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Elme Communities Announces Second Quarter 2024 Results

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Elme Communities (NYSE: ELME) reported its Q2 2024 financial results. Key highlights include:

  • Net loss of $3.5 million, or $0.04 per diluted share
  • NAREIT FFO of $20.4 million, or $0.23 per diluted share
  • Core FFO of $20.5 million, or $0.23 per diluted share
  • Net Operating Income (NOI) of $38.1 million
  • Same-store multifamily NOI increased by 1.3% year-over-year
  • Effective blended Lease Rate Growth of 3.2% for Same-Store Portfolio
  • Average Effective Monthly Rent Per Home increased 2.5% year-over-year
  • Same-store multifamily Average Occupancy was 94.6%, down 0.8% year-over-year

The company tightened its 2024 Core FFO guidance range to $0.91 to $0.95 per fully diluted share and declared a quarterly dividend of $0.18 per share.

Elme Communities (NYSE: ELME) ha riportato i risultati finanziari per il secondo trimestre del 2024. I punti salienti includono:

  • Perdita netta di 3,5 milioni di dollari, pari a 0,04 dollari per azione completamente diluita
  • FFO NAREIT di 20,4 milioni di dollari, pari a 0,23 dollari per azione completamente diluita
  • Core FFO di 20,5 milioni di dollari, pari a 0,23 dollari per azione completamente diluita
  • Reddito operativo netto (NOI) di 38,1 milioni di dollari
  • NOI multifamiliare stesso negozio aumentato dell'1,3% rispetto all'anno precedente
  • Crescita efficace del tasso di affitto miscelato del 3,2% per il portafoglio stesso negozio
  • Affitto medio mensile effettivo per casa aumentato del 2,5% rispetto all'anno precedente
  • Occupazione media del multifamiliare stesso negozio al 94,6%, in calo dello 0,8% rispetto all'anno precedente

L'azienda ha ristretto l'intervallo di guidance per il Core FFO 2024 a 0,91 - 0,95 dollari per azione completamente diluita e ha dichiarato un dividendo trimestrale di 0,18 dollari per azione.

Elme Communities (NYSE: ELME) reportó sus resultados financieros del segundo trimestre de 2024. Los aspectos clave incluyen:

  • Pérdida neta de 3,5 millones de dólares, o 0,04 dólares por acción diluida
  • FFO NAREIT de 20,4 millones de dólares, o 0,23 dólares por acción diluida
  • Core FFO de 20,5 millones de dólares, o 0,23 dólares por acción diluida
  • Ingreso operativo neto (NOI) de 38,1 millones de dólares
  • El NOI multifamiliar de la misma tienda aumentó un 1,3% en comparación interanual
  • Crecimiento efectivo del tipo de alquiler combinado del 3,2% para la cartera de la misma tienda
  • El alquiler mensual efectivo promedio por hogar aumentó un 2,5% en comparación interanual
  • La ocupación promedio multifamiliar de la misma tienda fue del 94,6%, una disminución del 0,8% en comparación interanual

La empresa ha ajustado su rango de orientación para el Core FFO 2024 a 0,91 - 0,95 dólares por acción completamente diluida y declaró un dividendo trimestral de 0,18 dólares por acción.

Elme Communities (NYSE: ELME)는 2024년 2분기 재무 결과를 발표했습니다. 주요 내용은 다음과 같습니다:

  • 순손실 350만 달러, 희석주당 0.04 달러
  • NAREIT FFO 2040만 달러, 희석주당 0.23 달러
  • 핵심 FFO 2050만 달러, 희석주당 0.23 달러
  • 순영업소득 (NOI) 3810만 달러
  • 동종매장 다가구 NOI가 전년 대비 1.3% 증가
  • 동종매장 포트폴리오에 대한 혼합 임대료 증가율 3.2%
  • 주택당 평균 월세가 전년 대비 2.5% 증가
  • 동종매장 다가구 평균 점유율 94.6%, 전년 대비 0.8% 감소

회사는 2024년 핵심 FFO 전망 범위를 희석주당 0.91에서 0.95로 조정하고, 주당 0.18 달러의 분기 배당금을 선언했습니다.

Elme Communities (NYSE: ELME) a publié ses résultats financiers pour le deuxième trimestre 2024. Les points clés comprennent :

  • Perte nette de 3,5 millions de dollars, soit 0,04 dollar par action diluée
  • FFO NAREIT de 20,4 millions de dollars, soit 0,23 dollar par action diluée
  • Core FFO de 20,5 millions de dollars, soit 0,23 dollar par action diluée
  • Revenu net d'exploitation (NOI) de 38,1 millions de dollars
  • Le NOI multifamilial en magasin identique a augmenté de 1,3 % d'une année sur l'autre
  • Croissance effective du taux de location mixte de 3,2 % pour le portefeuille de magasins identiques
  • Le loyer mensuel efficace moyen par maison a augmenté de 2,5 % d'une année sur l'autre
  • Le taux d'occupation moyen des multifamiliales en magasin identique était de 94,6 %, en baisse de 0,8 % d'une année sur l'autre

L'entreprise a resserré son intervalle de prévisions pour le Core FFO 2024 à 0,91 - 0,95 dollar par action entièrement diluée et a déclaré un dividende trimestriel de 0,18 dollar par action.

Elme Communities (NYSE: ELME) hat die finanziellen Ergebnisse für das zweite Quartal 2024 veröffentlicht. Zu den wichtigsten Punkten gehören:

  • Nettverlust von 3,5 Millionen Dollar, oder 0,04 Dollar pro verwässerter Aktie
  • NAREIT FFO von 20,4 Millionen Dollar, oder 0,23 Dollar pro verwässerter Aktie
  • Core FFO von 20,5 Millionen Dollar, oder 0,23 Dollar pro verwässerter Aktie
  • Netto-Betriebseinkommen (NOI) von 38,1 Millionen Dollar
  • Das NOI für die gleiche Verkaufsstelle im Mehrfamilienbereich stieg im Jahresvergleich um 1,3%
  • Effektives gemischtes Mietwachstum von 3,2% für das Portfolio der gleichen Verkaufsstelle
  • Der durchschnittliche effektive Monatsmietpreis pro Haushalt stieg im Jahresvergleich um 2,5%
  • Die durchschnittliche Belegung im Mehrfamilienbereich der gleichen Verkaufsstelle lag bei 94,6%, was einem Rückgang von 0,8% im Jahresvergleich entspricht

Das Unternehmen hat den Ausblick für das Core FFO 2024 auf 0,91 bis 0,95 Dollar pro vollständig verwässerte Aktie eingeschränkt und eine vierteljährliche Dividende von 0,18 Dollar pro Aktie erklärt.

Positive
  • Same-store multifamily NOI increased by 1.3% compared to the prior year period
  • Effective blended Lease Rate Growth increased to 3.2% for Same-Store Portfolio
  • Average Effective Monthly Rent Per Home increased 2.5% year-over-year
  • Same-store Retention was 65% while achieving strong renewal Lease Rate Growth
  • Company amended and restated credit agreement, extending maturity to July 2028 with increased facility size
Negative
  • Net loss of $3.5 million, or $0.04 per diluted share
  • Same-store multifamily Average Occupancy decreased 0.8% year-over-year to 94.6%
  • Other same-store NOI decreased by 1.3% compared to the prior year period
  • Atlanta market experiencing unprecedented level of new supply

Insights

Elme Communities' Q2 2024 results present a mixed picture. While the company reported a net loss of $3.5 million ($0.04 per diluted share), its NAREIT FFO and Core FFO both came in at $20.5 million ($0.23 per diluted share). This suggests that despite the net loss, the company's underlying property operations remain relatively stable.

The same-store multifamily NOI growth of 1.3% year-over-year is positive, albeit modest. The effective blended Lease Rate Growth of 3.2% for the Same-Store Portfolio is encouraging, especially considering the 5.4% renewal Lease Rate Growth. However, the 0.2% new Lease Rate Growth indicates potential challenges in attracting new tenants at higher rates.

The company's liquidity position appears strong, with the recent amendment of its credit agreement providing a $500 million revolving credit facility and an option to increase it to $1.0 billion. The Net Debt to Adjusted EBITDA ratio of 5.6x is relatively healthy for a REIT.

Elme has tightened its Core FFO guidance for 2024 to $0.91 to $0.95 per share, narrowing the range slightly. The updated same-store multifamily NOI growth expectation of 0.75% to 1.75% suggests cautious optimism about the company's core operations.

Overall, while Elme Communities is showing some resilience in a challenging market, investors should closely monitor occupancy rates and new lease growth as potential areas of concern.

Elme Communities' Q2 results reflect the nuanced dynamics of the multifamily real estate market in its operating regions. The Washington, DC metro area appears to be outperforming expectations, with management noting "exceptional" demand patterns in Northern Virginia. This is a positive sign for the company's largest market.

However, the Atlanta market presents challenges due to an "unprecedented level of new supply." Despite this, Elme reports stability and modest improvement in operating fundamentals in Atlanta, supported by strong retention and renewal rates. This resilience in the face of increased competition is noteworthy.

The company's same-store multifamily Average Occupancy of 94.6% during Q2, while down 0.8% year-over-year, showed a sequential improvement of 0.2% from Q1. The further increase to 95.3% in July is encouraging, suggesting a potential upward trend in occupancy rates.

The 65% retention rate, combined with strong renewal Lease Rate Growth of 5.4%, indicates that Elme is successfully retaining tenants at higher rates. However, the modest 0.2% new Lease Rate Growth suggests potential pricing pressure for new tenants, likely due to market competition.

The company's focus on Northern Virginia and its ability to navigate the challenging Atlanta market will be important for its performance in the coming quarters. Investors should keep an eye on how Elme balances occupancy rates with lease rate growth, especially in the context of varying supply dynamics in its key markets.

BETHESDA, Md., Aug. 01, 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 ended June 30, 2024:

Financial Results

  • Net loss was $3.5 million, or $0.04 per diluted share
  • NAREIT FFO was $20.4 million, or $0.23 per diluted share
  • Core FFO was $20.5 million, or $0.23 per diluted share
  • Net Operating Income (NOI) was $38.1 million

Operational Highlights

  • Same-store multifamily NOI increased by 1.3% compared to the prior year period
  • Effective blended Lease Rate Growth increased to 3.2% for our Same-Store Portfolio during the quarter, comprised of effective new Lease Rate Growth of 0.2% and effective renewal Lease Rate Growth of 5.4%
  • Average Effective Monthly Rent Per Home increased 2.5% 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 94.6% during the quarter, down 0.8% compared to the prior year period and up 0.2% compared to the prior quarter. Same-store multifamily Average Occupancy averaged 95.3% in July, up an additional 0.7% since quarter end.
  • Same-store multifamily Ending Occupancy was 95.5%, down 0.2% compared to the prior year period and up 0.4% compared to the prior quarter.

Liquidity Position

  • Subsequent to quarter end, the Company amended and restated its credit agreement. The amended and restated credit agreement provides for a $500 million revolving credit facility with an accordion feature that allows the Company to increase the facility to up to $1.0 billion, subject to the lenders’ additional commitments, and extends the maturity from August 2025 to July 2028 with two six-month extension options.
  • Availability on the Company's revolving credit facility was approximately $320 million as of August 1, 2024
  • Annualized second quarter Net Debt to Adjusted EBITDA ratio was 5.6x
  • The Company has a strong balance sheet with $125 million of debt maturing before 2028 and no secured debt

“The positive momentum we began to experience in April has continued, and blended lease rate growth and occupancy improved sequentially during the second quarter and further increased in July,” said Paul T. McDermott, President and CEO. “The demand patterns that we are seeing in Northern Virginia are exceptional, and we are tightening and raising the midpoint of our same-store multifamily NOI assumption due to better-than-expected Washington Metro performance. While the Atlanta market is experiencing an unprecedented level of new supply, our operating fundamentals are showing stability with modest improvement, supported by strong retention and renewal rates.”

Second Quarter Operating Results

  • Multifamily same-store NOI - Same-store NOI increased 1.3% compared to the corresponding prior year period driven primarily by higher base rent. Average Occupancy for the quarter decreased 80 basis points from the prior year period to 94.6%.
  • Other same-store NOI - The Other same-store portfolio is comprised of one asset, Watergate 600. Other same-store NOI decreased by 1.3% compared to the corresponding prior year period due to higher operating expenses. Watergate 600 was 87.8% occupied and leased at quarter end.

Guidance

Elme is tightening its Core FFO guidance range for 2024 to $0.91 to $0.95 from $0.90 to $0.96 per fully diluted share. The following assumptions are included in the Core FFO guidance for 2024:

Full Year 2024 Outlook on Key Assumptions and Metrics

  • Same-store multifamily NOI growth is now expected to range from 0.75% to 1.75%
  • Non-same-store multifamily NOI is now expected to range from $5.35 million to $6.15 million
  • Other same-store NOI, which consists solely of Watergate 600, is now expected to range from $12.25 million to $12.75 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 now expected to range from $37.5 million to $38.25 million
  • Does not consider any potential future acquisitions or dispositions in 2024
Full Year 2024 
Core FFO per diluted share$0.91 - $0.95
Net Operating Income Assumptions 
Same-store multifamily NOI growth (a)0.75% - 1.75%
Non-same-store multifamily NOI (b)$5.35 million - $6.15 million
Other same-store NOI (c)$12.25 million - $12.75 million
Expense Assumptions 
Property management expense$8.5 million - $9.0 million
G&A, net of core adjustments$24.25 million - $25.25 million
Interest expense$37.5 million - $38.25 million
(a) Includes revenue and expenses from retail operations at multifamily communities 
(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:

 LowHigh
Net loss per diluted share$(0.17)$(0.13)
Real estate depreciation and amortization 1.09  1.09 
NAREIT FFO per diluted share 0.92  0.96 
Core adjustments (0.01) (0.01)
Core FFO per diluted share$0.91 $0.95 
       

Dividends

On July 3, 2024, Elme Communities paid a quarterly dividend of $0.18 per share.

Elme Communities announced today that its Board of Trustees has declared a quarterly dividend of $0.18 per share to be paid on October 3, 2024 to shareholders of record on September 19, 2024.

Presentation Webcast and Conference Call Information

The Second Quarter 2024 Earnings Call is scheduled for Friday, August 2, 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: 222443
   

The instant replay of the Earnings Call will be available until Friday, August 16, 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: 50778
   

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: the risks associated with ownership of real estate in general and our real estate assets in particular; our ability to work through elevated eviction backlogs; our ability to benefit from core growth drivers across our Washington Metro communities and end the year in a strong position; our ability to ramp up renovations over the course of this year; our ability to achieve above market growth after 2024 driven by renovations; the economic health of the areas in which our properties are located, particularly with respect to the greater Washington, DC 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 our ability to realize any anticipated operational benefits from our internalization of community management functions; 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; the 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 2023 Form 10-K filed on February 16, 2024. 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 June 30, Six Months Ended June 30,
OPERATING RESULTS 2024   2023   2024   2023 
Revenue       
Real estate rental revenue$60,103  $56,599  $119,616  $112,408 
Expenses       
Property operating and maintenance (1) 13,996   13,325   27,460   25,664 
Real estate taxes and insurance (1) 7,986   6,933   16,241   14,115 
Property management 2,175   2,178   4,393   3,947 
General and administrative 6,138   6,680   12,334   13,521 
Transformation costs    2,454      5,354 
Depreciation and amortization 23,895   21,415   48,838   42,951 
  54,190   52,985   109,266   105,552 
Real estate operating income (loss) 5,913   3,614   10,350   6,856 
Other income (expense)       
Interest expense (9,384)  (6,794)  (18,878)  (13,625)
Loss on extinguishment of debt          (54)
Other income    569   1,410   569 
  (9,384)  (6,225)  (17,468)  (13,110)
Net loss$(3,471) $(2,611) $(7,118) $(6,254)
        
Net loss$(3,471) $(2,611) $(7,118) $(6,254)
Depreciation and amortization 23,895   21,415   48,838   42,951 
NAREIT funds from operations$20,424  $18,804  $41,720  $36,697 
        
Non-cash loss on extinguishment of debt$  $  $  $54 
Tenant improvements and incentives, net of reimbursements          (10)
Leasing commissions capitalized          (56)
Recurring capital improvements (2,144)  (2,456)  (4,915)  (4,460)
Straight-line rents, net 25   (57)  40   (86)
Non-real estate depreciation & amortization of debt costs 1,259   1,276   2,429   2,543 
Amortization of lease intangibles, net (163)  (178)  (325)  (415)
Amortization and expensing of restricted share and unit compensation 1,045   1,346   2,135   2,534 
Adjusted funds from operations$20,446  $18,735  $41,084  $36,801 
______________________________       
(1) Certain immaterial amounts in prior periods have been reclassified to conform with the current period presentation.
 


  Three Months Ended June 30, Six Months Ended June 30,
Per share data:  2024   2023   2024   2023 
Net loss(Basic)$(0.04) $(0.03) $(0.08) $(0.07)
 (Diluted)$(0.04) $(0.03) $(0.08) $(0.07)
NAREIT FFO(Basic)$0.23  $0.21  $0.47  $0.42 
 (Diluted)$0.23  $0.21  $0.47  $0.42 
         
Dividends paid $0.18  $0.18  $0.36  $0.36 
         
Weighted average shares outstanding - basic  87,910   87,741   87,898   87,695 
Weighted average shares outstanding - diluted  87,910   87,741   87,898   87,695 
Weighted average shares outstanding - diluted (for NAREIT FFO)  87,975   87,785   87,936   87,813 
                 


ELME COMMUNITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
    
 June 30, 2024 December 31, 2023
Assets   
Land$383,808  $384,097 
Income producing property 1,976,127   1,960,020 
  2,359,935   2,344,117 
Accumulated depreciation and amortization (573,054)  (528,024)
Net income producing property 1,786,881   1,816,093 
Properties under development or held for future development 30,980   30,980 
Total real estate held for investment, net 1,817,861   1,847,073 
Cash and cash equivalents 5,629   5,984 
Restricted cash 2,263   2,554 
Rents and other receivables 12,575   17,642 
Prepaid expenses and other assets 23,147   26,775 
Total assets$1,861,475  $1,900,028 
    
Liabilities   
Notes payable, net$522,734  $522,345 
Line of credit 156,000   157,000 
Accounts payable and other liabilities 37,283   38,997 
Dividend payable 15,905   15,863 
Advance rents 5,074   5,248 
Tenant security deposits 6,334   6,225 
Total liabilities 743,330   745,678 
    
Equity   
Shareholders' equity   
Preferred shares; $0.01 par value; 10,000 shares authorized; no shares issued or outstanding     
Shares of beneficial interest, $0.01 par value; 150,000 shares authorized: 88,011 and 87,867 shares issued and outstanding, as of June 30, 2024 and December 31, 2023, respectively 880   879 
Additional paid in capital 1,737,941   1,735,530 
Distributions in excess of net income (608,310)  (569,391)
Accumulated other comprehensive loss (12,651)  (12,958)
Total shareholders' equity 1,117,860   1,154,060 
    
Noncontrolling interests in subsidiaries 285   290 
Total equity 1,118,145   1,154,350 
    
Total liabilities and equity$1,861,475  $1,900,028 
        

The following tables contain reconciliations of net loss to NOI and same-store NOI for the periods presented (in thousands):

 Three Months Ended June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
Net loss$(3,471) $(2,611) $(7,118) $(6,254)
Adjustments:       
Property management expense 2,175   2,178   4,393   3,947 
General and administrative expense 6,138   6,680   12,334   13,521 
Transformation costs    2,454      5,354 
Real estate depreciation and amortization 23,895   21,415   48,838   42,951 
Interest expense 9,384   6,794   18,878   13,625 
Loss on extinguishment of debt          54 
Other income    (569)  (1,410)  (569)
Total Net Operating Income (NOI)$38,121  $36,341  $75,915  $72,629 
        
Multifamily NOI:       
Same-store Portfolio$33,516  $33,100  $66,536  $66,005 
Acquisitions 1,411      2,961    
Development (57)  (54)  (114)  (112)
Total 34,870   33,046   69,383   65,893 
        
Other NOI (Watergate 600) 3,251   3,295   6,532   6,736 
Total NOI$38,121  $36,341  $75,915  $72,629 
        

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 June 30, Six Months Ended June 30,
   2024   2023   2024   2023 
Net loss $(3,471) $(2,611) $(7,118) $(6,254)
Add:        
Real estate depreciation and amortization  23,895   21,415   48,838   42,951 
NAREIT funds from operations  20,424   18,804   41,720   36,697 
Add:        
Structuring expenses  60      60   60 
Loss on extinguishment of debt           54 
Severance expense  64      64   394 
Transformation costs     2,454      5,354 
Write-off of pursuit costs     9      49 
Relocation expense     134      320 
Gain on land easements        (1,410)   
Core funds from operations $20,548  $21,401  $40,434  $42,928 
         
  Three Months Ended June 30, Six Months Ended June 30,
Per share data:  2024   2023   2024   2023 
NAREIT FFO(Basic)$0.23  $0.21  $0.47  $0.42 
 (Diluted)$0.23  $0.21  $0.47  $0.42 
Core FFO(Basic)$0.23  $0.24  $0.46  $0.49 
 (Diluted)$0.23  $0.24  $0.46  $0.49 
         
Weighted average shares outstanding - basic  87,910   87,741   87,898   87,695 
Weighted average shares outstanding - diluted (for NAREIT and Core FFO)  87,975   87,785   87,936   87,813 
                 

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (in thousands):

 Three Months Ended June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
Net loss$(3,471) $(2,611) $(7,118) $(6,254)
Add/(deduct):       
Interest expense 9,384   6,794   18,878   13,625 
Real estate depreciation and amortization 23,895   21,415   48,838   42,951 
Non-real estate depreciation 197   222   308   437 
Severance expense 64      64   394 
Transformation costs    2,454      5,354 
Relocation expense    134      320 
Structuring expenses 60      60   60 
Loss on extinguishment of debt          54 
Write-off of pursuit costs    9      49 
Gain on land easements       (1,410)   
Adjusted EBITDA$30,129  $28,417  $59,620  $56,990 
                

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, adjustment to deferred taxes, write-off of pursuit costs, Transformation Costs and gain on land easements. 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, (8) adjustment to deferred taxes and (9) gain on land easements. 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, (8) adjustment to deferred taxes and (9) gain on land easements. 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 real estate investment trusts (“REITs”), and believe it is a useful measure 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, gain/loss from non-disposal activities and gain on land easements 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 (90%) before the start of the prior year. We define redevelopment properties as those for which we have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared. We currently have two same-store portfolios: “Same-store multifamily” which is comprised of our same-store apartment communities and “Other same-store” which is comprised of our Watergate 600 commercial property.

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' (ELME) Core FFO for Q2 2024?

Elme Communities reported Core FFO of $20.5 million, or $0.23 per diluted share, for Q2 2024.

How did Elme Communities' (ELME) same-store multifamily NOI perform in Q2 2024?

Elme Communities' same-store multifamily NOI increased by 1.3% compared to the prior year period in Q2 2024.

What is Elme Communities' (ELME) updated Core FFO guidance for 2024?

Elme Communities tightened its Core FFO guidance range for 2024 to $0.91 to $0.95 per fully diluted share.

What was Elme Communities' (ELME) effective blended Lease Rate Growth for Q2 2024?

Elme Communities' effective blended Lease Rate Growth increased to 3.2% for their Same-Store Portfolio during Q2 2024.

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