                                423                 -
   Impairment of assets held as General Partner                                               520                 -
                                                                                       ----------        ----------
         Total Expenses                                                                   189,263           153,092
                                                                                       ----------        ----------
Income from operations                                                                     27,405            33,373
Equity in earnings (losses) of unconsolidated affiliates                                   (1,184)           (1,100)
                                                                                       ----------        ----------
Income before minority interest and discontinued operations                                26,221            32,273
Minority interest                                                                           7,111             7,746
                                                                                       ----------        ----------
Income from continuing operations                                                          19,110            24,527
                                                                                       ----------        ----------
Discontinued operations
   Income from operations, net of $60 in 2003 and $1,001 in 2002 allocated to
     minority interest                                                                        103             1,599
   Gain on disposition of property, net of $188 in 2003 and $1,646 in 2002
     allocated to minority interest                                                           320             2,689
                                                                                       ----------        ----------
Discontinued operations                                                                       423             4,288
                                                                                       ----------        ----------
Income before loss on disposition of property                                              19,533            28,815
Loss on disposition of property, net of $5 in 2003 and $157 in 2002 allocated
     to minority interest                                                                     (10)             (245)
                                                                                       ----------        ----------
Net income                                                                                 19,523            28,570
Preferred dividends                                                                       (6,710)           (7,234)
Premium on Series B preferred stock repurchase                                                  -           (5,025)
                                                                                       ----------        ----------
Net income available to common shareholders                                               $12,813           $16,311
                                                                                       ==========        ==========

Basic earnings per share data:
   Income from continuing operations                                                         $.44              $.47
   Discontinued operations                                                                    .02               .17
                                                                                       ----------        ----------
Net income available to common shareholders                                                  $.46              $.64
                                                                                       ==========        ==========

Diluted earnings per share data:
   Income from continuing operations                                                         $.43              $.47
   Discontinued operations                                                                    .02               .16
                                                                                       ----------        ----------
Net income available to common shareholders                                                  $.45              $.63
                                                                                       ==========        ==========

Weighted average number of shares outstanding:
  Basic                                                                                27,881,682        25,451,169
                                                                                       ==========        ==========
  Diluted                                                                              28,307,215        25,773,934
                                                                                       ==========        ==========

The accompanying notes are an integral part of these consolidated financial statements.

                        HOME PROPERTIES OF NEW YORK, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002
           (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                                                             2003              2002
                                                                                             ----              ----
Revenues:
   Rental income                                                                         $104,319           $91,887
   Property other income                                                                    4,163             3,482
   Interest and dividend income                                                               109               422
   Other income                                                                             1,122               535
                                                                                       ----------        ----------
         Total Revenues                                                                   109,713            96,326
                                                                                       ----------        ----------

Expenses:
   Operating and maintenance                                                               46,040            38,688
   General and administrative                                                               4,582             2,822
   Interest                                                                                21,634            18,909
   Depreciation and amortization                                                           19,471            16,269
   Impairment of assets held as General Partner                                                93                 -
                                                                                       ----------        ----------
         Total Expenses                                                                    91,820            76,688
                                                                                       ----------        ----------
Income from operations                                                                     17,893            19,638
Equity in earnings (losses) of unconsolidated affiliates                                     (444)             (224)
                                                                                       ----------        ----------
Income before minority interest and discontinued operations                                17,449            19,414
Minority interest                                                                           5,174             4,003
                                                                                       ----------        ----------
Income from continuing operations                                                          12,275            15,411
                                                                                       ----------        ----------
Discontinued operations
   Income from operations, net of $584 allocated to minority interest                           -               954
   Gain (loss) on disposition of property, net of ($75) in 2003 and $1,672 in
     2002 allocated to minority interest                                                     (131)            2,729
                                                                                       ----------        ----------
Discontinued operations                                                                      (131)            3,683
                                                                                       ----------        ----------
Income before loss on disposition of property                                              12,144            19,094
Loss on disposition of property, net of $5 in 2003 and $10 in 2002 allocated to
     minority interest                                                                        (10)              (16)
                                                                                       ----------        ----------
Net income                                                                                 12,134            19,078
Preferred dividends                                                                        (3,192)           (3,852)
Premium on Series B preferred stock repurchase                                                  -            (5,025)
                                                                                       ----------        ----------
Net income available to common shareholders                                                $8,942           $10,201
                                                                                       ==========        ==========

Basic earnings per share data:
   Income from continuing operations                                                         $.32              $.25
   Discontinued operations                                                                      -               .14
                                                                                       ----------        ----------
Net income available to common shareholders                                                  $.32              $.39
                                                                                       ==========        ==========

Diluted earnings per share data:
   Income from continuing operations                                                         $.31              $.25
   Discontinued operations                                                                      -               .14
                                                                                       ----------        ----------
Net income available to common shareholders                                                  $.31              $.39
                                                                                       ==========        ==========

Weighted average number of shares outstanding:
  Basic                                                                                28,289,752        26,053,314
                                                                                       ==========        ==========
  Diluted                                                                              28,807,558        26,449,554
                                                                                       ==========        ==========

The accompanying notes are an integral part of these consolidated financial statements.

                        HOME PROPERTIES OF NEW YORK, INC.

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                 FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
                            (UNAUDITED, IN THOUSANDS)

                                                                    2003           2002
                                                                    ----           ----
Net income                                                       $19,523        $28,570
Other comprehensive income (net of minority interest):
     Change in fair value of hedge instruments                        92            (88)
                                                                 -------        -------

Comprehensive income                                             $19,615        $28,482
                                                                 =======        =======

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                          PROPERTIES OF NEW YORK, INC.

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002
                            (UNAUDITED, IN THOUSANDS)

                                                                    2003           2002
                                                                    ----           ----
Net income                                                       $12,134        $19,078
Other comprehensive income (net of minority interest):
     Change in fair value of hedge instruments                        36           (281)
                                                                 -------        -------

Comprehensive income                                             $12,170        $18,797
                                                                 =======        =======

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                         HOME PROPERTIES OF NEW YORK, INC.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
                                             (UNAUDITED, IN THOUSANDS)

                                                                                        2003           2002
                                                                                        ----           ----
Cash flows from operating activities:
  Net income                                                                         $19,523        $28,570
                                                                                     -------       --------
 Adjustments to reconcile net income to net cash provided by operating
    activities:

     Equity in (earnings) losses of unconsolidated affiliates                          1,184          1,100
     Income allocated to minority interest                                             7,354         10,236
     Depreciation and amortization                                                    39,279         32,465
     Impairment of assets held as General Partner                                        520              -
     Impairment of real property                                                         423              -
     (Gain) loss on disposition of property                                            (493)        (3,933)
     Loss from early extinguishment of debt                                            1,349              -
     Changes in assets and liabilities:
        Other assets                                                                   9,679          4,495
        Accounts payable and accrued liabilities                                     (2,515)            215
                                                                                     -------       --------
         Total adjustments                                                            56,780         44,578
                                                                                     -------       --------                                                                                     -------       --------
         Net cash provided by operating activities                                    76,303         73,148
                                                                                     -------       --------
Cash flows used in investing activities:
   Purchase of properties and other assets, net of mortgage
    notes assumed and UPREIT Units issued                                           (32,173)      (166,865)
   Additions to properties                                                          (47,096)       (53,087)
   Proceeds from sale of properties, net                                              20,266        40,173
   Advances to affiliates                                                            (1,785)        (4,621)
   Payments on advances to affiliates                                                  4,081        10,055
                                                                                     -------       --------
         Net cash used in investing activities                                      (56,707)      (174,345)
                                                                                     -------       --------                                                                                     -------       --------

Cash flows from financing activities:
   Proceeds from sale of preferred stock, net                                              -         58,098
   Proceeds from sale of common stock, net                                            16,675         39,292
   Repurchase of Series B preferred stock                                                  -       (29,392)
   Proceeds from mortgage notes payable                                               50,800        104,330
   Payments of mortgage notes payable                                               (33,496)       (29,554)
   Payment of prepayment penalty in connection with the early
      extinguishment of debt                                                          (1,349)              -
   Proceeds from line of credit                                                       90,000         78,000
   Payments on line of credit                                                       (86,000)       (52,500)
   Payments of deferred loan costs                                                     (463)        (1,949)
   Additions to cash escrows, net                                                      1,746        (8,845)
   Repayment of officer loans                                                            202          1,963
   Dividends and distributions paid                                                 (59,783)       (56,226)
                                                                                     -------       --------
         Net cash provided by (used in) financing activities                        (21,668)        103,217
                                                                                     -------       --------
Net increase (decrease) in cash and cash equivalents                                 (2,072)          2,020
Cash and cash equivalents:
   Beginning of year                                                                   8,782         10,719
                                                                                     -------       --------
   End of year                                                                        $6,710        $12,739
                                                                                     =======       ========
Supplemental disclosure of non-cash operating, investing and financing
- ----------------------------------------------------------------------
   activities:
   -----------
Mortgage loans assumed associated with property acquisitions                          $    -        $69,907
Conversion of preferred to common stock                                               33,680         24,367
Exchange of UPREIT Units/partnership interest for common shares                        3,378          1,025
Fair value of hedge instruments                                                        1,472          1,054
Issuance of UPREIT Units associated with property and other acquisitions               4,806              -
Compensation cost of stock options issued                                                409              -

The accompanying notes are an integral part of these consolidated financial statements.


                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1.   Unaudited Interim Financial Statements

     The interim  consolidated  financial  statements of Home  Properties of New
     York,  Inc. (the "Company") have been prepared in accordance with generally
     accepted  accounting  principles for interim financial  information and the
     applicable rules and regulations of the Securities and Exchange Commission.
     Accordingly,  certain disclosures  accompanying annual financial statements
     prepared in accordance with generally  accepted  accounting  principles are
     omitted. The year-end balance sheet data was derived from audited financial
     statements,  but does not include  all  disclosures  required by  generally
     accepted  accounting  principles.   In  the  opinion  of  management,   all
     adjustments,  consisting solely of normal recurring adjustments,  necessary
     for the fair presentation of the consolidated  financial statements for the
     interim  periods  have been  included.  The  current  period's  results  of
     operations are not necessarily  indicative of results which  ultimately may
     be achieved for the year. The interim consolidated financial statements and
     notes thereto should be read in conjunction with the consolidated financial
     statements  and notes thereto  included in the Company's  Form 10-K for the
     year ended December 31, 2002.

2.   Organization and Basis of Presentation

     Organization

     The Company is engaged primarily in the ownership, management, acquisition,
     and   rehabilitation   of   residential   apartment   communities   in  the
     Northeastern,  Mid-Atlantic  and Midwestern  United States.  As of June 30,
     2003,  the  Company   operated  288  apartment   communities   with  50,840
     apartments. Of this total, the Company owned 151 communities, consisting of
     41,508  apartments,  managed as general  partner,  7,422 apartments and fee
     managed 1,910 apartments for affiliates and third parties. The Company also
     fee manages 2.2 million square feet of office and retail properties.

     Basis of Presentation

     The accompanying  consolidated financial statements include the accounts of
     the Company and its 63.7% (62.2% at June 30, 2002) partnership  interest in
     the  Operating  Partnership.  Such  interest  has  been  calculated  as the
     percentage of outstanding  common shares  divided by the total  outstanding
     common shares and Operating Partnership Units ("UPREIT Units") outstanding.
     The  remaining  36.3%  (37.8% at June 30,  2002) is  reflected  as Minority
     Interest in these  consolidated  financial  statements.  The Company owns a
     1.0%  general  partner  interest  in  the  Operating  Partnership  and  the
     remainder as a limited  partner through its wholly owned  subsidiary,  Home
     Properties I, LLC, which owns 100% of the limited partner,  Home Properties
     Trust.  Home  Properties  Trust was formed in September 1997, as a Maryland
     real estate trust and as a qualified REIT  subsidiary  ("QRS") and owns the
     Company's  share  of  the  limited  partner   interests  in  the  Operating
     Partnership.  For  financing  purposes,  the  Company  has formed a limited
     liability   company  (the  "LLC")  and  a   partnership   (the   "Financing
     Partnership"),   which  beneficially  own  certain  apartment   communities
     encumbered  by  mortgage  indebtedness.  The  LLC is  wholly  owned  by the
     Operating  Partnership.  The  Financing  Partnership  is owned 99.9% by the
     Operating Partnership and 0.1% by the QRS.

     Effective  January  1,  2003,  the  accompanying   consolidated   financial
     statements  include the accounts of Home  Properties  Management,  Inc. and
     Home Properties Resident Services, Inc. (the "Management  Companies").  The
     Operating  Partnership acquired all of the shares held by Nelson and Norman
     Leenhouts  ("the  Leenhoutses")  in the first quarter of 2003. The value of
     the Leenhoutses shares was based upon an internal valuation and amounted to
     approximately  $81. As a result,  the  Management  Companies are now wholly
     owned subsidiaries of the Company. Prior to January 1, 2003, investments in
     these entities were accounted for using the equity method.  All significant
     intercompany  balances  and  transactions  have  been  eliminated  in these
     consolidated financial statements.

                       HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


2.   Organization and Basis of Presentation (continued)

     The Company  accounts for its investment as managing general partner ("GP")
     in unconsolidated  affordable housing limited partnerships ("LP") using the
     equity method of accounting.  As managing GP of the LP, the Company has the
     ability to exercise  significant  influence  over  operating  and financial
     policies.  This  influence  is  evident  in the  terms  of  the  respective
     partnership agreements,  participation in policy-making  processes, and the
     employment of its management personnel.  However, the Company does not have
     a controlling  interest in the  respective  LPs. The limited  partners have
     significant  rights,  such as the right to replace the general partner (for
     cause) and the right to approve  the sale or  refinancing  of the assets of
     the respective partnership in accordance with the partnership agreement.

     The Company  records its allocable  share of the  respective  partnership's
     income or loss  based on the terms of the  agreement.  To the  extent it is
     determined  that the LPs cannot  absorb their share of the losses,  if any,
     the GP will record the LPs share of such losses.  In addition to the extent
     the Company has  outstanding  loans or advances and the limited partner has
     no remaining capital account, the Company will absorb such losses.

     Reclassifications

     Certain reclassifications have been made to the 2002 consolidated financial
     statements to conform to the 2003 presentation.

     New Accounting Standards

     In January 2003, the FASB issued  Interpretation No. 46 - "Consolidation of
     Variable   Interest   Entities",   an   interpretation  of  ARB  No.  51  -
     "Consolidated   Financial   Statements."   The   interpretation   addresses
     consolidation by businesses of special purpose entities  (variable interest
     entities,  "VIE"). This interpretation  addresses consolidation by business
     enterprises of variable interest entities in which the equity investment at
     risk is not  sufficient  to permit  the entity to  finance  its  activities
     without additional  subordinated financial support from other parties or in
     which the equity investors do not have the characteristics of a controlling
     financial interest. This interpretation requires a variable interest entity
     to be consolidated by a company if that company is subject to a majority of
     the risk of loss from the variable interest entity's activities or entitled
     to  receive a  majority  of the  entity's  residual  returns  or both.  The
     interpretation  also requires  disclosures about variable interest entities
     that the  company  is not  required  to  consolidate  but in which it has a
     significant  variable  interest.  The  consolidation  requirements  of this
     interpretation  apply  immediately to variable  interest  entities  created
     after  January 31,  2003,  and in the first  fiscal year or interim  period
     beginning  after June 15, 2003,  to existing  variable  interest  entities.
     Management is uncertain but is assuming it is reasonably possible that each
     of the  limited  partnerships  in which it holds  the  general  partnership
     interest  would be  considered  a VIE  where  the  Company  is the  primary
     beneficiary, and as a result the Company would consolidate all or a certain
     number of the limited partnership's assets and liabilities.






                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2.   Organization and Basis of Presentation (continued)

     In April 2003,  the FASB issued SFAS No. 149 "Amendment of Statement 133 on
     Derivative  Instruments and Hedging Activities".  This Statement amends and
     clarifies  financial  accounting and reporting for derivative  instruments,
     including certain  derivative  instruments  embedded in other contracts and
     for hedging  activities  under SFAS No.  133,  "Accounting  for  Derivative
     Instruments  and Hedging  Activities."  This  Statement  is  effective  for
     contracts  entered into or modified  after June 30, 2003. The provisions of
     FAS  149 are  not  expected  to have a  material  impact  on the  Company's
     financial statements.

     In May 2003,  FASB  issued  SFAS 150,  "Accounting  for  Certain  Financial
     Instruments  with  Characteristics  of Both  Liabilities  and Equity." This
     Statement  establishes  standards for how an issuer classifies and measures
     certain financial  instruments with characteristics of both liabilities and
     equity. It requires that an issuer classify a financial  instrument that is
     within its scope as a liability (or an asset in some  circumstances).  This
     Statement is effective for financial  instruments  entered into or modified
     after May 31, 2003,  and  otherwise  is  effective at the  beginning of the
     first interim period beginning after June 15, 2003. The Company is still in
     the process of  evaluating  the  potential  impact of this  standard on its
     financial statements.

3.   Adoption of New Accounting Policy

     Effective  January 1, 2003, the Company  adopted the provisions of SFAS 148
     "Accounting for Stock Based Compensation - An Amendment of SFAS 123." Under
     the transition  provisions of this  Statement,  the Company has elected the
     "Modified  Prospective  Method" for  recognizing  stock-based  compensation
     costs for the three and six-month  periods ended June 30, 2003.  Under this
     method  the  Company  recognizes  stock-based  compensation  cost  from the
     beginning of the fiscal year in which the recognition  provisions are first
     applied as if the fair value based accounting  method in this Statement had
     been used to account for all employee awards granted,  modified, or settled
     in fiscal  years  beginning  after  December  15,  1994.  For the three and
     six-months  ended  June 30,  2003,  the Company  recognized  $372 and $652,
     respectively, in stock compensation costs related to its stock compensation
     plans.  Of this total,  $207 and $409, for the three and six-month  periods
     ended  June 30,  2003,  respectively,  related  to the  expensing  of stock
     compensation  costs  associated  with stock options granted by the Company.
     The remaining $165 and $243, for the three and six-month periods ended June
     30, 2003, respectively, pertains to the stock compensation costs recognized
     by the Company relative to its restricted stock grants.

     For the three and  six-months  ended June 30,  2002,  the Company  used the
     intrinsic  value method in accordance  with the Accounting  Principle Board
     Opinion  No.  25  ("APB  No.  25")  to  account  for  stock-based  employee
     compensation arrangements. Under this method, the Company did not recognize
     compensation  cost for stock options when the option  exercise price equals
     or exceeded the market value on the date of grant.  Restricted stock grants
     were recognized as compensation  expense over the vesting period based upon
     the  market  value  on the  date  of  grant.  Had  the  Company  determined
     compensation  cost  based upon the fair  value of the stock  option  grants
     under SFAS No. 123,  "Accounting  for Stock-Based  Compensation,"  the fair
     values of the options  granted at the grant dates  would be  recognized  as
     compensation expense over the vesting periods, and the Company's net income
     and earnings per share for the three and  six-month  periods ended June 30,
     2002 would have been as follows:

                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


3.   Adoption of New Accounting Policy (continued)


                                                                  Six Months     Three Months
                                                                  ----------     ------------
                                                                        2002             2002
                                                                        ----             ----

     Net income, as reported                                         $16,311          $10,201
     Total stock compensation cost recognized                            116               64
     Total stock compensation cost had SFAS 123 been adopted            (491)            (276)
                                                                     -------           ------
     Proforma net income had SFAS 123 been adopted                   $15,936           $9,989
                                                                     =======           ======

     Per share data:
       Basic - as reported                                             $0.64            $0.39
                                                                     =======           ======
       Basic - proforma                                                $0.63            $0.38
                                                                     =======           ======

       Diluted - as reported                                           $0.63            $0.39
                                                                     =======           ======
       Diluted - proforma                                              $0.62            $0.38
                                                                     =======           ======

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes  option-pricing model with the following assumptions used
     for grants in 2003 and 2002:  dividend  yields ranging from 8.40% to 9.40%;
     expected  volatility  of 19.17%;  and  expected  lives of 7.5 years for the
     options  with a lifetime of ten years,  and five years for  options  with a
     lifetime of five years. The interest rate used in the option-pricing  model
     is based on a risk free interest rate ranging from 4.29% to 6.87%.


4.   Earnings Per Common Share

     Basic  earnings  per share  ("EPS") is computed as net income  available to
     common shareholders divided by the weighted average number of common shares
     outstanding  for the period.  Diluted EPS reflects the  potential  dilution
     that  could  occur  from  common  shares   issuable   through   stock-based
     compensation  including  stock options,  restricted  stock,  phantom shares
     under  the  Company's   incentive   compensation  plan,  warrants  and  the
     conversion of any cumulative  convertible  preferred stock. The exchange of
     an  Operating  Partnership  Unit for  common  stock  will have no effect on
     diluted EPS as Unitholders and  stockholders  effectively  share equally in
     the  net  income  of the  Operating  Partnership.  Income  from  continuing
     operations is the same for both the basic and diluted calculation.


                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



4.   Earnings Per Common Share (continued)

     The  reconciliation  of the basic weighted  average shares  outstanding and
     diluted  weighted  average shares  outstanding for the six and three-months
     ended June 30, 2003 and 2002 is as follows:

                                                                          Six Months               Three Months
                                                                    --------------------      ---------------------
                                                                       2003         2002         2003          2002
                                                                       ----         ----         ----          ----

          Income from continuing operations                         $19,110      $24,527      $12,275       $15,411
          Less: Loss on disposal of property                           (10)        (245)         (10)          (16)
          Less: Preferred dividends                                 (6,710)      (7,234)      (3,192)       (3,852)
          Less: Premium on Series B preferred stock repurchase            -      (5,025)            -       (5,025)
                                                                 ----------   ----------   ----------    ----------
          Basic and Diluted - Income from continuing
          operations
            applicable to common shareholders                       $12,390      $12,023       $9,073        $6,518
          Discontinued operations                                       423        4,288        (131)         3,683
                                                                 ----------   ----------   ----------    ----------
          Net income available to common shareholders               $12,813      $16,311       $8,942       $10,201
                                                                 ==========   ==========   ==========    ==========

          Basic weighted average number of shares outstanding    27,881,682   25,451,169   28,289,752    26,053,314
          Effect of dilutive stock options                          282,452      322,765      375,253       396,240
          Effect of phantom and restricted shares                   143,081            -      142,553             -
                                                                 ----------   ----------   ----------    ----------
          Diluted weighted average number of shares
            outstanding                                          28,307,215   25,773,934   28,807,558    26,449,554
                                                                 ==========   ==========   ==========    ==========

          Basic earnings per share
            Income from continuing operations                          $.44         $.47         $.32          $.25
            Discontinued operations                                     .02          .17            -           .14
                                                                 ----------   ----------   ----------    ----------
          Net Income available to common shareholders                  $.46         $.64         $.32          $.39
                                                                 ==========   ==========   ==========    ==========

          Basic earnings per share
            Income from continuing operations                          $.43         $.47         $.31          $.25
            Discontinued operations                                     .02          .17            -           .14
                                                                 ----------   ----------   ----------    ----------
          Net Income available to common shareholders                  $.45         $.63         $.31          $.39
                                                                 ==========   ==========   ==========    ==========

     Unexercised  stock  options  and  warrants  to  purchase  2,115,743  shares
     (excluding 701,190  anti-dilutive shares) of the Company's common stock are
     dilutive  and  included  in  diluted  weighted  average  number  of  shares
     outstanding as of June 30, 2003.  Unexercised stock options and warrants to
     purchase  2,401,648 shares (excluding 63,000  anti-dilutive  shares) of the
     Company's  common  stock are  dilutive  and  included  in diluted  weighted
     average  number of shares  outstanding as of June 30, 2002. For the six and
     three-months  periods ended June 30, 2003 (as  applicable and on a weighted
     average basis), the 1,085,078 and 831,143,  respectively,  of the Series B,
     C, D and E Convertible  Cumulative Preferred Stock (2,771,593 and 3,016,922
     common stock equivalents,  respectively)  have an anti-dilutive  effect and
     are not included in the  computation  of diluted EPS. In addition,  for the
     six and  three-months  periods ended June 30, 2002 (as  applicable and on a
     weighted average basis), the 1,945,580 and 1,448,343,  respectively, of the
     Series B, C, D and E Convertible  Cumulative Preferred Stock (4,444,277 and
     4,274,497 common stock equivalents,  respectively) on an as-converted basis
     have an  anti-dilutive  effect and are not included in the  computation  of
     diluted EPS.






                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



5.   Stockholders Equity

     On  January 9,  2003,  100,000  shares of Series C  Preferred  Shares  were
     converted into 330,579 shares of common stock. The conversion had no effect
     on the reported results of operations of the Company.

     On May 6, 2003,  36,800 shares of Series E Preferred  Shares were converted
     into 116,456  shares of common stock.  The  conversion had no effect on the
     reported results of operations of the Company.

     On May 8, 2003,  200,000 shares of Series C Preferred Shares were converted
     into 661,157  shares of common stock.  The  conversion had no effect on the
     reported results of operations of the Company.

6.   Other income

     Other income for the six and  three-month  periods  ended June 30, 2003 and
     2002 is summarized as follows:

                                Six Months                     Three-months
                                ----------                     ------------
                            2003           2002            2003            2002
                            ----           ----            ----            ----
     Management fees      $2,309           $969          $1,138            $473
     Other                    12            115            (16)              62
                          ------         ------          ------            ----
                          $2,321         $1,084          $1,122            $535
                          ======         ======          ======            ====
7.   Equity in earnings (losses) of unconsolidated affiliates

     Certain  property  management,   leasing  and  development  activities  are
     performed by the Management Companies.  Both are Maryland corporations and,
     effective  January 1,  2001,  have  elected  to  convert  to  taxable  REIT
     subsidiaries  under the Tax Relief Extension Act of 1999.  Through December
     31, 2002, the Operating  Partnership  owned non-voting  common stock in the
     Management  Companies  which entitled the Operating  Partnership to receive
     95% and 99% of the economic  interest in Home Properties  Management,  Inc.
     and Home Properties Resident Services,  respectively.  Effective January 1,
     2003, the Operating  Partnership  acquired all of the remaining shares held
     by the  Leenhoutses.  As a  result  of  this  transaction,  the  Management
     Companies  are  now  wholly  owned  subsidiaries  of  the Company  and  are
     reflected in the  consolidated  financial  statements from January 1, 2003.
     Prior to January 1, 2003, the  operations of the Management  Companies were
     recorded using the equity method of accounting.

     In addition,  the Company  accounts for its investment as managing  general
     partner in unconsolidated affordable housing limited partnerships using the
     equity method of accounting.  The Company's share of earnings (losses) from
     these  investments are included in this line item. The Company assesses the
     financial  status and cash flow of each of the partnerships at each balance
     sheet  date in order to  assess  recoverability  of its  investment  in and
     advances to these affiliates.

                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


7.   Equity in earnings (losses) of unconsolidated affiliates (continued)

     The Company's share of earnings (losses) from the Management  Companies and
     investment in limited  partnerships for the six and three-months ended June
     30, 2003 and 2002 is summarized as follows:

                                                                 Six Months                 Three Months
                                                                 ----------                 ------------
                                                                  2003         2002          2003          2002
                                                                  ----         ----          ----          ----
     Management fees                                         $      -       $1,417         $   -          $751
     Interest income                                                -          377             -           187
     Miscellaneous                                                  -           33             -            16
     General and administrative                                     -       (1,742)            -          (925)
     Interest expense                                               -         (386)            -          (173)
     Other expense                                                  -         (199)            -          (100)
                                                              -------      -------         -----         -----
     Net loss                                                       -        ($500)            -         ($244)
                                                              -------      -------         -----         -----
     Company's share                                                -        ($503)            -         ($242)
     Company's share of earnings (losses)
     from investment in limited partnerships                   (1,184)        (597)         (444)           18
                                                              -------      -------         -----         -----

     Equity in earnings (losses) of unconsolidated
     affiliates                                               ($1,184)     ($1,100)        ($444)        ($224)
                                                              =======      =======         =====         =====

     The  general and  administrative  expenses  reflected  above  represent  an
     allocation of direct and indirect costs  incurred by the Company  estimated
     by  management  to be  associated  with the  operations  of the  management
     companies.

     In December 2002, the Company, including its equity affiliates,  determined
     that it would market for sale virtually all of the assets  associated  with
     its  interest in various  affordable  housing  limited  partnerships.  Such
     assets include the equity interest in the affordable housing  partnerships,
     loans, advances and management  contracts.  The Company recorded impairment
     charges  aggregating  $520  during the first six months of 2003 from monies
     loaned to certain equity affiliates to fund operating shortfalls, which are
     not anticipated to be recovered from projected sale proceeds.

     The Company intends to sell the assets in three phases:

     Phase I consists  of the  Company's  interest in 40  properties  containing
     1,357 units,  all New York State Rural  Development  properties,  which are
     under  contract  to be sold.  A closing  is  anticipated  during  the third
     quarter of 2003 at approximately book value.

     Phase II consists of the  Company's  interest in 49  properties  with 1,471
     units, all Pennsylvania  Rural  Development  properties.  An offer has been
     accepted  for  approximately  book  value.  The  final  contract  is  being
     negotiated. The Company anticipates closing on this phase during the fourth
     quarter of 2003.

     Phase III consists of the Company's interest in the remaining 35 properties
     with 3,421 units,  primarily  located in Upstate New York and Pennsylvania.
     The  Company  has  received  competitive  bids and is  expected to select a
     qualified buyer in the next several months with closing  anticipated in the
     first quarter of 2004.

     The Company plans on retaining the general partner  interest in one 77-unit
     property  located in Rochester,  New York.  The property is 80% market rate
     and is managed as a market rate community.

                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


7.   Equity in earnings (losses) of unconsolidated affiliates (continued)

     Summarized  balance sheet information  relating to these partnerships is as
     follows (amounts are in thousands):

                                                              June 30,       December 31,
                                                              --------       ------------
                                                                  2003               2002
                                                                  ----               ----
     Balance Sheets:
       Real estate, net                                       $248,839           $266,613
       Other assets                                             33,135             37,764
                                                              --------           --------
         Total assets                                         $281,974           $304,377
                                                              ========           ========

       Mortgage notes payable                                 $247,149           $253,285
       Advances from affiliates                                 22,334             24,725
       Other liabilities                                        15,488             15,125
       Partners' equity (deficit)                               (2,997)            11,242
                                                              --------           --------
         Total liabilities and partners' equity (deficit)     $281,974           $304,377
                                                              ========           ========


     The  Company's  ability  to sell the  affordable  assets  on the  timelines
     described  above is  dependent  on a variety of factors,  some of which are
     outside of the Company's  control,  such as the receipt of the approvals of
     various partners, lenders and governmental agencies necessary for the sale.

                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



8.   Segment Reporting

     The  Company is engaged in the  ownership  and  management  of market  rate
     apartment  communities.  Each apartment  community is considered a separate
     operating segment.  Each segment on a stand alone basis is less than 10% of
     the revenues, profit or loss, and assets of the combined reported operating
     segments and meets the majority of the aggregation criteria under SFAS 131.
     The operating  segments are  aggregated and segregated as Core and Non-core
     properties.

     Non-segment  revenue to reconcile to total revenue consists of interest and
     dividend income and other income.  Non-segment assets to reconcile to total
     assets  include  cash  and  cash  equivalents,  cash in  escrows,  accounts
     receivable,  prepaid  expenses,  investments in and advances to affiliates,
     deferred charges and other assets.

     Core properties consist of all apartment  communities which have been owned
     more than one full calendar year. Therefore,  the Core Properties represent
     communities  owned as of January 1, 2002.  Non-core  properties  consist of
     apartment  communities  acquired  during 2002 and 2003, such that full year
     comparable operating results are not available.

     The accounting  policies of the segments are the same as those described in
     Notes 1 and 2 of the Company's Form 10-K.

     The Company  assesses and measures  segment  operating  results  based on a
     performance  measure referred to as Funds from Operations  ("FFO").  FFO is
     generally defined as net income (loss), before gains (losses) from the sale
     of property,  impairment  charges on depreciable  property or  investments,
     extraordinary  items, plus real estate depreciation  including  adjustments
     for  unconsolidated  partnerships  and joint  ventures less  dividends from
     non-convertible preferred shares. The Company considers debt extinguishment
     costs,  which are incurred as a result of repaying  property specific debt,
     as a component  of the gain or loss on sale of the  property.  FFO is not a
     measure of operating  results or cash flows from  operating  activities  as
     measured  by  generally  accepted  accounting  principles  and  it  is  not
     indicative  of  cash  available  to  fund  cash  needs  and  should  not be
     considered an  alternative  to cash flows as a measure of liquidity.  Other
     companies  may  calculate  similarly  titled  performance   measures  in  a
     different manner.




                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



8.   Segment Reporting (continued)

     The revenues, profit (loss), and assets for each of the reportable segments
     are  summarized  as follows as of and for the six and  three-month  periods
     ended June 30, 2003, and 2002.

                                                                              Six Months                 Three Months
                                                                       ----------------------      -----------------------
                                                                           2003          2002          2003           2002
                                                                           ----          ----          ----           ----
     Revenues
     Apartments owned
       Core properties                                                 $184,046      $178,211       $93,357        $90,155
       Non-core properties                                               30,002         6,376        15,125          2,215
     Reconciling items                                                    2,620         1,878         1,231            956
                                                                       --------      --------      --------        -------
     Total Revenue                                                     $216,668      $186,465      $109,713        $93,326
     Profit (loss)
     Funds from operations:
     Apartments owned
       Core properties                                                 $100,480      $100,898       $53,415        $53,356
       Non-core properties                                               17,756         3,934         9,027          3,326
     Reconciling items                                                    2,620         1,878         1,231            956
                                                                       --------      --------      --------        -------
     Segment contribution to FFO                                        120,856       106,710        63,673         57,638
     General & administrative expenses                                   (9,701)       (5,921)       (4,582)        (2,822)
     Interest expense                                                   (42,934)      (36,713)      (21,634)       (18,909)
     Depreciation of unconsolidated affiliates                            1,113           437           564             65
     Non-real estate depreciation/amortization                           (1,147)         (403)         (538)          (190)
     Redeemable preferred dividend (Series F)                            (2,700)       (1,455)       (1,350)        (1,350)
     Equity in earnings (losses) of unconsolidated affiliates            (1,184)       (1,100)         (444)          (224)
     Impairment of assets held as General Partner                          (520)            -           (93)             -
     Income from discontinued operations before minority
       interest, depreciation and loss on disposition of property           163         3,906             -          2,070
                                                                       --------      --------      --------        -------
     Funds from Operations                                               63,946        65,461        35,596         36,278
     Depreciation - apartments owned                                    (37,377)      (31,606)      (18,933)       (16,611)
     Depreciation of unconsolidated affiliates                           (1,113)         (437)         (564)           (65)
     Redeemable preferred dividend                                        2,700         1,455         1,350          1,350
     Prepayment penalty                                                  (1,349)            -             -              -
     Impairment of real property                                           (423)            -             -              -
     Income from discontinued operations before minority
     interest and loss on disposition of property                          (163)       (2,600)            -         (1,538)
     Minority interest                                                   (7,111)       (7,746)       (5,174)        (4,003)
                                                                       --------      --------      --------        -------
     Income from continuing operations                                  $19,110       $24,527       $12,275        $15,411
                                                                       ========      ========      ========        =======

     Assets - As of June 30, 2003 and December 31, 2002
     Apartments owned:
       - Core                                                                                    $1,876,161     $1,872,424
       - Non-core                                                                                   492,828        467,570
     Reconciling items                                                                               95,387        116,272
                                                                                                 ----------     ----------
     Total Assets                                                                                $2,464,376     $2,456,266
                                                                                                 ==========     ==========


                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


9.   Pro Forma Condensed Financial Information

     The Company acquired one apartment  community  ("2003 Acquired  Community")
     with 280 units in one transaction  during the six and  three-month  periods
     ended June 30, 2003. The total purchase price (including  closing costs) of
     $34 million  equates to approximately $121 per unit.  Consideration for the
     community was funded through the use of the Company's line of credit.

     In  addition,  the Company  disposed of two  apartment  communities  ("2003
     Disposed  Properties") with 552 units in two unrelated  transactions during
     the first  quarter of 2003.  The total  selling  price  (including  closing
     costs) of $19.3 million resulted in a $451 gain on sale of real estate, net
     of minority  interest.  Due to the prepayment of debt  associated  with the
     sale of one of the  properties,  a $1,349  charge was  recorded  during the
     first quarter.  During the second  quarter of 2003, the Company  reported a
     $131 loss,  net of  minority  interest,  relating  to  additional  expenses
     incurred in the same quarter for sales which took place during 2002.  These
     costs  represent  a change in  estimate  from those  accrued at the time of
     sale.

     The  following  proforma  information  was  prepared  as if  (i)  the  2003
     transaction related to the acquisition of the "2003 Acquired Community" had
     occurred  on  January 1, 2002,  (ii) the 2002  transactions  related to the
     acquisition of 21 apartment  communities in seven separate transactions had
     occurred on January 1, 2002,  (iii) the  disposition  of the "2003 Disposed
     Properties"  had  occurred on January 1, 2002,  (iv) the 2002  transactions
     related  to the  disposition  of  twelve  apartment  communities  in  eight
     separate  transactions  had  occurred on January 1, 2002,  and (v) the 2002
     Series F Preferred  Share offering and the two common equity  offerings had
     occurred on January 1, 2002.  The proforma  financial  information is based
     upon  the  historical   consolidated   financial   statements  and  is  not
     necessarily  indicative of the  consolidated  results which  actually would
     have occurred if the  transactions had been consummated at the beginning of
     2002, nor does it purport to represent the results of operations for future
     periods.  Adjustments  to the  proforma  condensed  combined  statement  of
     operations  for the six and  three-months  ended  June 30,  2003 and  2002,
     consist  principally  of providing  net  operating  activity and  recording
     interest, depreciation and amortization from January 1, 2002 to the earlier
     of June 30, 2003 or 2002, as applicable, or the acquisition date.
                                                          For the Six-months Ended       For the Three-months Ended
                                                          ------------------------       --------------------------
                                                                     June 30                         June 30
                                                                 2003         2002             2003            2002
                                                                 ----         ----             ----            ----

     Total revenues                                          $217,164     $208,366         $109,961        $105,384

     Net income available to common shareholders               13,618       16,652            9,152           7,981

     Per common share data:
     Net income available to common shareholders
         Basic                                                  $0.49        $0.64            $0.32           $0.30
         Diluted                                                $0.48        $0.63            $0.32           $0.29

     Weighted average numbers of shares outstanding:
         Basic                                             27,881,682   26,035,093       28,289,752      26,757,916
         Diluted                                           28,307,215   26,357,858       28,807,558      27,154,156

                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



10.  Derivative Financial Instruments

     The Company has three interest rate swaps that effectively convert variable
     rate debt to fixed rate debt. As of June 30, 2003, the aggregate fair value
     of the Company's  interest rate swaps was $1,472 prior to the allocation of
     minority interest and is included in accrued expenses and other liabilities
     in the  consolidated  balance  sheets.  For the six-months  ending June 30,
     2003, as the critical terms of the interest rate swaps and the hedged items
     are  the  same,  no  ineffectiveness   was  recorded  in  the  consolidated
     statements of  operations.  All  components of the interest rate swaps were
     included in the  assessment of hedge  effectiveness.  The fair value of the
     interest rate swaps is based upon the estimate of amounts the Company would
     receive or pay to  terminate  the  contract  at the  reporting  date and is
     estimated using interest rate market pricing models.

11.  Disposition of Property and Discontinued Operations

     Included in discontinued operations for the six-month period ended June 30,
     2002 are fourteen apartment community  dispositions (two and twelve sold in
     2003  and  2002,  respectively)  and two  properties  sold in 2003  for the
     six-month  period  ended June 30, 2003.  For  purposes of the  discontinued
     operations  presentation,   the  Company  only  includes  interest  expense
     associated with specific  mortgage  indebtedness of the properties that are
     sold or classified as held for sale.  Properties  classified in this manner
     through June 30, 2003,  have been reflected on a comparative  basis for the
     period ended June 30, 2002.

     As part of its strategic disposition program, during 2002, the Company sold
     twelve  properties with a total of 1,724 units for total  consideration  of
     $87 million,  or an average of $51 per unit. In January,  2003, the Company
     sold the two  apartment  communities  referred to above having 552 units in
     two unrelated transactions.  The total sales price of $21.1 million equates
     to $38 per unit.  A gain on sale of  approximately  $451,  net of  minority
     interest,  was recorded in the first quarter from these transactions and is
     reflected  in  discontinued  operations.  Due to  the  prepayment  of  debt
     associated  with the sale of one of the  properties,  a $1,349  charge  was
     recorded during the first quarter.  During the second quarter,  the Company
     reported a $131 loss,  net of minority  interest,  relating  to  additional
     expenses  incurred in the same  quarter  for sales which took place  during
     2002.  These costs represent a change in estimate from those accrued at the
     time of sale.

     In  connection  with the Company's  strategic  asset  disposition  program,
     management is constantly reevaluating the performance of its portfolio on a
     property-by-property  basis.  The Company from time to time determines that
     it is in the best  interest  of the  Company to dispose of assets that have
     reached their  potential or are less efficient to operate due to their size
     or remote location and reinvest such proceeds in higher  performing  assets
     located in targeted  geographic  markets.  It is possible  that the Company
     will sell such  properties at a loss. In addition,  it is possible that for
     assets held for use, certain holding period assumptions made by the Company
     may change which could result in the  Company's  recording of an impairment
     charge.




                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


11.  Disposition of Property and Discontinued Operations (continued)

     On July 25, 2003, the Company sold one additional community with a total of
     212  units.  The total  sales  price of $10.5  million  equates  to $50 per
     apartment  unit. The Company  expects to record a loss on sale in the third
     quarter,  net of minority interest of approximately $240. This property has
     not been  reflected  in  discontinued  operations  at June 30,  2003 as all
     significant contingencies surrounding the sale had not been resolved.

     The operating  results of the  components of  discontinued  operations  are
     summarized  as follows for the six and  three-month  periods ended June 30,
     2003 and 2002.
                                                                     Six months                Three months
                                                                     ----------                ------------
                                                                 2003          2002          2003         2002
                                                                 ----          ----          ----         ----
     Revenues:
        Rental Income                                            $184        $6,826            $-       $2,994
        Property other income                                       6           187             -           92
                                                                 ----        ------         -----       ------
     Total Revenues                                               190         7,013             -        3,086
                                                                 ----        ------         -----       ------

              Operating and Maintenance                            (6)        2,612             -          799
        Interest expense                                           33           495             -          217
        Depreciation and amortization                               -         1,306             -          532
                                                                 ----        ------         -----       ------
     Total Expenses                                                27         4,413             -        1,548
                                                                 ----        ------         -----       ------

     Income from discontinued operations before
        minority interest and gain (loss) on
        disposition of property                                   163         2,600             -        1,538

     Minority interest                                             60         1,001             -          584
                                                                 ----        ------         -----       ------

     Income from discontinued operations before gain
       (loss) on disposition of property and related
       minority interest                                          103         1,599             -          954

     Gain (loss) on disposition of property                       320         2,689          (131)       2,729
                                                                 ----        ------         -----       ------

     Income (loss) from discontinued operations                  $423        $4,288         ($131)      $3,683
                                                                 ====        ======         =====       ======

12.  Commitments and Contingencies

     Contingencies

     In 2001,  the Company  underwent a state tax audit.  The state has assessed
     taxes of $469 for the 1998 and 1999 tax years under  audit.  If the state's
     position  is  applied  to all tax years  through  December  31,  2001,  the
     assessment  would be  $1.3 million.  At the time, the Company  believed the
     assessment and the state's underlying  position was neither  supportable by
     the law nor consistent with  previously  provided  interpretative  guidance
     from the office of the State  Secretary  of Revenue.  After two  subsequent
     enactments by the state legislature during 2002 affecting the pertinent tax
     statute,  the  Company  has been  advised  that  its  filing  position  for
     1998-2001 should prevail.  Based upon this information as of June 30, 2003,
     the Company has  recorded  an accrual of $525,  representing  only its 2002
     liability. Effective January 1, 2003, the Company reorganized the ownership
     of Home Properties  Trust,  subjecting the Company to a much lower level of
     tax going forward.




                        HOME PROPERTIES OF NEW YORK, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

12.  Commitments and Contingencies (continued)

     Guarantees

     The  Company has  guaranteed  a total of $597 of debt  associated  with two
     entities where the Company is the general partner. All other mortgage notes
     payable of affiliates are non-recourse debt to the limited partnerships and
     the Company.  In addition,  the  Company,  through its general  partnership
     interests  in  certain  affordable  property  limited   partnerships,   has
     guaranteed  the Low Income  Housing Tax  Credits to limited  partners in 75
     partnerships  totaling  approximately  $63.8 million.  As of June 30, 2003,
     there were no known conditions that would make such payments necessary, and
     no amounts have been recorded. In addition, the Company,  acting as general
     partner in certain  partnerships,  is  obligated  to advance  funds to meet
     partnership operating deficits.

13.  Impairment of Real Property

     During the first  quarter of 2003,  the Company  listed for sale a 120-unit
     property  located in Detroit.  As a result of tests performed in accordance
     with SFAS No. 144, it was  determined  that the book value of this property
     was in excess of the undiscounted cash flows.  Therefore,  an impairment of
     real property of $423 was recorded for the  three-month  period ended March
     31, 2003. This property is not reflected in discontinued  operations as all
     significant  contingencies  surrounding  the  potential  sale have not been
     resolved.




                        HOME PROPERTIES OF NEW YORK, INC.

                  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


The following  discussion  should be read in conjunction  with the  accompanying
consolidated financial statements and notes thereto.

Forward-Looking Statements

This  discussion  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
activities within anticipated  budgets,  the actual pace of future  acquisitions
and continued access to capital to fund growth.

Liquidity and Capital Resources

The Company's  principal  liquidity  demands are expected to be distributions to
the common and preferred  stockholders  and Operating  Partnership  Unitholders,
capital improvements and repairs and maintenance for the properties, acquisition
of additional properties, property development and debt repayments.

The Company intends to meet its short-term  liquidity  requirements  through net
cash flows  provided by operating  activities  and its unsecured line of credit.
The Company  considers  its ability to generate  cash to be adequate to meet all
operating  requirements and make distributions to its stockholders in accordance
with the  provisions of the Internal  Revenue  Code,  as amended,  applicable to
REITs.

As of June 30, 2003, the Company had an unsecured line of credit from M & T Bank
of $115 million. The Company's  outstanding balance as of June 30, 2003, was $39
million.  Borrowings  under the line of credit  bear  interest at 1.15% over the
one-month LIBOR rate. Accordingly, increases in interest rates will increase the
Company's  interest expense and as a result will affect the Company's results of
operations and financial  condition.  The line of credit expires on September 1,
2005.

To the  extent  that  the  Company  does not  satisfy  its  long-term  liquidity
requirements  through net cash flows  provided by operating  activities  and its
credit facility, it intends to satisfy such requirements through the issuance of
UPREIT units,  proceeds from the Dividend  Reinvestment Plan ("DRIP"),  proceeds
from  the  sale  of  properties,  additional  long  term  secured  or  unsecured
indebtedness,  or the issuance of additional equity  securities.  As of June 30,
2003, the Company owned 23 properties  with 3,769  apartment  units,  which were
unencumbered by debt.

In May  1998,  the  Company's  Form  S-3  Registration  Statement  was  declared
effective  relating  to the  issuance  of up to $400  million  of common  stock,
preferred  stock  or  other  securities.  The  available  balance  on the  shelf
registration statement at June 30, 2003 was $144.4 million.

In September  1999,  the Company  completed  the sale of $50 million of Series B
Preferred Stock in a private transaction with GE Capital. The Series B Preferred
stock  carried  an annual  dividend  rate  equal to the  greater of 8.36% or the
actual  dividend  paid on the  Company's  common shares into which the preferred
shares could be converted.  The stock had a liquidation preference of $25.00 per
share,  a  conversion  price of $29.77  per  share,  and a  five-year,  non-call
provision.  On February  14,  2002,  1,000,000  shares of the Series B Preferred
stock were converted to 839,771  common shares.  The conversion had no effect on
the reported results of operations.  On May 24, 2002 the Company repurchased the
remaining  1.0 million  shares  outstanding  at an amount  equivalent to 839,772
common  shares (as if the  preferred  shares had been  converted).  The  Company
repurchased  the shares for $29,392  equal to the $35.00  common  stock  trading
price when the transaction was consummated.  A premium of $5,025 was incurred on
the repurchase.

In May and June 2000, the Company  completed the sale of $60 million of Series C
Preferred  Stock in a private  transaction  with  affiliates of Prudential  Real
Estate Investors  ("Prudential"),  Teachers Insurance and Annuity Association of
America  ("Teachers"),  affiliates  of AEW Capital  Management  and Pacific Life
Insurance Company.  The Series C Preferred Stock carries an annual dividend rate
equal to the  greater  of 8.75% or the  actual  dividend  paid on the  Company's
common shares into which the preferred shares can be converted.  The stock has a
conversion  price of $30.25 per share and a five-year,  non-call  provision.  As
part of the Series C  Preferred  Stock  transaction,  the  Company  also  issued
240,000  warrants  to  purchase  common  shares at a price of $30.25  per share,
expiring in five years. On January 9, 2003,  holders of 100,000 shares of Series
C Preferred  Shares elected to convert those shares for 330,579 shares of common
stock.  On May 8,  2003,  200,000  shares  of  Series C  Preferred  Shares  were
converted into 661,157 shares of common stock.  The conversions had no effect on
the reported results of operations.

In June  2000,  the  Company  completed  the  sale of $25  million  of  Series D
Preferred  Stock in a private  transaction  with The  Equitable  Life  Assurance
Society of the United  States.  The Series D Preferred  Stock  carries an annual
dividend rate equal to the greater of 8.775% or the actual  dividend paid on the
Company's  common shares into which the preferred  shares can be converted.  The
stock  has a  conversion  price  of $30  per  share  and a  five-year,  non-call
provision.

In  December  2000,  the Company  completed  the sale of $30 million of Series E
Preferred  Stock in a private  transaction,  again with affiliates of Prudential
and Teachers. The Series E Preferred Stock carries an annual dividend rate equal
to the  greater of 8.55% or the actual  dividend  paid on the  Company's  common
shares  into  which  the  preferred  shares  can be  converted.  The stock has a
conversion  price of $31.60 per share and a five-year,  non-call  provision.  In
addition,  as part of the Series E  Preferred  Stock  transaction,  the  Company
issued  warrants  to  purchase  285,000  common  shares at a price of $31.60 per
share,  expiring  in five  years.  On August  20,  2002,  63,200 of the Series E
Convertible Preferred Shares were converted into 200,000 shares of common stock.
On May 6, 2003,  36,800 shares of Series E Preferred  Shares were converted into
116,456 shares of common stock.  The  conversions  had no effect on the reported
results of operations.

On February 28, 2002, the Company closed on two common equity offerings totaling
704,602  shares of the Company's  common stock,  at a weighted  average price of
$30.99 per share,  resulting  in net  proceeds to the  Company of  approximately
$21.8 million.

In March  2002,  the  Company  issued  2,400,000  shares of its  9.00%  Series F
Cumulative  Redeemable  Preferred  Stock ("Series F Preferred  Shares"),  with a
$25.00 liquidation preference per share. This offering generated net proceeds of
approximately  $58  million.  The net  proceeds  were used to fund the  Series B
preferred stock repurchase,  property  acquisitions,  and property upgrades. The
Series F Preferred  Shares are  redeemable by the Company at anytime on or after
March 25, 2007 at a redemption price of $25.00 per share,  plus any accumulated,
accrued and unpaid  dividends.  Each Series F  Preferred  share will  receive an
annual  dividend  equal  to  9.00%  of  the  liquidation  preference  per  share
(equivalent to a fixed annual amount of $2.25 per share).

The issuance of UPREIT Units for property acquisitions  continues to be a source
of capital for the  Company.  During  2003,  the Company  exercised an option to
acquire  approximately  10  acres  of  land  adjacent  to one  of  its  existing
properties for $2.8 million.  In connection with this  transaction,  the Company
issued  UPREIT units  valued at  approximately  $2.8  million.  In addition,  $2
million of UPREIT  units were  issued to satisfy an existing  liability.  During
2002,  the Company  acquired an 864-unit  property for a total purchase price of
$81.5  million.  The Company issued UPREIT units valued at  approximately  $11.5
million, with the balance funded by the assumption of debt and cash.

During 2002,  $27.4 million of common stock was issued under the Company's DRIP.
An additional  $14.5 million has been raised through the DRIP program during the
first six months of 2003.

The DRIP was amended,  effective April 10, 2001, in order to reduce management's
perceived  dilution from issuing new shares at or below the underlying net asset
value.  The discount on reinvested  dividends  and optional  cash  purchases was
reduced  from  3% to 2%.  The  maximum  monthly  investment  (without  receiving
approval  from the  Company)  was reduced  from $5 thousand to $1  thousand.  As
expected,  these  changes  significantly  reduced  participation  in  the  plan.
Management will continue to monitor the relationship between the Company's stock
price and estimated net asset value. During times when this difference is small,
management has the flexibility to issue waivers to DRIP  participants to provide
for  investments in excess of the $1 thousand  maximum  monthly  investment.  In
connection  with the  announcement of the February,  2002 dividend,  the Company
announced such waivers will be considered beginning with the March 2002 optional
cash  purchase,  as  management  believed  the stock was trading at or above its
estimate  of net asset  value.  During the first  quarter of 2002,  the  Company
granted 53 waivers for purchases aggregating a total of $3.9 million. No waivers
were granted during the balance of 2002 or the first six months of 2003.

On August 6, 2002 the Board of Directors  increased its authorization  2,000,000
shares to  repurchase  its common stock or UPREIT units in  connection  with the
Company's stock repurchase program.  The shares/units may be repurchased through
open market or privately  negotiated  transactions  at the discretion of Company
management.  The  Board's  action does not  establish a target  stock price or a
specific  timetable for share  repurchase.  During the six months of 2003, there
were no shares or UPREIT Units repurchased by the Company.  At June 30, 2003 the
Company had  authorization  to repurchase  3,135,800  shares of common stock and
UPREIT Units under the stock repurchase program.

As of June 30, 2003,  the weighted  average rate of interest on mortgage debt is
6.34% and the weighted average maturity is approximately 8 years.  Approximately
96.7% of the debt is fixed rate. This limits the exposure to changes in interest
rates, minimizing the effect on results of operations and financial condition.

Off-Balance Sheet Investments

The Company has  investments  in and advances to  approximately  136  affordable
housing  limited  partnerships  where the Company acts as the  managing  general
partner.  The Company  accounts for these  investments  on the equity  method of
accounting,  recording  its share of the net income or loss based upon the terms
of the  partnership  agreement.  To the extent  that it is  determined  that the
limited  partners  cannot absorb their share of the losses,  if any, the general
partner will record the limited partners' share of such losses.

The  Company  guaranteed  the low income  housing  tax  credits  to the  limited
partners for a period of five years (from the date of property development under
the tax credit program) in 75 partnerships totaling approximately $63.8 million.
Such guarantee requires the Company to operate the properties in compliance with
Internal  Revenue Code Section 42 for 15 years.  The weighted  average number of
compliance years remaining is approximately 10 years. In addition, acting as the
general  partner in certain  partnerships,  the Company is  obligated to advance
funds to meet partnership operating deficits. However, such funding requirements
cease after a five-year  period.  If operating  deficits continue to occur after
the  expiration  of the  five-year  period,  the Company  would  determine on an
individual  partnership  basis if it is in the best  interest  of the Company to
continue to fund these deficits.  The Company believes the properties operations
conform to the applicable  requirements as set forth above and do not anticipate
any payment on the guarantees described above.

These  partnerships  are  funded  with  non-recourse  financing.  The  Company's
proportionate share of non-recourse financing was $5.6 million at June 30, 2003.
The Company has guaranteed a total of $597 of debt  associated with two of these
partnerships.  In addition, the Company, including the Management Companies, has
provided  loans and advances to certain of the  partnerships  aggregating  $10.4
million at June 30, 2003.  The Company  assesses the  financial  status and cash
flow of each of the  partnerships  at each balance sheet date in order to assess
recoverability of its investment in and advances to these affiliates.

In December 2002, the Company, including its equity affiliates,  determined that
it would  market  for  sale  virtually  all of the  assets  associated  with its
interest in the  aforementioned  affordable housing limited  partnerships.  Such
assets  include the equity  interest  in the  affordable  housing  partnerships,
loans,  advances  and  management  contracts.  The Company  recorded  impairment
charges  aggregating $520 during the first six months of 2003 from monies loaned
to  certain  equity  affiliates  to fund  operating  shortfalls,  which  are not
anticipated to be recovered from projected sale proceeds.

The Company intends to sell the assets in three phases:

Phase I consists of the  Company's  interest in 40 properties  containing  1,357
units, all New York State Rural Development properties, which are under contract
to be sold.  A  closing  is  anticipated  during  the third  quarter  of 2003 at
approximately book value.

Phase II consists of the Company's  interest in 49 properties  with 1,471 units,
all Pennsylvania  Rural Development  properties.  An offer has been accepted for
approximately  book value. The final contract is being  negotiated.  The Company
anticipates closing on this phase during the fourth quarter of 2003.

Phase III consists of the Company's interest in the remaining 35 properties with
3,421 units, primarily located in Upstate New York and Pennsylvania. The Company
has received competitive bids and is expected to select a qualified buyer in the
next several months with closing anticipated in the first quarter of 2004.

The  Company  plans on  retaining  the general  partner  interest in one 77-unit
property located in Rochester,  New York. The property is 80% market rate and is
managed as a market rate community.

Summarized  balance  sheet  information  relating  to these  partnerships  is as
follows (amounts are in thousands):

                                                      June 30, 2003    December 31, 2002
                                                      -------------    -----------------
Balance Sheets:
  Real estate, net                                           $248,839           $266,613
  Other assets                                                 33,135             37,764
                                                             --------           --------
    Total assets                                             $281,974           $304,377
                                                             ========           ========

  Mortgage notes payable                                     $247,149           $253,285
  Advances from affiliates                                     22,334             24,725
  Other liabilities                                            15,488             15,125
  Partners' equity (deficit)                                   (2,997)            11,242
                                                             --------           --------
    Total liabilities and partners' equity (deficit)         $281,974           $304,377
                                                             ========           ========
The Company's ability to sell the affordable  assets on the timelines  described
above is  dependent  on a variety of  factors,  some of which are outside of the
Company's  control,  such as the receipt of the  approvals of various  partners,
lenders and governmental agencies necessary for the sale.

Acquisitions and Dispositions

During the first quarter of 2003,  the Company  acquired its second  property in
the Boston area with 280 units in Stoughton, MA. The total purchase price of $34
million,  including closing costs,  equates to approximately  $121 per apartment
unit.  The weighted  average  expected  first year  capitalization  rate on this
acquisition is 7.7%.  Capitalization rate ("cap rate") is defined as the rate of
interest used to convert the first year expected net  operating  income  ("NOI")
less a 3.0%  management fee into a single  present value.  NOI is defined by the
Company  as  rental  income  and  property   other  income  less  operating  and
maintenance  expenses.  Management  generally considers NOI to be an appropriate
measure of operating  performance  because it helps  investors to understand the
operations of a community.  In addition the apartment communities are valued and
sold in the market by using a multiple of NOI.

Also during the first quarter of 2003, the Company sold two  communities  with a
total of 552  apartment  units in Indiana  and Ohio for total  consideration  of
$21.1  million,  or an average of $38 per unit. A gain on sale of  approximately
$451,  net of minority  interest,  was reported in the first  quarter from these
transactions and is reflected in discontinued operations.  Due to the prepayment
of debt associated with the sale of Candlewood  Apartments in Indiana,  a $1,349
charge was recorded during the first quarter.

During  the first  quarter  of 2003,  the  Company  listed  for sale a  120-unit
property located in Detroit. The book value of the property was in excess of the
projected sale proceeds by approximately $423. Therefore,  an impairment of real
property has been  recorded for that amount.  This  property is not reflected in
discontinued  operations as the Company believes it has not yet met the criteria
to classify the property as held for sale.






Subsequent  to the  end of the  second  quarter,  the  Company  sold a 212  unit
community  located  in  Pennsylvania.  The total  sales  price of $10.5  million
equates to $50 per apartment  unit. The Company expects to record a loss on sale
in the third  quarter,  net of minority  interest of  approximately  $240.  This
property has not been reflected in  discontinued  operations at June 30, 2003 as
all significant contingencies surrounding the sale had not been resolved.

Contractual Obligations and Other Commitments

The primary  obligations of the Company relate to its mortgage notes payable and
its borrowings  under the line of credit.  The Company's  mortgage notes payable
and line of  credit  outstanding  at June 30,  2003 and  December  31,  2002 are
summarized as follows (in thousands):

                                                                June 30, 2003     December 31, 2002
                                                                -------------     -----------------

Fixed rate mortgage notes payable                                  $1,312,056            $1,279,752
Variable rate mortgage notes payable                                    6,055                21,055
                                                                   ----------            ----------
Total mortgage notes payable                                        1,318,111             1,300,807
Variable rate line of credit facility                                  39,000                35,000
                                                                   ----------            ----------
Total mortgage notes payable and line of credit facility           $1,357,111            $1,335,807
                                                                   ==========            ==========
Mortgage notes payable are  collateralized by certain apartment  communities and
mature at various dates from  November,  2003 through June,  2036.  The weighted
average  interest rate of the Company's  variable rate notes and credit facility
was 2.35% and 2.83% at June 30, 2003 and December 31,  2002,  respectively.  The
weighted  average  interest rate of the Company's fixed rate notes was 6.47% and
6.50% at June 30, 2003 and December 31, 2002, respectively.

The  Company  has a  non-cancelable  operating  ground  lease  for  one  of  its
properties.  The lease  expires May 1, 2020,  with options to extend the term of
the lease for two successive terms of twenty-five  years each. At June 30, 2003,
future minimum rental  payments  required under the lease are $70 per year until
the lease expires.  The lease also provides for contingent rental payments based
on collected  rents.  The contingent rent expense for the six-month period ended
June 30, 2003 amounted to $70.

As  discussed  in the section  entitled  "Off-Balance  Sheet  Investments,"  the
Company  has the  following  guarantees  or  commitments  relating to its equity
method  partnership  investments:  a) guarantee  for a  total  of  $597  of debt
associated with two of partnerships,  b) guarantee of the low income housing tax
credits to the limited  partners  for a period of five years in 75  partnerships
totaling  approximately $63.8 million, and c) the obligation to advance funds to
meet  partnership  operating  deficits  for  a  five  year  period  for  certain
partnerships.  The Company  believes the  properties  operations  conform to the
applicable  requirements as set forth above and do not anticipate any payment on
these guarantees.

Capital Improvements

The  Company's  policy  is to  capitalize  costs  related  to  the  acquisition,
development, rehabilitation, construction and improvement of properties. Capital
improvements  are costs that increase the value and extend the useful life of an
asset.  Ordinary repair and maintenance costs that do not extend the useful life
of the asset are expensed as incurred. Costs incurred on a lease turnover due to
normal wear and tear by the resident are expensed on the turn. Recurring capital
improvements  typically  include:  appliances,   carpeting  and  flooring,  HVAC
equipment,  kitchen/ bath cabinets,  new roofs,  site  improvements  and various
exterior  building  improvements.  Non- recurring,  revenue  generating  capital
improvements  include,  among other items:  community centers,  new windows, and
kitchen/ bath apartment upgrades.  Revenue generating capital  improvements will
directly result in rental earnings or expense savings.  The Company  capitalizes
interest and certain internal  personnel costs related to the communities  under
rehabilitation and construction.





The  Company  estimates  that on an  annual  basis  $525  per  unit is  spent on
recurring capital expenditures. During the three and six-month period ended June
30,  2003  approximately  $131 and $262  per unit was  estimated  to be spent on
recurring  capital  expenditures.  The table below  summarizes  the actual total
capital  improvements  incurred by major  categories for the three and six-month
periods  ended June 30, 2003 and 2002 and an estimate of the  breakdown of total
capital  improvements by major categories  between recurring and  non-recurring,
revenue generating capital improvements for the three and six-month period ended
June 30, 2003 as follows:

                              For the three-month period ended June 30,
                                (in thousands, except per unit data)
                                                2003                                        2002
                    -------------------------------------------------------------- ------------------------
                                                  Non-                  Total                     Total
                    Recurring        Per     Recurring       Per      Capital        Per        Capital        Per
                       Cap Ex    Unit(a)        Cap Ex   Unit(a)  Improvement    Unit(a)   Improvements    Unit(a)
                       ------    -------        ------   -------  -----------    -------   ------------    -------

New Buildings              $-         $-          $496       $12         $496       $12          $1,546        $40
Major building
improvements              945         23         5,516       133        6,461       156           5,228        137
Roof replacements         361          9           684        16        1,045        25           1,819         48
Site improvements         346          8         1,708        41        2,054        49           3,905        102
Apartment upgrades        681         16         7,788       188        8,469       204           7,776        204
Appliances                566         14           667        16        1,233        30           1,039         27
Carpeting/Flooring      1,777         43         1,269        31        3,046        74           2,666         70
HVAC/Mechanicals          523         12         2,772        67        3,295        79           3,247         85
Miscellaneous             233          6           943        23        1,176        29           1,146         30
                       ------       ----       -------      ----      -------      ----         -------       ----
Totals                 $5,432       $131       $21,843      $527      $27,275      $658         $28,372       $743
                      =======       ====       =======      ====      =======     ======        =======     ======

(a)  Calculated  using  the  weighted  average  number  of  units   outstanding,
     including  36,736  core  units,  2002  acquisition  units of 4,492 and 2003
     acquisition units of 280 for the three-month period ended June 30, 2003 and
     36,736 core units and 2002  acquisition  units of 1,467 for the three-month
     period ended June 30, 2002.


                               For the six-month period ended June 30,
                                (in thousands, except per unit data)
                                                2003                                        2002
                    -------------------------------------------------------------- ------------------------
                                                  Non-                  Total                     Total
                    Recurring        Per     Recurring       Per      Capital        Per        Capital        Per
                       Cap Ex    Unit(a)        Cap Ex   Unit(a)  Improvement    Unit(a)   Improvements    Unit(a)
                       ------    -------        ------   -------  -----------    -------   ------------    -------

New Buildings              $-         $-          $883       $21         $883        $21         $3,128        $83
Major building
improvements            1,886         46         8,029       194        9,915        240         10,125        269
Roof replacements         721         17           618        15        1,339         32          2,091         56
Site improvements         691         17         2,139        52        2,830         69          5,556        148
Apartment upgrades      1,360         33        14,831       358       16,191        391         14,964        398
Appliances              1,130         27         1,158        28        2,288         55          1,957         52
Carpeting/Flooring      3,548         86         1,809        44        5,357        130          4,865        129
HVAC/Mechanicals        1,045         25         4,525       109        5,570        134          4,773        127
Miscellaneous             463         11         1,581        38        2,044         49          2,210         59
                       ------       ----       -------      ----      -------      ----         -------       ----
Totals                $10,844       $262       $35,573      $859      $46,417     $1,121        $49,669     $1,321
                      =======       ====       =======      ====      =======     ======        =======     ======

(a)  Calculated  using  the  weighted  average  number  of  units   outstanding,
     including  36,736  core  units,  2002  acquisition  units of 4,492 and 2003
     acquisition  units of 215 for the six-month  period ended June 30, 2003 and
     36,736  core  units  and 2002  acquisition  units of 906 for the  six-month
     period ended June 30, 2002.






The  schedule  below  summarizes  the  breakdown of total  capital  improvements
between core and non-core as follows:

                                         For the three-month period ended June 30,
                                            (in thousands, except per unit data)
                                                            2003                                      2002
                                ------------------------------------------------------------- ----------------------
                                                  Non-                  Total                     Total
                    Recurring        Per     Recurring       Per      Capital        Per        Capital        Per
                       Cap Ex       Unit        Cap Ex      Unit  Improvement       Unit   Improvements       Unit
                       ------       ----        ------      ----  -----------       ----   ------------       ----

Core Communities       $4,807       $131       $16,651      $453      $21,458       $584        $27,063       $737
2003 Acquisition
  Communities              37        131             3        12           40        143              -          -
2002 Acquisition
  Communities             588        131         5,189     1,155        5,777      1,286          1,309        892
                       ------       ----       -------      ----      -------      ----         -------       ----
Sub-total               5,432        131        21,843       527       27,275        658         28,372        743
2003 Disposed
  Communities               -        131             -         -            -          -            263        477
2002 Disposed
  Communities               -          -             -         -            -          -            655      2,324
Corporate office
  expenditures (1)          -          -             -         -          339          -            676          -
                       ------       ----       -------      ----      -------      ----         -------       ----
                       $5,432       $131       $21,843      $527      $27,614       $658        $29,966       $750
                      =======       ====       =======      ====      =======     ======        =======     ======



                                          For the six-month period ended June 30,
                                            (in thousands, except per unit data)
                                                            2003                                      2002
                                ------------------------------------------------------------- ----------------------
                                                  Non-                  Total                     Total
                    Recurring        Per     Recurring       Per      Capital        Per        Capital        Per
                       Cap Ex       Unit        Cap Ex      Unit  Improvement       Unit   Improvements       Unit
                       ------    -------        ------   -------  -----------    -------   ------------    -------

Core Communities       $9,614       $262       $26,756      $728      $36,370       $990        $48,334     $1,316
2003 Acquisition
  Communities              56        262             -         -           56        262              -          -
2002 Acquisition
  Communities           1,174        262         8,817     1,963        9,991      2,225          1,335      1,473
Sub-total              10,844        262        35,573       859       46,417      1,121        $49,669      1,319
                       ------       ----       -------      ----      -------      ----         -------       ----
2003 Disposed
  Communities               5        262             -         -            5        262            483        875
2002 Disposed
  Communities               -          -             -         -            -          -          1,002      1,987
Corporate office
  expenditures (1)          -          -             -         -          796          -          1,884          -
                       ------       ----       -------      ----      -------      ----         -------       ----
                      $10,849       $262       $35,573      $859      $47,218     $1,121        $53,038     $1,322
                      =======       ====       =======      ====      =======     ======        =======     ======

(1)  No distinction is made between recurring and non-recurring expenditures for
     corporate office.
Results of Operations

Summary of Core Properties

The Company had 129  apartment  communities  with 36,736  units which were owned
during the six-month period being presented (the "Core Properties"). The Company
has acquired an additional 22 apartment communities with 4,772 units during 2002
and 2003 (the "Acquired Communities"). In addition, the Company also disposed of
14 properties with a total of 2,276 units during 2002 and 2003 (the "Disposition
Communities").   These   dispositions   have  been  classified  as  discontinued
operations.  The inclusion of the Acquired  Communities  generally accounted for
the significant  changes in operating  results for the six-months ended June 30,
2003.

A  summary  of the Core  Properties  net  operating  income  is as  follows  (in
thousands):

                                      Six Months                                 Three Month
                             -------------------------------            ----------------------------
                                 2003         2002      %Chg             2003         2002      %Chg
                                 ----         ----      ----             ----         ----      ----

Rental income                $176,832     $171,731      3.0%          $89,534      $86,801      3.1%
Property other income           7,214        6,480     11.3%            3,823        3,354     14.0%
                             --------     --------     ----           -------      -------     ----
Total income                  184,046      178,211      3.3%           93,357       90,155      3.6%
Operating and
  Maintenance                 (83,566)     (77,313)    (8.1%)         (39,942)     (36,799)    (8.5%)
                             --------     --------     ----           -------      -------     ----
Net operating income         $100,480     $100,898     (0.4%)         $53,415      $53,356      0.1%
                             ========     ========     ====           =======      =======      ===

Comparison of six-months ended June 30, 2003 to the same period in 2002

Of the  $28,269  increase  in rental  income,  $23,171  is  attributable  to the
Acquired  Communities.  The  balance  of this  increase,  which is from the Core
Properties,  was the result of an increase of 3.2% in  weighted  average  rental
rates,  offset by a decrease  in  occupancy  from 91.7% to 91.5%.  Occupancy  is
defined as total possible rental income,  net of vacancy and bad debt 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.

Property  other income,  which  consists  primarily of income from  operation of
laundry  facilities,  late  charges,  administrative  fees,  garage and  carport
charges, net profits from corporate apartments,  cable revenue, pet charges, and
miscellaneous  charges to residents increased by $1,193. Of this increase,  $459
is  attributable  to the  Acquired  Communities  and  $734  represents  an 11.3%
increase from the Core Properties.

Interest and dividend income decreased $496 due to decreased levels of financing
to affiliates and a lower interest rate environment.

Of the  $16,057  increase  in  operating  and  maintenance  expenses,  $9,804 is
attributable to the Acquired  Communities.  The balance,  a $6,253 increase,  is
attributable  to the Core  Properties  and is  primarily  due to an  increase in
personnel expense,  repairs and maintenance,  property insurance,  utilities and
snow removal  costs.  The increase in personnel and snow removal costs of $2,505
are  significantly  related  to  weather  conditions.  The  regions in which the
Company  operates,  received higher than normal snowfall,  and many regions that
get very little snow were hit with unusual snow storms. A significant  amount of
overtime was incurred clearing and shoveling.

General  and  administrative  expense  increased  in 2003 by  $3,780,  or 63.8%.
General and administrative  expenses as a percentage of total revenues were 4.5%
for 2003 as compared to 3.2% for 2002.  The increase  primarily is attributed to
the consolidation of the Management  Companies in 2003 which added an additional
$2,270 to this line item. Previously such expenses were allocated and charged to
the Management Companies and were included in the equity in earnings (losses) of
unconsolidated  affiliates. Of the remaining $1,510 variance, $409 is related to
the  expensing  of stock  options  for the  first  time in both of the first two
quarters of 2003 and a $318 increase in incentive compensation costs compared to
the same period a year ago.  The balance of this  increase  is  attributable  to
incremental  increases in general and  administrative  costs related to the 2002
Acquisition Communities.

Interest  expense  increased  $6,221 due to the  increase  in the amount of debt
outstanding  associated  with the Acquired  Communities  offset in part by lower
interest rates.

Due to the prepayment of debt associated with the sale of Candlewood  Apartments
in Indiana, a $1,349 charge was recorded during the first quarter.

Depreciation and amortization  expense  increased $7,821 due to the depreciation
on the Acquisition Communities, the additions to the Core Properties, net of the
Disposition Communities.

The  impairment  of real  property of $423 relates to an apartment  community in
Detroit  currently  under contract to be sold. As a result of tests performed in
accordance  with SFAS No.  144,  it was  determined  that the book value of this
property was in excess of the estimated  undiscounted  cash flows. This property
is not reflected in  discontinued  operations as all  significant  contingencies
surrounding the sale have not been resolved.

In the fourth  quarter of 2002,  the Company  announced  its  intention  to sell
virtually all of the assets associated with its general partner interests in the
affordable  properties to focus solely on the direct ownership and management of
market rate  apartment  communities.  At that time,  the Company  announced  its
intention to sell the assets,  which  include  principally  loans,  advances and
management contracts.

The impairment of assets held as General  Partner of $520,  represents  advances
made to certain of the affordable property limited partnerships during the first
six months of 2003 which the Company  believes  will not be repaid upon the sale
of the loans.

The  equity in  earnings  (losses)  of  unconsolidated  affiliates  of $1,184 is
primarily  the result of the general  partner  recording a greater  share of the
underlying  investment's  losses due to the loans and advances to certain of the
affordable  property  limited  partnerships  where the  limited  partner  has no
capital account. This is pursuant to the accounting  requirements of EITF 99-10,
"Percentage Used to Determine the Amount of Equity Method Losses."

Minority  interest  decreased  $635 due to the  impairment  of real property and
assets  held by the  General  Partner  recorded  in the first six months of 2003
together  with an overall  reduction  in income from  operations  as a result of
increased  interest and  depreciation  costs as compared to the previous period.
Both of these  items  were  offset  by the  impact  of the  premium  paid on the
repurchase of the Series B Convertible Cumulative Preferred Stock which had been
treated  as a charge  to net  income  available  to common  shareholders  in the
previous year.

Included in discontinued operations for the six-month period ended June 30, 2002
are fourteen apartment  community  dispositions (two and twelve sold in 2003 and
2002,  respectively)  and two properties  sold in 2003 for the six-months  ended
June 30, 2003. The operations of these fourteen  properties  have been reflected
on a comparative basis for the period ended June 30, 2002.

The Company  reported a $245 loss, net of minority  interest,  on disposition of
property in the first quarter of 2002 relating to additional  expenses  incurred
in the same quarter for a sale which closed in the fourth quarter of 2001. These
costs represented a change in estimate from those accrued at the time of sale.

Comparison of the three-months ended June 30, 2003 to the same period in 2002

Of the $12,432 increase in rental income, $9,699 is attributable to the Acquired
Communities.  The balance of this increase,  which is from the Core  Properties,
was the  result  of an  increase  of  3.1% in  weighted  average  rental  rates.
Occupancy  reflected no change and was 92.3% for each of the quarters ended June
30, 2003 and 2002.  Occupancy is defined as total possible rental income, net of
vacancy and bad debt 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.

Property  other income,  which  consists  primarily of income from  operation of
laundry  facilities,  late  charges,  administrative  fees,  garage and  carport
charges, net profits from corporate apartments,  cable revenue, pet charges, and
miscellaneous charges to residents increased by $681. Of this increase,  $212 is
attributable to the Acquired Communities and $469 represents a 14% increase from
the Core Properties.

Interest and dividend income decreased $313 due to decreased levels of financing
to affiliates and a lower interest rate environment.

Of the  $7,352  increase  in  operating  and  maintenance  expenses,  $4,209  is
attributable to the Acquired  Communities.  The balance,  a $3,143 increase,  is
attributable  to the Core  Properties  and is  primarily  due to an  increase in
repairs and maintenance,  personnel expense,  utilities, and property insurance,
offset by a decrease in real  estate  taxes.  The  increase  in  utilities  is a
combination  of a colder  spring  than  usual,  as well as  renewal  of  certain
contracts  during the 2003 current  quarter at higher rates compared to the year
ago quarter.  The  increase in repairs and  maintenance  reflects the  Company's
continual focus on properly  maintaining  the  communities.  Property  insurance
expenses  in 2002  continued  to benefit  from the legal  settlement  received a
couple of years  ago.  The  increase  in  personnel  costs  reflects  efforts to
increase  occupancy.  The  property  management  teams have been  challenged  to
increase  occupancy  while  selectively  giving  up  some  rental  rate  growth.
Additional staffing,  plus overtime hours to improve the Company's capture rate,
contributed to the increased personnel costs.

General and administrative  expense increased in 2003 by $1,760, or 62%. General
and administrative expenses as a percentage of total revenues were 4.2% for 2003
as  compared to 2.9% for 2002.  The  increase  primarily  is  attributed  to the
consolidation  of the  Management  Companies  in 2003 which added an  additional
$1,113 to this line item. Previously such expenses were allocated and charged to
the Management Companies and were included in the equity in earnings (losses) of
unconsolidated  affiliates.  Of the remaining $647 variance,  $207 is related to
the expensing of stock options for the first time in the second  quarter of 2003
and a $63 increase in incentive compensation costs compared to the same period a
year ago. The balance of this increase is attributable to incremental  increases
in general and administrative costs related to the 2002 Acquisition Communities.

Interest  expense  increased  $2,725 due to the  increase  in the amount of debt
outstanding  associated  with the Acquired  Communities  offset in part by lower
interest rates.

Depreciation and amortization  expense  increased $3,202 due to the depreciation
on the Acquisition Communities, the additions to the Core Properties, net of the
Disposition Communities.

In the fourth  quarter of 2002,  the Company  announced  its  intention  to sell
virtually all of the assets associated with its general partner interests in the
affordable  properties to focus solely on the direct ownership and management of
market rate  apartment  communities.  At that time,  the Company  announced  its
intention to sell the assets,  which  include  principally  loans,  advances and
management contracts.

The  impairment of assets held as General  Partner of $93,  represents  advances
made to certain  of the  affordable  property  limited  partnerships  during the
second  quarter of 2003 which the Company  believes  will not be repaid upon the
sale of the loans.

The  equity  in  earnings  (losses)  of  unconsolidated  affiliates  of  $444 is
primarily  the result of the general  partner  recording a greater  share of the
underlying  investment's  losses due to the loans and advances to certain of the
affordable  property  limited  partnerships  where the  limited  partner  has no
capital account. This is pursuant to the accounting  requirements of EITF 99-10,
"Percentage Used to Determine the Amount of Equity Method Losses."

Minority interest  increased $1,171 as a result of the reduced level of gains on
disposition  of real property  reflected in  discontinued  operations in 2003 as
compared  to the same  period one year ago,  offset by an overall  reduction  in
income from operations as a result of increased  interest and depreciation costs
as compared to the previous period. In addition,  these items were offset by the
impact  of the  premium  paid on the  repurchase  of the  Series  B  Convertible
Cumulative  Preferred  Stock  which had been  treated  as a charge to net income
available to common shareholders in the previous year.

Included in discontinued  operations for the  three-month  period ended June 30,
2002 are fourteen apartment community  dispositions (two and twelve sold in 2003
and 2002,  respectively)  and two properties  sold in 2003 for the  three-months
ended June 30, 2003.  The  operations  of these  fourteen  properties  have been
reflected on a comparative  basis for the period ended June 30, 2002. During the
second  quarter,  the Company  reported a $131 loss,  net of minority  interest,
relating to  additional  expenses  incurred in the same  quarter for sales which
took place during 2002.  These costs  represent a change in estimate  from those
accrued at the time of sale.

Funds From Operations

Pursuant to the revised  definition of Funds From Operations  ("FFO") 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 sales of property,  minority  interest
and  extraordinary   items  plus  depreciation  from  real  property   including
adjustments for  unconsolidated  partnerships  and joint ventures less dividends
from non-convertible preferred shares. The Company considers debt extinguishment
costs  which are  incurred as a result of repaying  property  specific  debt and
non-cash real estate impairment  charges,  as a component of the 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.






Management  believes  that in order to facilitate a clear  understanding  of the
combined historical  operating results of the Company,  FFO should be considered
in  conjunction  with net  income as  presented  in the  consolidated  financial
statements  included  elsewhere  herein.  Management  believes that by excluding
gains or losses  related to  dispositions  of property and excluding real estate
depreciation (which can vary among owners of similar assets in similar condition
based on historical cost accounting and useful life estimates), FFO can help one
compare the operating  performance of a company's real estate between periods or
as compared to different  companies.  FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting principles
and is not  necessarily  indicative of cash  available to fund cash needs.  Cash
provided by  operating  activities  was  $76,303  and $73,148 for the  six-month
period ended and $42,794 and $43,832 for the  three-month  period ended June 30,
2003 and 2002,  respectively.  Cash used in investing activities was $56,707 and
$174,345  for the  six-month  period  ended and  $25,850  and  $115,954  for the
three-month  period ended June 30, 2003 and 2002,  respectively.  Cash (used in)
and  provided  by  financing  activities  was  ($21,668)  and  $103,217  for the
six-month  period ended and  ($19,033)  and $24,130 for the  three-month  period
ended June 30, 2003 and 2002,  respectively.  FFO should not be considered as an
alternative  to net income as an indication of the Company's  performance  or to
cash flow as a measure of liquidity.

The calculation of FFO and reconciliation to GAAP net income available to common
Shareholders  for the six and  three-months  ended  June  30,  2003 and 2002 are
presented below (in thousands):

                                                                             Six Months              Three Months
                                                                       --------------------       ------------------
                                                                          2003         2002        2003         2002
                                                                          ----         ----        ----         ----

Net income available to common shareholders                            $12,813      $16,311      $8,942      $10,201
Convertible preferred dividends                                          4,010        5,779       1,842        2,502
Minority interest                                                        7,111        7,746       5,174        4,003
Minority interest - income from discontinued operations                     60        1,001           -          584
Depreciation from real property                                         37,377       31,606      18,933       16,611
Depreciation from real property from unconsolidated entities             1,113          437         564           65
Impairment of real property                                                423            -           -            -
Loss on disposition of property                                             10          245          10           16
Prepayment penalty from early extinguishment of debt in
   connection with sale of Candlewood Apartments                         1,349            -           -            -
(Gain) loss on disposition of discontinued operations, net of
   minority interest                                                     (320)      (2,689)         131      (2,729)
                                                                      --------     --------    --------     --------
FFO as defined above                                                    63,946       60,436      35,596       31,253

Premium on Series B preferred stock repurchase                               -        5,025           -        5,025
                                                                      --------     --------    --------     --------

FFO as adjusted by the Company                                         $63,946      $65,461     $35,596      $36,278

Weighted average common shares/units outstanding:
         - Basic                                                      44,044.6     41,422.5    44,473.7     42,013.0
                                                                      ========     ========    ========     ========
         - Diluted                                                    47,417.2     46,384.0    47,693.2     46,664.5
                                                                      ========     ========    ========     ========
On May 24, 2002 the Company  repurchased  the 1.0 million shares  outstanding of
the Series B preferred  stock at an amount  equivalent to 839,772  common shares
(as if the  preferred  shares had been  converted).  The stock had a liquidation
preference of $25.00 per share,  a conversion  price of $29.77 per share,  and a
five-year,  non-call  provision.  The Company repurchased the shares for $29,392
equal  to the  $35.00  common  stock  trading  price  when the  transaction  was
consummated. A premium of $5,025 was incurred on the repurchase.

In the  adjusted  presentation  above,  the Company  excluded the premium on the
Series B preferred  stock.  The Company  believes that this  calculation is more
reflective  of continuing  operations  as the premium was  considered a one time
charge. All REITs may not be using the same definition for FFO. Accordingly, the
above  presentation  may not be comparable to other similarly titled measures of
FFO of other REITs.






Covenants

In connection with the issuance of the Series F Preferred  Stock, the Company is
required to maintain for each fiscal  quarterly  period a fixed charge  coverage
ratio, as defined in the Series F Cumulative  Redeemable Preferred Stock Article
Supplementary,  of  1.75  to  1.0.  The  fixed  charge  coverage  ratio  and the
components  thereof do not represent a measure of cash  generated from operating
activities in accordance with generally accepted  accounting  principles and are
not necessarily  indicative of cash available to fund cash needs.  Further, this
ratio should not be  considered  as an  alternative  measure to net income as an
indication  of the  Company's  performance  or of  cash  flow  as a  measure  of
liquidity.  The calculation of the fixed charge coverage ratio for the four most
recent quarters since the issuance of the Series F Preferred Stock are presented
below (in thousands).  Net operating income from discontinued  operations in the
calculation below is defined as total revenues from discontinued operations less
operating and maintenance expenses.

                  Calculation Presented for Series F Covenants

                                                                                  Three-months ended
                                                                                  ------------------
                                                                      June 30      Mar. 31      Dec. 31      Sept. 30
                                                                         2003         2003         2002          2002
                                                                         ----         ----         ----          ----

   EBITDA
        Total revenues                                               $109,713     $106,955     $105,715      $102,184
        Net operating income from discontinued operations                   -          196          299           618
        Operating and maintenance                                    (46,040)     (49,772)     (44,199)      (40,598)
        General and administrative                                    (4,582)      (5,119)      (3,891)       (2,837)
        Impairment of assets held as General Partner                     (93)        (427)      (3,183)             -
        Equity in earnings (losses) of unconsolidated
        affiliates                                                      (444)        (740)     (16,085)         (308)
                                                                     --------     --------     --------      --------
                                                                      $58,554      $51,093      $38,656       $59,059
   Fixed Charges
        Interest expense                                              $21,634      $21,300      $20,350       $19,990
        Interest expense on discontinued operations                         -           33            -             -
        Preferred dividends                                             3,192        3,518        3,717         3,793
        Capitalized interest                                              230          230          230           230
                                                                     --------     --------     --------      --------
                                                                      $25,056      $25,081      $24,297       $24,013
                                                                                                    (1)
   Times Coverage ratio:                                                 2.34         2.04         1.59          2.46



(1)  Results for the quarter  reflect  impairment and other charges  relating to
     certain government assisted properties  ("affordable  properties") in which
     the Company is a general  partner as  described in more detail in the notes
     to the Company's annual report filed on form 10K.  Excluding the impairment
     and other charges of $18,074,  the fixed charge  coverage  ratio would have
     been 2.34.

Economic Conditions

Substantially all of the leases at the Company's apartment communities are for a
term of one year or less, which enables the Company to seek increased rents upon
renewal of  existing  leases or  commencement  of new leases.  These  short-term
leases  minimize the  potential  adverse  effect of inflation on rental  income,
although residents may leave without penalty at the end of their lease terms and
may do so if rents are increased significantly.

Historically,  real estate has been subject to a wide range of cyclical economic
conditions, which affect various real estate sectors and geographic regions with
differing  intensities and at different  times. In 2002 and continuing into 2003
many regions of the United States have  experienced  varying degrees of economic
recession  and  certain  recessionary  trends,  such as the  cost  of  obtaining
sufficient property and liability insurance coverage, short-term interest rates,
and a temporary  reduction in  occupancy.  In light of this, we will continue to
review our business  strategy  however,  we believe that given our property type
and the  geographic  regions in which we are located,  we do not  anticipate any
changes in our strategy or material effects in financial performance.

Declaration of Dividend

On August 5, 2003, the Board of Directors  approved a dividend of $.61 per share
for the  quarter  ended  June 30,  2003.  This is the  equivalent  of an  annual
distribution  of $2.44 per share.  The  dividend  is payable  August 28, 2003 to
shareholders of record on August 18, 2003.

On August 5, 2003 the Company  also  declared a regular  dividend of $0.5625 per
share on its Series F Cumulative  Redeemable  Preferred  Stock,  for the quarter
ending  August 31,  2003.  The  dividend on the  preferred  shares is payable on
September 2, 2003, to  shareholders  of record on August 18, 2003. This dividend
is equivalent to an annualized rate of $2.25 per share.

Contingency

In 2001, the Company  underwent a state tax audit.  The state has assessed taxes
of $469 for the 1998 and 1999 tax years under audit. If the state's  position is
applied to all tax years  through  December 31, 2001,  the  assessment  would be
$1.3 million.  At the time, the Company  believed the assessment and the state's
underlying  position  was  not  supportable  by  the  law  nor  consistent  with
previously  provided  interpretative  guidance  from  the  office  of the  State
Secretary of Revenue.  After two subsequent  enactments by the state legislature
during 2002  affecting the  pertinent tax statute,  the Company has been advised
that  its  filing  position  for  1998-2001  should  prevail.  Based  upon  this
information  as of June 30,  2003,  the Company has recorded an accrual of $525,
representing  only its 2002  liability.  Effective  January 1, 2003, the Company
reorganized the ownership of Home Properties Trust,  subjecting the Company to a
much lower level of tax going forward.

New Accounting Standard

In January  2003,  the FASB issued  Interpretation  No. 46 -  "Consolidation  of
Variable  Interest  Entities",  an  interpretation of ARB No. 51 - "Consolidated
Financial Statements." The interpretation  addresses consolidation by businesses
of  special  purpose  entities  (variable  interest   entities,   "VIE").   This
interpretation  addresses  consolidation  by  business  enterprises  of variable
interest  entities in which the equity  investment at risk is not  sufficient to
permit the entity to finance  its  activities  without  additional  subordinated
financial  support  from other  parties or in which the equity  investors do not
have  the   characteristics   of  a   controlling   financial   interest.   This
interpretation  requires  a variable  interest  entity to be  consolidated  by a
company if that  company  is subject to a majority  of the risk of loss from the
variable interest  entity's  activities or entitled to receive a majority of the
entity's residual returns or both. The interpretation also requires  disclosures
about variable interest entities that the company is not required to consolidate
but  in  which  it  has  a  significant  variable  interest.  The  consolidation
requirements  of this  interpretation  apply  immediately  to variable  interest
entities created after January 31, 2003, and in the first fiscal year or interim
period beginning after June 15, 2003, to existing  variable  interest  entities.
Management is uncertain  but is assuming it is reasonably  possible that each of
the  limited  partnerships  in which it holds the general  partnership  interest
would be considered a VIE where the Company is the primary beneficiary, and as a
result the  Company  would  consolidate  all or a certain  number of the limited
partnership's assets and liabilities.

In April 2003,  the FASB  issued SFAS No. 149  "Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities".  This  Statement  amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities under SFAS No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities." This Statement is effective for contracts entered into
or modified  after June 30, 2003.  The provisions of FAS 149 are not expected to
have a material impact on the Company's financial statements.






In May 2003, FASB issued SFAS 150, "Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity." This Statement establishes
standards  for  how  an  issuer   classifies  and  measures  certain   financial
instruments with  characteristics  of both  liabilities and equity.  It requires
that an issuer  classify a  financial  instrument  that is within its scope as a
liability (or an asset in some  circumstances).  This Statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period  beginning  after June
15, 2003. The Company is still in the process of evaluating the potential impact
of this standard on its financial statements.


                        HOME PROPERTIES OF NEW YORK, INC.

                      ITEM 3. QUANTITATIVE AND QUALITATIVE
                          DISCLOSURES ABOUT MARKET RISK

The  Company's  primary  market risk exposure is interest rate risk. At June 30,
2003 and December  31, 2002,  approximately  97% and 96%,  respectively,  of the
Company's debt bore interest at fixed rates with a weighted  average maturity of
approximately  8 years and a weighted  average  interest  rate of  approximately
6.47% and  6.50%,  respectively.  The  remainder  of the  Company's  debt  bears
interest at variable rates with a weighted  average  maturity of approximately 4
and 2 years,  respectively,  and a weighted  average  interest rate of 2.87% and
2.83%,  respectively,  at June 30, 2003 and December 31, 2002.  The Company does
not intend to utilize variable rate debt to acquire properties in the future. On
occasion,  the  Company  may  assume  variable  rate debt in  connection  with a
property  acquisition.  The Company  believes,  however,  that in no event would
increases in interest expense as a result of inflation  significantly impact the
Company's distributable cash flow.

At June 30, 2003 and December 31, 2002,  the interest rate risk on $25.2 million
of such variable rate debt has been  mitigated  through the use of interest rate
swap agreements (the "Swaps") with major financial institutions.  The Company is
exposed to credit risk in the event of non-performance by the counter-parties to
the Swaps.  The Company  believes it mitigates  its credit risk by entering into
these Swaps with major financial institutions.  The Swaps effectively convert an
aggregate of $25.2 million in variable  rate  mortgages to fixed rates of 5.91%,
8.22% and 8.40%.

For both June 30, 2003 and December 31,  2002,  the fair value of the  Company's
fixed rate debt,  including the $25.2 million which was swapped to a fixed rate,
amounted to a liability of $1.5 billion  compared to its carrying amount of $1.3
billion.  The  Company  estimates  that a 100  basis  point  decrease  in market
interest  rates  at June 30,  2003  would  have  changed  the fair  value of the
Company's fixed rate debt to a liability of $1.6 billion.

The Company intends to  continuously  monitor and actively manage interest costs
on its debt  portfolio  and may enter  into swap  positions  based  upon  market
fluctuations.  In  addition,  the  Company  believes  that it has the ability to
obtain  funds  through  additional  equity  offerings  or the issuance of UPREIT
Units.  Accordingly,  the  cost  of  obtaining  such  interest  rate  protection
agreements in relation the Company's  access to capital markets will continue to
be  evaluated.  The  Company  has not,  and does  not  plan to,  enter  into any
derivative financial instruments for trading or speculative purposes. As of June
30, 2003, the Company had no other material exposure to market risk.


                        HOME PROPERTIES OF NEW YORK, INC.

                            ITEM 4. INTERNAL CONTROLS

The Company  maintains  disclosure  controls and procedures that are designed to
ensure that information  required to be disclosed in the Company's  Exchange Act
reports is recorded, processed,  summarized and reported within the time periods
specified in the Securities and Exchange  Commission's rules and forms, and that
such  information  is accumulated  and  communicated  to the Company's  Co-Chief
Executive Officers and Chief Financial  Officer,  as appropriate to allow timely
decisions  regarding  required  disclosure.  In  designing  and  evaluating  the
disclosure controls and procedures,  management recognized that any controls and
procedures,  no  matter  how  well  designed  and  operated,  can  provide  only
reasonable assurance of achieving the desired control objectives, and management
necessarily  was required to apply its judgment in evaluating  the  cost-benefit
relationship  of  possible  controls  and  procedures.  Also,  the  Company  has
investments in certain unconsolidated  entities. As the Company does not control
these  entities,  the  disclosure  controls  with  respect to such  entities are
necessarily substantially more limited than those maintained with respect to the
Company's consolidated subsidiaries.

The Co-Chief  Executive Officers and Chief Financial Officer have, as of the end
of the period covered by this quarterly  report,  evaluated the effectiveness of
the  disclosure  controls  and  procedures  (as defined in Rules  13a-15(e)  and
15d-15(e)  under the  Securities  Exchange  Act of 1934,  as  amended)  and have
determined  that such  disclosure  controls  and  procedures  are  adequate.  In
connection with the evaluation, no change in the Company's internal control over
financial  reporting  (as defined in Rules  13a-15(f)  and  15d-15(f)  under the
Securities  Exchange Act of 1934, as amended) was identified that has materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.


                           PART II - OTHER INFORMATION

                        HOME PROPERTIES OF NEW YORK, INC.



Item 6. Exhibits and Reports or Form 8-K

(a)  Exhibit 31.1 Section 302 Certifications of Chief Executive Officers

     Exhibit 31.2 Section 302 Certification of Chief Financial Officer

     Exhibit 32.1 Section 906 Certifications of Chief Executive Officers

     Exhibit 32.2 Section 906 Certification of Chief Financial Officer


(b)  Reports on Form 8-K:

     -    Form 8-K was filed on August 8, 2003,  date of report  August 8, 2003,
          as amended by Form 8-K/A  filed on August 14,  2003,  with  respect to
          Items 7 and 12 disclosures  regarding the  Registrant's  press release
          announcing  its results for the second  quarter of 2003 and the second
          quarter 2003 investor conference call.


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                            HOME PROPERTIES OF NEW YORK, INC.
                                            (Registrant)


                                            Date:    August 14, 2003

                                            By:      /s/ Norman P. Leenhouts
                                                     -----------------------
                                                     Norman P. Leenhouts
                                                     Chairman and
                                                     Co-Chief Executive Officer


                                            Date:    August 14, 2003
                                                     -----------------------

                                            By:      /s/ David P. Gardner
                                                     David P. Gardner
                                                     Senior Vice President and
                                                     Chief Financial Officer