Elme Communities Announces Third Quarter 2022 Results

WASHINGTON, Oct. 27, 2022 (GLOBE NEWSWIRE) — Elme Communities (the “Company”) (NYSE: ELME), a multifamily REIT with properties within the Washington metro space and the Sunbelt, reported monetary and working outcomes right now for the quarter ended September 30, 2022:

Financial Results

• Net loss was $10.7 million, or $0.12 per diluted share
• NAREIT FFO was $12.9 million, or $0.15 per diluted share
• Core FFO was $20.5 million, or $0.23 per diluted share
• Net Operating Income (NOI) was $35.0 million

Operational Highlights

• Same-store multifamily NOI elevated by 10.4% in comparison with the prior yr interval and continues to speed up into the fourth quarter
• Effective new Lease Rate Growth was 10.5%, efficient renewal Lease Rate Growth was 10.1%, and efficient blended Lease Rate Growth was 10.3% in the course of the quarter for our same-store portfolio
• Effective new Lease Rate Growth was 13.8%, efficient renewal Lease Rate Growth was 18.4%, and efficient blended Lease Rate Growth was 16.3% in the course of the quarter for our non-same retailer portfolio
• Post quarter finish, thus far we’ve got achieved efficient blended Lease Rate Growth of 9.7% for our non-same retailer portfolio and seven.1% for our same-store portfolio
• Same-store retention was 60%, unchanged in comparison with the prior yr interval, and above the historic common whereas attaining very sturdy double-digit renewal lease charge development
• Same-store multifamily Average Occupancy decreased 20 foundation factors from the third quarter of 2021 to 95.6%, in keeping with the focused vary
• Same-store multifamily occupancy elevated publish quarter-end to 95.7% as of October 27, 2022

Transformation Update

• Rebranded as Elme Communities to mirror our ongoing dedication to elevating the value-living expertise for our residents. The title change follows our transformation right into a targeted multifamily firm, and geographic enlargement into Sunbelt markets.
• Began onboarding multifamily community-level operations from third get together property managers. Two communities have been efficiently onboarded onto our redesigned, technology-forward working mannequin. The Company expects to transition the remaining 25 multifamily communities in phases by means of mid-2023 and for the complete transition to yield income and value advantages.
• The Company is actively evaluating alternatives that can create further worth for shareholders and has the capability to accumulate roughly $125 million whereas remaining inside our focused leverage vary. Subsequent to quarter finish, the Company re-evaluated its yield necessities and decided, given shifting market circumstances, that it not anticipates it would full further acquisitions this yr.

Liquidity Position

• Available liquidity was greater than $650 million as of September 30, 2022, consisting of availability beneath the Company’s revolving credit score facility and money readily available
• Following the extinguishment of roughly $77 million secured debt by way of a defeasance course of, as of September 1, 2022, the Company has no secured debt
• The Company has no scheduled debt maturities till July 2023

“Becoming Elme Communities represents the culmination of our multifamily portfolio transformation, geographic expansion, and technology-forward infrastructure revamp,” mentioned Paul T. McDermott, President and CEO. “It’s the start of a new trajectory, positioning us to capitalize on the opportunity to be a differentiated provider of multifamily homes. Our transformation is already delivering positive results, and we have begun the process of successfully transitioning our community level operations to internal management. We look forward to discussing how this and the other changes that we’ve made set us up to deliver better revenue generation, expense base optimization and profitable growth on our earnings call.”

Third Quarter Operating Results

• Same-store Multifamily NOI – Same-store NOI elevated 10.4% in comparison with the corresponding prior yr interval pushed primarily by greater base hire and decrease concessions. Average occupancy for the quarter decreased 20 foundation factors from the prior yr interval to 95.6%.
• Other same-store NOI – Our Other same-store portfolio is comprised of 1 asset, Watergate 600. Other same-store NOI elevated by 6.2% in comparison with the corresponding prior yr interval because of greater rental and parking earnings. Watergate 600 was 92.4% occupied and 92.4% leased at quarter finish.

“Our strong third quarter financial performance further positions us to deliver historical growth in 2023,” mentioned Stephen E. Riffee, Executive Vice President and CFO. “We are on track to deliver Core FFO growth of approximately 14% in 2023 based on the midpoint of our guidance range, our strongest in 20 years. While the capital markets continue to show disruption, we are well-positioned until we can resume scaling our portfolio. We believe that our focus on value-oriented price points and presence in historically stable economies provides relative strength across economic cycles, and we have a well-positioned balance sheet with low leverage and strong liquidity. Furthermore, we have the opportunity to deliver better overall operating performance once our community onboarding process is complete.”

2022 Guidance

With just one quarter remaining, administration is sustaining the midpoint of its 2022 Core FFO steerage and tightening the vary by $0.02 per totally diluted share to $0.87 to $0.89 per totally diluted share. The following assumptions are included within the Core FFO steerage for 2022:

Full Year 2022 Outlook on Key Assumptions and Metrics

• Same-store multifamily NOI development is now anticipated to vary between 8.75% to 9.25%, which represents a tightened vary and continues to signify 9.0% on the midpoint
• Same-store multifamily and Trove NOI, which was totally delivered and invested by the beginning of 2021, is now anticipated to develop between 12.5% and 13.0%, which represents a tightened vary and continues to signify 12.75% on the midpoint
• Non-same-store multifamily NOI is now anticipated to vary from $22.25 million to $22.75 million in 2022, which represents a tightened vary and continues to signify $22.5 million on the midpoint
• Other same-store NOI, which consists solely of Watergate 600, is predicted to vary from $13.25 million to $13.75 million
• Property administration expense is now anticipated to be roughly $7.5 million, which displays a $0.25 million decline on the midpoint
• G&A, internet of core changes, is now anticipated to vary from $26.0 million to $26.5 million, which displays a rise of $0.25 million on the midpoint
• Interest expense is now anticipated to vary from $24.5 million to $25.0 million, which displays a decrease midpoint of $24.75 million following the dedication that the Company is not going to full further acquisitions on this yr
• Transformation prices at the moment are anticipated to be roughly $10.0 million, which displays a lower of $1.0 million in comparison with prior steerage
• No further acquisitions are assumed in 2022 because of altering market circumstances
• Core AFFO payout ratio is predicted to be within the mid-70% vary

^(a) Includes Trove, The Oxford, Assembly Eagles Landing, Carlyle of Sandy Springs, Alder Park, Marietta Crossing, and Riverside Development. Guidance doesn’t ponder any further acquisitions or tendencies.
^(b) Includes revenues and bills from retail operations at multifamily communities
^(c) Consists of Watergate 600
^(d) Capitalized curiosity was $0.3 million year-to-date and is predicted to be the identical quantity for the complete yr 2022 because of the suspension of improvement actions at Riverside.

2023 Guidance

Management is reaffirming its 2023 Core FFO, which is predicted to vary from $0.96 to $1.04 per totally diluted share. The following assumptions are included within the Core FFO steerage for 2023:

Full Year 2023 Outlook on Key Assumptions and Metrics

• Same-store multifamily NOI development is predicted to vary from 9.0% to 11.0%, which displays year-over-year development of 10% on the midpoint additional constructing on the double-digit NOI development anticipated within the second half of 2022.
• Non-same-store multifamily NOI is now anticipated to vary from $12.75 million to $13.75 million following the dedication that the Company is not going to full further acquisitions in 2022
• Other same-store NOI, which consists solely of Watergate 600, is predicted to vary from $13.0 million to $13.75 million
• Property administration expense is now anticipated to vary from $8.0 million to $8.5 million, which displays a lower on the midpoint in comparison with our prior steerage following the dedication that the Company is not going to full further acquisitions in 2022
• G&A, internet of core changes, is predicted to vary from $26.25 million to $27.25 million
• Interest expense is now anticipated to vary from $27.5 million to $28.5 million following the dedication that the Company is not going to full further acquisitions in 2022
• No acquisitions are assumed in 2023. The Company has acquisition capability and can replace steerage if an acquisition is recognized.

^(a) Includes Carlyle of Sandy Springs, Alder Park, Marietta Crossing, and Riverside Development. Guidance doesn’t ponder any further acquisitions or tendencies.
^(b) Includes revenues and bills from retail operations at multifamily communities
^(c) Consists of Watergate 600
^(d) Represents the ultimate prices associated to the internalization of community-level operations

Elme Communities’ 2022 and 2023 Core FFO steerage and outlook are primarily based on numerous components, a lot of that are exterior the Company’s management and all of that are topic to alter. Elme Communities might change the steerage offered in the course of the yr as precise and anticipated outcomes differ from these assumptions, however Elme Communities undertakes no obligation to take action.

2022 Guidance Reconciliation Table

A reconciliation of projected internet loss per diluted share to projected Core FFO per diluted share for the complete yr ending December 31, 2022 is as follows:

2023 Guidance Reconciliation Table

A reconciliation of projected internet loss per diluted share to projected Core FFO per diluted share for the complete yr ending December 31, 2023 is as follows:

Dividends

On October 5, 2022, Elme Communities paid a quarterly dividend of $0.17 per share.

Elme Communities introduced right now that its Board of Trustees has declared a quarterly dividend of $0.17 per share to be paid on January 5, 2023 to shareholders of file on December 22, 2022.

Presentation Webcast and Conference Call Information

The Third Quarter 2022 Earnings Call is scheduled for Friday, October 28, 2022 at 10:00 A.M. Eastern Time. Conference Call entry info is as follows:

The prompt replay of the Earnings Call can be out there till Friday, November 11, 2022. Instant replay entry info is as follows:

The reside on-demand webcast of the Conference Call with presentation slides can be out there on the Investor part of Elme Communities’ web site at www.elmecommunities.com. Online playback of the webcast and presentation slides can be out there following the Conference Call.

About Elme Communities
Elme Communities (previously generally known as Washington Real Estate Investment Trust or WashREIT) is dedicated to elevating what residence might be for middle-income renters by offering a better degree of high quality, service, and expertise. The firm is a multifamily actual property funding belief that owns and operates roughly 8,900 residence properties within the Washington, DC metro and the Sunbelt, and owns roughly 300,000 sq. toes of economic area. Focused on offering high quality, reasonably priced properties to a deep, stable, and underserved base of mid-market demand, Elme Communities is constructing long-term worth for shareholders.

Note: Elme Communities’ press releases and supplemental monetary info can be found on the Company web site at www.elmecommunities.com or by contacting Investor Relations at (202) 774-3200.

Forward Looking Statements
Certain statements in our earnings launch and on our convention name are “forward-looking statements” throughout the that means of the Private Securities Litigation Reform Act of 1995 and contain dangers and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and techniques, anticipated occasions or developments and comparable expressions regarding issues that aren’t historic info. In some circumstances, you possibly can establish ahead wanting statements by means of forward-looking terminology comparable to “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the detrimental of those phrases and phrases or comparable phrases or phrases that are predictions of or point out future occasions or developments and which don’t relate solely to historic issues. Such statements contain recognized and unknown dangers, uncertainties, and different components which can trigger the precise outcomes, efficiency, or achievements of Elme Communities to be materially completely different from future outcomes, efficiency or achievements expressed or implied by such forward-looking statements. Additional components which can trigger the precise outcomes, efficiency, or achievements of Elme Communities to be materially completely different from future outcomes, efficiency or achievements expressed or implied by such forward-looking statements embrace, however usually are not restricted to: dangers related to our capability to execute on our methods, together with new methods with respect to our operations and our portfolio, together with the acquisition of residential properties within the Southeastern markets, on the phrases anticipated, or in any respect, the operational advantages from our working mannequin redesign on the timing contemplated or in any respect, and to comprehend any anticipated returns and advantages, together with the efficiency of any acquired residential properties on the ranges anticipated; the dangers related to possession of actual property typically and our actual property belongings specifically; whether or not precise Core FFO can be in keeping with expectations; the financial well being of the areas through which our properties are positioned, significantly with respect to better Washington, DC metro area and the bigger Southeastern area; the danger of failure to enter into and/or full contemplated acquisitions and tendencies, in any respect, throughout the worth ranges anticipated and on the phrases and timing anticipated; adjustments within the composition of our portfolio; fluctuations in rates of interest and different dangers associated to adjustments in rates of interest; reductions in or precise or threatened adjustments to the timing of federal authorities spending; the dangers associated to make use of of third-party suppliers; the financial well being of our residents; the final word length of the COVID-19 world pandemic, together with any mutations thereof, the actions taken to comprise the pandemic or mitigate its influence, the direct and oblique financial results of the pandemic and containment measures, the effectiveness and willingness of individuals to take COVID-19 vaccines, and the length of related immunity and efficacy of the vaccines towards rising variants of COVID-19; the influence from macroeconomic components (together with inflation, will increase in rates of interest, potential financial slowdown or a recession and geopolitical conflicts); compliance with relevant legal guidelines and company social duty objectives, together with these regarding the surroundings and entry by individuals with disabilities; the dangers associated to not having ample insurance to cowl potential losses; adjustments available in the market worth of securities; terrorist assaults or actions and/or cyber-attacks; whether or not we are going to succeed within the day-to-day property administration and leasing actions that we’ve got beforehand outsourced; the provision and phrases of financing and capital and the overall volatility of securities markets; the dangers associated to our organizational construction and limitations of inventory possession; failure to qualify and preserve our qualification as a REIT and the dangers of adjustments in legal guidelines affecting REITs; and different dangers and uncertainties detailed infrequently in our filings with the SEC, together with our 2021 Form 10-Ok filed on February 18, 2022. While forward-looking statements mirror our good religion beliefs, they aren’t ensures of future efficiency. We undertake no obligation to replace our forward-looking statements or danger components to mirror new info, future occasions, or in any other case.

This Earnings Release additionally consists of sure forward-looking non-GAAP info. Due to the excessive variability and issue in making correct forecasts and projections of a few of the info excluded from these estimates, along with a few of the excluded info not being ascertainable or accessible, the Company is unable to quantify sure quantities that will be required to be included in essentially the most immediately comparable GAAP monetary measures with out unreasonable efforts.

Adjusted EBITDA is earnings earlier than curiosity expense, taxes, depreciation, amortization, achieve/loss on sale of actual property, casualty achieve/loss, actual property impairment, achieve/loss on extinguishment of debt, achieve/loss on rate of interest derivatives, severance expense, acquisition bills and achieve from non-disposal actions and transformation prices. Adjusted EBITDA is included herein as a result of we consider it helps buyers and lenders perceive our capability to incur and repair debt and to make capital expenditures. Adjusted EBITDA is a non-GAAP and non-standardized measure and could also be calculated in another way by different REITs.

Adjusted Funds From Operations (“AFFO”) is a non-GAAP measure. It is calculated by subtracting from FFO (1) recurring expenditures, tenant enhancements and leasing prices, which are capitalized and amortized and are mandatory to keep up our properties and income stream (excluding objects contemplated previous to acquisition or related to improvement / redevelopment of a property) and (2) straight line rents, then including (3) non-real property depreciation and amortization, (4) non-cash honest worth curiosity expense and (5) amortization of restricted share compensation, then including or subtracting the (6) amortization of lease intangibles, (7) actual property impairment and (8) non-cash achieve/loss on extinguishment of debt, as applicable. AFFO is included herein, as a result of we think about it to be a efficiency measure of a REIT’s capability to incur and repair debt and to distribute dividends to its shareholders. AFFO is a non-GAAP and non-standardized measure, and could also be calculated in another way by different REITs.

Core Adjusted Funds From Operations (“Core AFFO”) is calculated by adjusting AFFO for the next objects (which we consider usually are not indicative of the efficiency of Washington REIT’s working portfolio and have an effect on the comparative measurement of Washington REIT’s working efficiency over time): (1) positive factors or losses on extinguishment of debt and positive factors or losses on rate of interest derivatives, (2) bills associated to acquisition and structuring actions, (3) non-share-based government transition prices, severance bills and different bills associated to company restructuring and government retirements or resignations, (4) property impairments, casualty positive factors and losses, and positive factors or losses on sale not already excluded from FAD, as applicable, (5) relocation expense, (6) transformation prices and (7) write-off of pursuit prices. These objects can differ vastly from interval to interval, relying upon the amount of our acquisition exercise and debt retirements, amongst different components. We consider that by excluding this stuff, Core AFFO serves as a helpful, supplementary efficiency measure of Washington REIT’s capability to incur and repair debt, and distribute dividends to its shareholders. Core AFFO is a non-GAAP and non-standardized measure, and could also be calculated in another way by different REITs.

Core Funds From Operations (“Core FFO”) is calculated by adjusting NAREIT FFO for the next objects (which we consider usually are not indicative of the efficiency of Washington REIT’s working portfolio and have an effect on the comparative measurement of Washington REIT’s working efficiency over time): (1) positive factors or losses on extinguishment of debt and positive factors or losses on rate of interest derivatives, (2) bills associated to acquisition and structuring actions, (3) government transition prices, severance bills and different bills associated to company restructuring and government retirements or resignations, (4) property impairments, casualty positive factors and losses, and positive factors or losses on sale not already excluded from NAREIT FFO, as applicable, (5) relocation expense, (6) transformation prices and (7) write-off of pursuit prices. These objects can differ vastly from interval to interval, relying upon the amount of our acquisition exercise and debt retirements, amongst different components. We consider that by excluding this stuff, Core FFO serves as a helpful, supplementary measure of Washington REIT’s capability to incur and repair debt, and distribute dividends to its shareholders. Core FFO is a non-GAAP and non-standardized measure, and could also be calculated in another way by different REITs.

NAREIT Funds From Operations (“FFO”) is outlined by 2018 National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) FFO White Paper Restatement, as internet earnings (computed in accordance with usually accepted accounting ideas (“GAAP”)) excluding positive factors (or losses) related to gross sales of properties, impairments of depreciable actual property and actual property depreciation and amortization. We think about NAREIT FFO to be a regular supplemental measure for fairness actual property funding trusts (“REITs”) as a result of it facilitates an understanding of the working efficiency of our properties with out giving impact to actual property depreciation and amortization, which traditionally assumes that the worth of actual property belongings diminishes predictably over time. Since actual property values have as a substitute traditionally risen or fallen with market circumstances, we consider that NAREIT FFO extra precisely offers buyers a sign of our capability to incur and repair debt, make capital expenditures and fund different wants. Our FFO will not be similar to FFO reported by different actual property funding trusts. These different REITs might not outline the time period in accordance with the present NAREIT definition or might interpret the present NAREIT definition in another way. NAREIT FFO is a non-GAAP measure.

Net Operating Income (“NOI”), outlined as actual property rental income much less direct actual property working bills, is a non-GAAP measure. NOI is calculated as internet earnings, much less non-real property income and the outcomes of discontinued operations (together with the achieve or loss on sale, if any), plus curiosity expense, depreciation and amortization, lease origination bills, common and administrative bills, acquisition prices, actual property impairment, casualty achieve and losses and achieve or loss on extinguishment of debt. NOI doesn’t embrace administration bills, which include company property administration prices and property administration charges paid to 3rd events. They are the first efficiency measures we use to evaluate the outcomes of our operations on the property degree. We additionally current NOI on a money foundation (“Cash NOI”) which is calculated as NOI much less the influence of straight-lining residence hire concessions. We consider that every of NOI and Cash NOI is a helpful efficiency measure as a result of, compared throughout intervals, they mirror the influence on operations of developments in occupancy charges, rental charges and working prices on an unleveraged foundation, offering perspective not instantly obvious from internet earnings. NOI and Cash NOI exclude sure elements from internet earnings with a view to present outcomes extra carefully associated to a property’s outcomes of operations. For instance, curiosity expense isn’t essentially linked to the working efficiency of an actual property asset. In addition, depreciation and amortization, due to historic value accounting and helpful life estimates, might distort working efficiency on the property degree. As a results of the foregoing, we offer every NOI and Cash NOI as a complement to internet earnings, calculated in accordance with GAAP. NOI and Cash NOI don’t signify internet earnings or earnings from persevering with operations calculated in accordance with GAAP. As such, neither needs to be thought-about a substitute for these measures as a sign of our working efficiency.

Average Effective Monthly Rent Per Home represents the common of efficient hire (internet of concessions) for in-place leases and the market hire for vacant properties.

Average Occupancy relies on common each day occupied residence properties as a proportion of whole residence properties.

Current Strategy represents the category of every group in our portfolio primarily based on a set of standards. Our methods include the next subcategories: Class A, Class A-, Class B Value-Add and Class B. A group’s class depends on quite a lot of components, together with its classic, web site location, facilities and providers, hire development drivers and hire relative to the market.

• Class A communities are recently-developed, well-located, have aggressive facilities and providers and command common rental charges nicely above market median rents.
• Class A- communities have been developed throughout the previous 20 years and have operational enhancements and unit upgrades and command rents at or above median market rents.
• Class B Value-Add communities are over 20 years outdated however function operational enhancements and robust potential for unit renovations. These communities command common rental charges beneath median market rents for models that haven’t been renovated.
• Class B communities are over 20 years outdated, function operational enhancements and command common rental charges beneath median market rents.

Debt Service Coverage Ratio is computed by dividing earnings attributable to the controlling curiosity earlier than curiosity expense, taxes, depreciation, amortization, actual property impairment, achieve on sale of actual property, achieve/loss on extinguishment of debt, severance expense, relocation expense, acquisition and structuring bills and achieve/loss from non-disposal actions by curiosity expense (together with curiosity expense from discontinued operations) and principal amortization.

Debt to Total Market Capitalization is whole debt divided by the sum of whole debt plus the market worth of shares excellent on the finish of the interval.

Earnings to Fixed Charges Ratio is computed by dividing earnings attributable to the controlling curiosity by mounted fees. For this function, earnings include earnings from persevering with operations (or internet earnings if there are not any discontinued operations) plus mounted fees, much less capitalized curiosity. Fixed fees include curiosity expense (excluding curiosity expense from discontinued operations), together with amortized prices of debt issuance, plus curiosity prices capitalized.

Ending Occupancy is calculated as occupied properties as a proportion of whole properties as of the final day of that interval.

Lease Rate Growth is outlined as the common proportion change in both gross (excluding the influence of concessions) or efficient hire (internet of concessions) for a brand new or renewed multifamily lease in comparison with the prior lease primarily based on the move-in date. The blended charge represents the weighted common of latest and renewal lease charge development achieved.

Recurring Capital Expenditures signify non-accretive constructing enhancements required to keep up present revenues. Recurring capital expenditures don’t embrace acquisition capital that was considered when underwriting the acquisition of a constructing or that are incurred to convey a constructing as much as “operating standard”.

Retention represents the share of multifamily leases renewed that have been set to run out within the interval offered.

Same-store Portfolio Properties embrace properties that have been owned for everything of the years being in contrast, and exclude properties beneath redevelopment or improvement and properties acquired, offered or categorized as held on the market in the course of the years being in contrast. We categorize our properties as “same-store” or “non-same-store” for functions of evaluating comparative working efficiency. We outline improvement properties as these for which we’ve got deliberate or ongoing main building actions on current or acquired land pursuant to a certified improvement plan. Development properties are categorized as same-store after they have reached stabilized occupancy (90%) earlier than the beginning of the prior yr. We outline redevelopment properties as these for which have deliberate or ongoing important improvement and building actions on current or acquired buildings pursuant to a certified plan, which has an influence on present working outcomes, occupancy and the flexibility to lease area with the meant end result of a better financial return on the property. We categorize a redevelopment property as same-store when redevelopment actions have been full for almost all of every yr being in contrast. We at present have two same-store portfolios: “Same-store multifamily” which is comprised of our same-store residence communities and “Other same-store” which is comprised of our Watergate 600 industrial property.

Transformation Costs embrace prices associated to the strategic shift away from the industrial sector to the residential sector, together with the allocation of inner prices, consulting, advisory and termination advantages.