Elme Communities Announces Fourth Quarter and Full Year 2023 Results
- Strong financial and operational results reported by Elme Communities for full year 2023 and fourth quarter.
- Net loss of $53.0 million for full year, with NAREIT FFO up 27.9% and Core FFO up 10.2% compared to prior year.
- NOI increased by 9.4%, with average effective monthly rent per home rising by 6.5%.
- Fourth quarter net loss of $3.1 million, with NAREIT FFO up 14.3%.
- Liquidity position strong with approximately $550 million available as of December 31, 2023.
- Guidance for 2024 includes moderated NOI growth and Core FFO ranging from $0.90 to $0.96 per fully diluted share.
- None.
Insights
The reported financial and operating results by Elme Communities, a multifamily REIT, indicate a significant upswing in NAREIT FFO and Core FFO, which are critical metrics for evaluating a REIT's performance. The increase in NAREIT FFO by 27.9% and Core FFO by 10.2% year-over-year suggests operational efficiency and a strong revenue-generating ability. Such performance could attract investor interest as it reflects the company's potential to generate sustainable income. Moreover, the growth in Net Operating Income (NOI) by 9.4% compared to the previous year is a positive sign of the company's profitability from its core operations.
However, the anticipation of a year-over-year decline in Core FFO for 2024, primarily due to higher interest rates, may raise concerns about the company's future earnings potential. Investors should consider the impact of rising interest rates on the REIT's cost of debt and consequent profitability. The company's liquidity position, with $550 million in available funds and no debt maturities until 2025, provides financial stability and flexibility.
The dividend declaration of $0.18 per share is consistent with the previous quarter, which may be interpreted as a sign of management's confidence in the company's steady cash flow. However, it is essential to monitor the payout ratio to ensure that dividends are sustainable.
The data on same-store multifamily NOI growth and average effective monthly rent per home increase by 8.3% and 6.5%, respectively, are strong indicators of the health of Elme Communities' portfolio. A high average occupancy rate of 95.6% throughout the year, with a slight increase in the fourth quarter, demonstrates strong demand for the company's properties. This is particularly noteworthy in the context of the Washington, DC and Atlanta metro areas, which are competitive markets with significant demand for multifamily housing.
Elme's focus on operational enhancements and new technology to boost profitability is a strategic move to improve margins and enhance shareholder value. The emphasis on the Washington Metro portfolio, which constitutes over 80% of multifamily NOI, highlights the importance of regional market dynamics in the company's performance. Given the portfolio's significant contribution, regional economic trends, such as employment rates and housing demand, will be critical to watch.
The projected same-store multifamily NOI growth for 2024 ranging from 0.25% to 2.0% is modest, potentially reflecting cautious optimism or conservative estimates by management. This guidance, alongside the expected NOI from non-same-store multifamily properties and other assets like Watergate 600, will be key in evaluating the company’s growth trajectory.
The anticipated improvement in the capital markets environment mentioned by the CEO, alongside interest rate stabilization, is a macroeconomic factor that could benefit Elme Communities. Stabilizing interest rates can lead to lower borrowing costs and potentially increase real estate investment. However, the company's mention of a potential decline in Core FFO due to higher interest rates indicates that the current economic climate, with its inflationary pressures and volatile interest rates, poses a risk to the REIT sector.
Investors should consider the broader economic trends, such as inflation and interest rate changes, which can influence property values, rental income and the cost of capital for real estate investments. The company's guidance includes assumptions that are subject to these economic factors and any significant deviation from these assumptions could impact the projected financial outcomes.
The Net Debt to Adjusted EBITDA ratio of 5.5x is a leverage metric that investors use to gauge a company's ability to manage its debt and service its obligations. While this ratio falls within a reasonable range for REITs, it will be important to monitor this in relation to industry norms and the company's historical performance.
BETHESDA, Md., Feb. 15, 2024 (GLOBE NEWSWIRE) -- Elme Communities (the “Company”) (NYSE: ELME), a multifamily REIT with communities in the Washington, DC metro area and the Atlanta metro area, reported financial and operating results today for the quarter and year ended December 31, 2023:
Full-Year 2023 Financial and Operational Results
- Net loss was
$53.0 million , or$0.61 per diluted share - NAREIT FFO was
$77.8 million , or$0.88 per diluted share, up27.9% compared to the prior year - Core FFO was
$85.2 million , or$0.97 per diluted share, up10.2% compared to the prior year - Net Operating Income (NOI) was
$148.1 million , up9.4% compared to the prior year - Same-store multifamily NOI increased by
8.3% compared to the prior year period - Average Effective Monthly Rent per Home increased
6.5% compared to the prior year for our Same-Store Portfolio - Same-store multifamily Average Occupancy was
95.6% during the year, up0.2% compared to the prior year
Fourth Quarter Financial Results
- Net loss was
$3.1 million , or$0.04 per diluted share - NAREIT FFO was
$21.0 million , or$0.24 per diluted share, up14.3% compared to the prior year period - Core FFO was
$20.9 million , or$0.24 per diluted share, unchanged compared to the prior year period - Net Operating Income (NOI) was
$38.6 million , up4.6% compared to the prior year period
Fourth Quarter Operational Highlights
- Same-store multifamily NOI increased by
4.5% compared to the prior year period - Effective blended Lease Rate Growth was
2.5% during the quarter for our Same-Store Portfolio, comprised of effective new Lease Rate Growth of (2.4)% and effective renewal Lease Rate Growth of6.2% - Average Effective Monthly Rent Per Home increased
3.8% compared to the prior year period for our Same-Store Portfolio - Same-store Retention was
65% while achieving strong renewal Lease Rate Growth - Same-store multifamily Average Occupancy was
95.5% during the quarter, up0.5% compared to the prior year period - Same-store multifamily Ending Occupancy was
95.9% , up0.7% compared to the prior year period
Liquidity Position
- Available liquidity was approximately
$550 million as of December 31, 2023, consisting of availability under the Company's revolving credit facility and cash on hand - Annualized fourth quarter Net Debt to Adjusted EBITDA ratio was 5.5x
- The Company has no debt maturities until 2025 and no secured debt
"We delivered solid fourth quarter performance, closing out a year of exceptional growth," said Paul T. McDermott, President and CEO. "Looking forward, our primary emphasis will be on implementing operational enhancements and utilizing our new technology to enhance profitability. Our Washington Metro portfolio, which represents over
Fourth Quarter Operating Results
- Multifamily same-store NOI - Same-store NOI increased
4.5% compared to the corresponding prior year period driven primarily by higher base rent. Average Occupancy for the quarter increased 50 basis points from the prior year period to95.5% . - Other same-store NOI - The other Same-Store Portfolio is comprised of one asset, Watergate 600. Other same-store NOI decreased by
6.5% compared to the corresponding prior year period due to lower occupancy. Watergate 600 was87.8% occupied and leased at quarter end.
2024 Guidance
"With embedded rent growth in our Washington Metro portfolio and the potential to outperform in our markets based on operational initiatives that are already underway, we are well positioned at this point in the year," said Steven Freishtat, Executive Vice President and CFO. "Our 2024 guidance reflects moderated NOI growth, particularly in the first half of the year, supported by stable demand for value-oriented apartments in the Washington Metro region. While we anticipate a year-over-year decline in Core FFO in 2024 primarily driven by higher interest rates, our core business is performing well, our stock valuation is compelling, and we are laying the groundwork for strong NOI performance going forward."
Elme is providing its guidance for 2024, including its full year 2024 outlook on key assumptions and matters. Elme expects Core FFO for 2024 to range from
Full Year 2024 Outlook on Key Assumptions and Metrics
- Same-store multifamily NOI growth is expected to range from
0.25% to2.0% - Non-same-store multifamily NOI is expected to range from
$5.25 million to$6.25 million - Other same-store NOI, which consists solely of Watergate 600, is expected to range from
$12.0 million to$13.0 million - Property management expense is expected to range from
$8.5 million to$9.0 million - G&A, net of core adjustments, is expected to range from
$24.25 million to$25.25 million - Interest expense is expected to range from
$37.25 million to$38.25 million - Does not take into account any potential future acquisitions or dispositions in 2024
| Full Year 2024 | |
| Core FFO per diluted share | |
| Net Operating Income Assumptions | |
| Same-store multifamily NOI growth(a) | |
| Non-same-store multifamily NOI(b) | |
| Other same-store NOI(c) | |
| Expense Assumptions | |
| Property management expense | |
| G&A, net of core adjustments | |
| Interest expense | |
| (a)Includes revenue and expenses from retail operations at multifamily properties | |
| (b)Includes Elme Druid Hills and Riverside Development. | |
| (c)Consists of Watergate 600 | |
Elme Communities' 2024 Core FFO guidance and outlook are based on a number of factors, many of which are outside the Company's control, including economic factors such as inflation and interest rate changes, and all of which are subject to change. Elme Communities may change the guidance provided during the year as actual and anticipated results vary from these assumptions, but Elme Communities undertakes no obligation to do so.
2024 Guidance Reconciliation Table
A reconciliation of projected net loss per diluted share to projected Core FFO per diluted share for the full year ending December 31, 2024 is as follows:
| Low | High | |
| Net loss per diluted share | ||
| Real estate depreciation and amortization | 1.05 | 1.05 |
| NAREIT FFO per diluted share | 0.90 | 0.96 |
| Core adjustments | — | — |
| Core FFO per diluted share | ||
Dividends
On January 4, 2024, Elme Communities paid a quarterly dividend of
Elme Communities announced today that its Board of Trustees has declared a quarterly dividend of
Presentation Webcast and Conference Call Information
The Fourth Quarter 2023 Earnings Call is scheduled for Friday, February 16, 2024 at 10:00 A.M. Eastern Time. Conference Call access information is as follows:
| USA Toll Free Number: | 1-888-506-0062 |
| International Toll Number: | 1-973-528-0011 |
| Conference ID: | 558089 |
The instant replay of the Earnings Call will be available until Friday, March 1, 2024. Instant replay access information is as follows:
| USA Toll Free Number: | 1-877-481-4010 |
| International Toll Number: | 1-919-882-2331 |
| Conference ID: | 49686 |
The live on-demand webcast of the Conference Call with presentation slides will be available on the Investor section of Elme Communities' website at www.elmecommunities.com. Online playback of the webcast and presentation slides will be available following the Conference Call.
About Elme Communities
Elme Communities is committed to elevating what home can be for middle-income renters by providing a higher level of quality, service, and experience. The Company is a multifamily real estate investment trust that owns and operates approximately 9,400 apartment homes in the Washington, DC metro and the Atlanta metro regions, and owns approximately 300,000 square feet of commercial space. Focused on providing quality, affordable homes to a deep, solid, and underserved base of mid-market demand, Elme Communities is building long-term value for shareholders.
Note: Elme Communities' press releases and supplemental financial information are available on the Company website at www.elmecommunities.com or by contacting Investor Relations at (202) 774-3200.
Forward Looking Statements
Certain statements in our earnings release and on our conference call are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Elme Communities to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Additional factors which may cause the actual results, performance, or achievements of Elme Communities to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to: our ability to deliver NOI and rent growth in 2024; the capital market environment in 2024; the ability of the price points within our portfolio to insulate our portfolio from the effects of new supply; the risks associated with ownership of real estate in general and our real estate assets in particular; the economic health of the areas in which our properties are located, particularly with respect to the greater Washington metro and Sunbelt regions; risks associated with our ability to execute on our strategies, including new strategies with respect to our operations and our portfolio, including the acquisition of apartment homes in the Sunbelt markets and to advance our initiatives; the risk of failure to enter into and/or complete acquisitions and dispositions; changes in the composition of our portfolio; reductions in or actual or threatened changes to the timing of federal government spending; the economic health of our residents; the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdowns or recessions and geopolitical conflicts); risks related to our ability to control our expenses if revenues decrease; compliance with applicable laws and corporate social responsibility goals, including those concerning the environment and access by persons with disabilities; risks related to not having adequate insurance to cover potential losses; changes in the market value of securities; terrorist attacks or actions and/or cyber-attacks; whether we will succeed in the day-to-day property management and leasing activities that we have previously outsourced; the availability and terms of financing and capital and the general volatility of securities markets; risks related to our organizational structure and limitations of share ownership; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2022 Form 10-K filed on February 17, 2023. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.
This Earnings Release also includes certain forward-looking non-GAAP information. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Please see the following pages for the corresponding definitions and reconciliations of such non-GAAP financial measures.
| ELME COMMUNITIES AND SUBSIDIARIES | |||||||||||||||
| FINANCIAL HIGHLIGHTS | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
| OPERATING RESULTS | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Revenue | |||||||||||||||
| Real estate rental revenue | $ | 58,852 | $ | 55,593 | $ | 227,911 | $ | 209,380 | |||||||
| Expenses | |||||||||||||||
| Property operating and maintenance(1) | 12,625 | 12,090 | 50,985 | 47,384 | |||||||||||
| Real estate taxes and insurance(1) | 7,629 | 6,614 | 28,845 | 26,617 | |||||||||||
| Property management | 2,226 | 1,974 | 8,108 | 7,436 | |||||||||||
| General and administrative | 5,996 | 7,260 | 25,887 | 28,258 | |||||||||||
| Transformation costs | — | 3,041 | 6,339 | 9,686 | |||||||||||
| Depreciation and amortization | 24,095 | 21,851 | 88,950 | 91,722 | |||||||||||
| Real estate impairment | — | — | 41,860 | — | |||||||||||
| 52,571 | 52,830 | 250,974 | 211,103 | ||||||||||||
| Loss on sale of real estate | — | — | — | — | |||||||||||
| Real estate operating income (loss) | 6,281 | 2,763 | (23,063 | ) | (1,723 | ) | |||||||||
| Other income (expense) | |||||||||||||||
| Interest expense | (9,386 | ) | (6,552 | ) | (30,429 | ) | (24,940 | ) | |||||||
| Loss on extinguishment of debt | — | — | (54 | ) | (4,917 | ) | |||||||||
| Other income | — | 258 | 569 | 712 | |||||||||||
| (9,386 | ) | (6,294 | ) | (29,914 | ) | (29,145 | ) | ||||||||
| Net loss | $ | (3,105 | ) | $ | (3,531 | ) | $ | (52,977 | ) | $ | (30,868 | ) | |||
| Net loss | $ | (3,105 | ) | $ | (3,531 | ) | $ | (52,977 | ) | $ | (30,868 | ) | |||
| Depreciation and amortization | 24,095 | 21,851 | 88,950 | 91,722 | |||||||||||
| Real estate impairment | — | — | 41,860 | — | |||||||||||
| NAREIT funds from operations | $ | 20,990 | $ | 18,320 | $ | 77,833 | $ | 60,854 | |||||||
| Non-cash loss on extinguishment of debt | $ | — | $ | — | $ | 54 | $ | 4,873 | |||||||
| Tenant improvements and incentives, net of reimbursements | (267 | ) | — | (277 | ) | (1,025 | ) | ||||||||
| Leasing commissions capitalized | — | (16 | ) | (56 | ) | (16 | ) | ||||||||
| Recurring capital improvements | (2,642 | ) | (2,656 | ) | (8,592 | ) | (7,682 | ) | |||||||
| Straight-line rents, net | (27 | ) | (55 | ) | (187 | ) | (492 | ) | |||||||
| Non-cash fair value interest expense | — | — | — | 210 | |||||||||||
| Non-real estate depreciation & amortization of debt costs | 1,217 | 1,147 | 5,108 | 4,664 | |||||||||||
| Amortization of lease intangibles, net | (248 | ) | (337 | ) | (818 | ) | (945 | ) | |||||||
| Amortization and expensing of restricted share and unit compensation | 1,508 | 1,831 | 5,474 | 7,988 | |||||||||||
| Adjusted funds from operations | $ | 20,531 | $ | 18,234 | $ | 78,539 | $ | 68,429 | |||||||
| ______________________________ | |||||||||||||||
| (1) Certain immaterial amounts in prior periods have been reclassified to conform with the current period presentation. | |||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| Per share data: | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net loss | (Basic) | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.61 | ) | $ | (0.36 | ) | |||
| (Diluted) | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.61 | ) | $ | (0.36 | ) | ||||
| NAREIT FFO | (Basic) | $ | 0.24 | $ | 0.21 | $ | 0.88 | $ | 0.69 | |||||||
| (Diluted) | $ | 0.24 | $ | 0.21 | $ | 0.88 | $ | 0.69 | ||||||||
| Dividends paid | $ | 0.18 | $ | 0.17 | $ | 0.72 | $ | 0.68 | ||||||||
| Weighted average shares outstanding - basic | 87,788 | 87,491 | 87,735 | 87,388 | ||||||||||||
| Weighted average shares outstanding - diluted | 87,788 | 87,491 | 87,735 | 87,388 | ||||||||||||
| Weighted average shares outstanding - diluted (for NAREIT FFO) | 87,836 | 87,622 | 87,815 | 87,491 | ||||||||||||
| ELME COMMUNITIES AND SUBSIDIARIES | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (In thousands, except per share data) | |||||||
| (Unaudited) | |||||||
| December 31, 2023 | December 31, 2022 | ||||||
| Assets | |||||||
| Land | $ | 384,097 | $ | 373,171 | |||
| Income producing property | 1,960,020 | 1,897,835 | |||||
| 2,344,117 | 2,271,006 | ||||||
| Accumulated depreciation and amortization | (528,024 | ) | (481,588 | ) | |||
| Net income producing property | 1,816,093 | 1,789,418 | |||||
| Properties under development or held for future development | 30,980 | 31,260 | |||||
| Total real estate held for investment, net | 1,847,073 | 1,820,678 | |||||
| Cash and cash equivalents | 5,984 | 8,389 | |||||
| Restricted cash | 2,554 | 1,463 | |||||
| Rents and other receivables | 17,642 | 16,346 | |||||
| Prepaid expenses and other assets | 26,775 | 25,730 | |||||
| Total assets | $ | 1,900,028 | $ | 1,872,606 | |||
| Liabilities | |||||||
| Notes payable, net | $ | 522,345 | $ | 497,359 | |||
| Line of credit | 157,000 | 55,000 | |||||
| Accounts payable and other liabilities | 38,997 | 34,386 | |||||
| Dividend payable | 15,863 | 14,934 | |||||
| Advance rents | 5,248 | 1,578 | |||||
| Tenant security deposits | 6,225 | 5,563 | |||||
| Total liabilities | 745,678 | 608,820 | |||||
| Equity | |||||||
| Shareholders' equity | |||||||
| Preferred shares; | — | — | |||||
| Shares of beneficial interest, | 879 | 875 | |||||
| Additional paid in capital | 1,735,530 | 1,729,854 | |||||
| Distributions in excess of net income | (569,391 | ) | (453,008 | ) | |||
| Accumulated other comprehensive loss | (12,958 | ) | (14,233 | ) | |||
| Total shareholders' equity | 1,154,060 | 1,263,488 | |||||
| Noncontrolling interests in subsidiaries | 290 | 298 | |||||
| Total equity | 1,154,350 | 1,263,786 | |||||
| Total liabilities and equity | $ | 1,900,028 | $ | 1,872,606 | |||
| The following tables contain reconciliations of net loss to NOI and same-store NOI for the periods presented (in thousands): | |||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net loss | $ | (3,105 | ) | $ | (3,531 | ) | $ | (52,977 | ) | $ | (30,868 | ) | |||
| Adjustments: | |||||||||||||||
| Property management expense | 2,226 | 1,974 | 8,108 | 7,436 | |||||||||||
| General and administrative expense | 5,996 | 7,260 | 25,887 | 28,258 | |||||||||||
| Transformation costs | — | 3,041 | 6,339 | 9,686 | |||||||||||
| Real estate depreciation and amortization | 24,095 | 21,851 | 88,950 | 91,722 | |||||||||||
| Real estate impairment | — | — | 41,860 | — | |||||||||||
| Interest expense | 9,386 | 6,552 | 30,429 | 24,940 | |||||||||||
| Loss on extinguishment of debt, net | — | — | 54 | 4,917 | |||||||||||
| Other income | — | (258 | ) | (569 | ) | (712 | ) | ||||||||
| Total Net Operating Income (NOI) | $ | 38,598 | $ | 36,889 | $ | 148,081 | $ | 135,379 | |||||||
| Multifamily NOI: | |||||||||||||||
| Same-store Portfolio | $ | 30,988 | $ | 29,661 | $ | 120,891 | $ | 111,673 | |||||||
| Acquisitions | 4,261 | 3,504 | 13,433 | 9,428 | |||||||||||
| Development | (56 | ) | (57 | ) | (224 | ) | (128 | ) | |||||||
| Non-residential | 56 | 199 | 676 | 792 | |||||||||||
| Total | 35,249 | 33,307 | 134,776 | 121,765 | |||||||||||
| Other NOI (Watergate 600) | 3,349 | 3,582 | 13,305 | 13,614 | |||||||||||
| Total NOI | $ | 38,598 | $ | 36,889 | $ | 148,081 | $ | 135,379 | |||||||
| The following table contains a reconciliation of net loss to core funds from operations for the periods presented (in thousands, except per share data): | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss | $ | (3,105 | ) | $ | (3,531 | ) | $ | (52,977 | ) | $ | (30,868 | ) | ||||
| Add: | ||||||||||||||||
| Real estate depreciation and amortization | 24,095 | 21,851 | 88,950 | 91,722 | ||||||||||||
| Real estate impairment | — | — | 41,860 | — | ||||||||||||
| NAREIT funds from operations | 20,990 | 18,320 | 77,833 | 60,854 | ||||||||||||
| Add: | ||||||||||||||||
| Structuring expenses | — | 60 | 60 | 1,161 | ||||||||||||
| Loss on extinguishment of debt, net | — | — | 54 | 4,917 | ||||||||||||
| Severance expense | 391 | — | 785 | 474 | ||||||||||||
| Transformation costs | — | 3,041 | 6,339 | 9,686 | ||||||||||||
| Write-off of pursuit costs | 24 | — | 73 | 174 | ||||||||||||
| Relocation expense | 3 | 74 | 629 | 74 | ||||||||||||
| Adjustment to deferred taxes | (526 | ) | — | (526 | ) | — | ||||||||||
| Core funds from operations | $ | 20,882 | $ | 21,495 | $ | 85,247 | $ | 77,340 | ||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| Per share data: | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| NAREIT FFO | (Basic) | $ | 0.24 | $ | 0.21 | $ | 0.88 | $ | 0.69 | |||||||
| (Diluted) | $ | 0.24 | $ | 0.21 | $ | 0.88 | $ | 0.69 | ||||||||
| Core FFO | (Basic) | $ | 0.24 | $ | 0.25 | $ | 0.97 | $ | 0.88 | |||||||
| (Diluted) | $ | 0.24 | $ | 0.24 | $ | 0.97 | $ | 0.88 | ||||||||
| Weighted average shares outstanding - basic | 87,788 | 87,491 | 87,735 | 87,388 | ||||||||||||
| Weighted average shares outstanding - diluted (for NAREIT and Core FFO) | 87,836 | 87,622 | 87,815 | 87,491 | ||||||||||||
| Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (in thousands): | |||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net loss | $ | (3,105 | ) | $ | (3,531 | ) | $ | (52,977 | ) | $ | (30,868 | ) | |||
| Add/(deduct): | |||||||||||||||
| Interest expense | 9,386 | 6,552 | 30,429 | 24,940 | |||||||||||
| Real estate depreciation and amortization | 24,095 | 21,851 | 88,950 | 91,722 | |||||||||||
| Real estate impairment | — | — | 41,860 | — | |||||||||||
| Non-real estate depreciation | 158 | 178 | 886 | 822 | |||||||||||
| Severance expense | 391 | — | 785 | 474 | |||||||||||
| Transformation costs | — | 3,041 | 6,339 | 9,686 | |||||||||||
| Relocation expense | 3 | 74 | 629 | 74 | |||||||||||
| Structuring expenses | — | 60 | 60 | 1,161 | |||||||||||
| Loss on extinguishment of debt | — | — | 54 | 4,917 | |||||||||||
| Adjustment to deferred taxes | (526 | ) | — | (526 | ) | — | |||||||||
| Adjusted EBITDA | $ | 30,402 | $ | 28,225 | $ | 116,489 | $ | 102,928 | |||||||
| Non-GAAP Financial Measures |
Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain/loss on sale of real estate, casualty gain/loss, real estate impairment, gain/loss on extinguishment of debt, gain/loss on interest rate derivatives, severance expense, acquisition expenses, gain from non-disposal activities, adjustments to deferred taxes and Transformation Costs. Adjusted EBITDA is included herein because we believe it helps investors and lenders understand our ability to incur and service debt and to make capital expenditures. Adjusted EBITDA is a non-GAAP and non-standardized measure and may be calculated differently by other REITs.
Adjusted Funds From Operations (“AFFO”) is a non-GAAP measure. It is calculated by subtracting from FFO (1) recurring improvements, tenant improvements and leasing costs, that are capitalized and amortized and are necessary to maintain our properties and revenue stream (excluding items contemplated prior to acquisition or associated with development / redevelopment of a property) and (2) straight line rents, then adding (3) non-real estate depreciation and amortization, (4) non-cash fair value interest expense and (5) amortization of restricted share compensation, then adding or subtracting the (6) amortization of lease intangibles, (7) real estate impairment and (8) non-cash gain/loss on extinguishment of debt, as appropriate. AFFO is included herein, because we consider it to be a performance measure of a REIT’s ability to incur and service debt and to distribute dividends to its shareholders. AFFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
Core Adjusted Funds From Operations ("Core AFFO") is calculated by adjusting AFFO for the following items (which we believe are not indicative of the performance of Elme Communities' operating portfolio and affect the comparative measurement of Elme Communities' operating performance over time): (1) gains or losses on extinguishment of debt and gains or losses on interest rate derivatives, (2) expenses related to acquisition and structuring activities, (3) non-share-based executive transition costs, severance expenses and other expenses related to corporate restructuring and executive retirements or resignations, (4) property impairments, casualty gains and losses, and gains or losses on sale not already excluded from Core AFFO, as appropriate, (5) relocation expense, (6) Transformation Costs, (7) write-off of pursuit costs and (8) adjustments to deferred taxes. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core AFFO serves as a useful, supplementary performance measure of Elme Communities' ability to incur and service debt, and distribute dividends to its shareholders. Core AFFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
Core Funds From Operations (“Core FFO”) is calculated by adjusting NAREIT FFO for the following items (which we believe are not indicative of the performance of Elme Communities' operating portfolio and affect the comparative measurement of Elme Communities' operating performance over time): (1) gains or losses on extinguishment of debt and gains or losses on interest rate derivatives, (2) expenses related to acquisition and structuring activities, (3) executive transition costs, severance expenses and other expenses related to corporate restructuring and executive retirements or resignations, (4) property impairments, casualty gains and losses, and gains or losses on sale not already excluded from NAREIT FFO, as appropriate, (5) relocation expense, (6) Transformation Costs, (7) write-off of pursuit costs and (8) adjustments to deferred taxes. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of Elme Communities' ability to incur and service debt, and distribute dividends to its shareholders. Core FFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
NAREIT Funds From Operations (“FFO”) is defined by the 2018 National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) FFO White Paper Restatement, as net income (computed in accordance with generally accepted accounting principles (“GAAP”) excluding gains (or losses) associated with sales of properties, impairments of depreciable real estate and real estate depreciation and amortization. We consider NAREIT FFO to be a standard supplemental measure for equity real estate investment trusts (“REITs”) because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. Our NAREIT FFO may not be comparable to FFO reported by other REITs. These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. NAREIT FFO is a non-GAAP measure.
Net Debt to Adjusted EBITDA represents net debt as of period end divided by adjusted EBITDA for the period, as annualized (i.e. three months periods are multiplied by four) or on a trailing 12 month basis. We define net debt as the total outstanding debt reported as per our consolidated balance sheets less cash and cash equivalents at the end of the period.
Net Operating Income (“NOI”), defined as real estate rental revenue less direct real estate operating expenses, is a non-GAAP measure. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain or loss on sale, if any), plus interest expense, depreciation and amortization, lease origination expenses, general and administrative expenses, acquisition costs, real estate impairment, casualty gain and losses and gain or loss on extinguishment of debt. NOI does not include management expenses, which consist of corporate property management costs and property management fees paid to third parties. NOI is the primary performance measure we use to assess the results of our operations at the property level. We believe that NOI is a useful performance measure because, when compared across periods, it reflects the impact on operations of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from net income. NOI excludes certain components from net income in order to provide results more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. As a result of the foregoing, we provide NOI as a supplement to net income, calculated in accordance with GAAP. NOI does not represent net income or income from continuing operations calculated in accordance with GAAP. As such, NOI should not be considered an alternative to these measures as an indication of our operating performance.
| Other Definitions |
Average Effective Monthly Rent Per Home represents the average of effective rent (net of concessions) for in-place leases plus the market rent for vacant homes, divided by the total number of homes. We believe Average Effective Monthly Rent Per Home is a useful metric in evaluating the average pricing of our homes. It is a component of Residential Revenue, which is used to calculate our NOI. It does not represent actual rental revenue collected per unit.
Average Occupancy is based on average daily occupied apartment homes as a percentage of total apartment homes.
Current Strategy represents the class of each community in our portfolio based on a set of criteria. Our strategies consist of the following subcategories: Class A, Class A-, Class B Value-Add and Class B. A community's class is dependent on a variety of factors, including its vintage, site location, amenities and services, rent growth drivers and rent relative to the market.
- Class A communities are recently-developed, well-located, have competitive amenities and services and command average rental rates well above market median rents.
- Class A- communities have been developed within the past 20 years and feature operational improvements and unit upgrades and command rents at or above median market rents.
- Class B Value-Add communities are over 20 years old but feature operational improvements and strong potential for unit renovations. These communities command average rental rates below median market rents for units that have not been renovated.
- Class B communities are over 20 years old, feature operational improvements and command average rental rates below median market rents.
Debt Service Coverage Ratio is computed by dividing earnings attributable to the controlling interest before interest expense, taxes, depreciation, amortization, real estate impairment, gain on sale of real estate, gain/loss on extinguishment of debt, severance expense, relocation expense, acquisition and structuring expenses and gain/loss from non-disposal activities by interest expense (including interest expense from discontinued operations) and principal amortization.
Debt to Total Market Capitalization is total debt divided by the sum of total debt plus the market value of shares outstanding at the end of the period.
Earnings to Fixed Charges Ratio is computed by dividing earnings attributable to the controlling interest by fixed charges. For this purpose, earnings consist of income from continuing operations (or net income if there are no discontinued operations) plus fixed charges, less capitalized interest. Fixed charges consist of interest expense (excluding interest expense from discontinued operations), including amortized costs of debt issuance, plus interest costs capitalized.
Ending Occupancy is calculated as occupied homes as a percentage of total homes as of the last day of that period.
Lease Rate Growth is defined as the average percentage change in either gross (excluding the impact of concessions) or effective rent (net of concessions) for a new or renewed multifamily lease compared to the prior lease based on the move-in date. The "blended" rate represents the weighted average of new and renewal lease rate growth achieved.
Recurring Capital Improvements represent non-accretive building improvements required to maintain a property's income and value. Recurring capital improvements do not include acquisition capital that was taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to "operating standard". This category includes improvements made as needed upon vacancy of an apartment. Aside from improvements related to apartment turnover, these improvements include facade repairs, installation of new heating and air conditioning equipment, asphalt replacement, permanent landscaping, new lighting and new finishes.
Retention represents the percentage of multifamily leases renewed that were set to expire in the period presented.
Relocation expenses represent costs associated with the relocation of the corporate headquarters to a new location in the Washington metro region.
Same-store Portfolio includes properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. We categorize our properties as "same-store" or "non-same-store" for purposes of evaluating comparative operating performance. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. Development properties are categorized as same-store when they have reached stabilized occupancy (
Transformation Costs include costs related to the strategic shift away from the commercial sector to the residential sector, including the allocation of internal costs, consulting, advisory and termination benefits.
CONTACT:
Amy Hopkins
Vice President, Investor Relations
E-Mail: ahopkins@elmecommunities.com
FAQ
What was Elme Communities' net loss for the full year 2023?
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What was the average effective monthly rent per home increase for Elme Communities in the full year 2023?
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