ELME COMMUNITIES Financial Results
- Net loss was
$3.6 million , or$0.04 per diluted share - NAREIT FFO was
$21.3 million , or$0.24 per diluted share, up 20% compared to the prior year period due primarily to additional payments received with respect to easements previously conveyed - Core FFO was
$19.9 million , or$0.23 per diluted share, down 4% compared to the prior year period - Net Operating Income (NOI) was
$37.8 million , up 4% compared to the prior year period
Operational Highlights
- Same-store multifamily NOI increased by 0.3% compared to the prior year period
- Effective blended Lease Rate Growth was 2.3% during the quarter for our Same-Store Portfolio, comprised of effective new Lease Rate Growth of (2.1)% and effective renewal Lease Rate Growth of 6.2%
- Average Effective Monthly
Rent Per Home increased 3.1% 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 94.4% during the quarter, down 0.9% compared to the prior year period and down 0.5% compared to the prior quarter primarily due to the timing of evictions in our
Atlanta communities and the impact of supply. Occupancy remains strong and stable across ourWashington Metro portfolio and we expect average occupancy for ourAtlanta portfolio to improve over the remainder of the year. - Same-store multifamily Ending Occupancy was 95.1%, down 0.3% compared to the prior year period and down 0.2% compared to the prior quarter
Liquidity Position
- Available liquidity was approximately
$545 million as ofMarch 31, 2024 , consisting of availability under the Company's revolving credit facility and cash on hand - Annualized first quarter Net Debt to Adjusted EBITDA ratio was 5.7x
- The Company has no debt maturities until 2025 and no secured debt
"Our first quarter results were in line with our expectations, and believe our portfolio is positioned very well heading into our busiest leasing months," said
First Quarter Operating Results
- Multifamily same-store NOI - Same-store NOI increased 0.3% compared to the corresponding prior year period driven primarily by higher base rent. Average Occupancy for the quarter decreased 90 basis points from the prior year period to 94.4%.
- Other same-store NOI - The other Same-Store Portfolio is comprised of one asset, Watergate 600. Other same-store NOI decreased by 4.6% compared to the corresponding prior year period due to lower occupancy. Watergate 600 was 87.8% occupied and leased at quarter end.
Guidance
"We are very pleased with the strong fundamentals throughout our
Elme is reiterating 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% to 2.0%
- 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 consider 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) | 0.25% - 2.0% |
| 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 communities | |
| (b) | |
| (c) Consists of Watergate 600 | |
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
| Low | High | |
| Net loss per diluted share | ||
| Real estate depreciation and amortization | 1.09 | 1.09 |
| NAREIT FFO per diluted share | 0.92 | 0.98 |
| Core adjustments | (0.02) | (0.02) |
| Core FFO per diluted share | ||
Dividends
On
Presentation Webcast and Conference Call Information
The First Quarter 2024 Earnings Call is scheduled for
| 1-877-545-0523 | |
| International Toll Number: | 1-973-528-0016 |
| Conference ID: | 504503 |
The instant replay of the Earnings Call will be available until
| 1-877-481-4010 | |
| International Toll Number: | 1-919-882-2331 |
| Conference ID: | 50221 |
The live on-demand webcast of the Conference Call with presentation slides will be available on the Investor section of
About
Note:
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
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 | |||||||
| OPERATING RESULTS | 2024 | 2023 | |||||
| Revenue | |||||||
| Real estate rental revenue | $ | 59,513 | $ | 55,809 | |||
| Expenses | |||||||
| Property operating and maintenance(1) | 13,464 | 12,339 | |||||
| Real estate taxes and insurance(1) | 8,255 | 7,182 | |||||
| Property management | 2,218 | 1,769 | |||||
| General and administrative | 6,196 | 6,841 | |||||
| Transformation costs | — | 2,900 | |||||
| Depreciation and amortization | 24,943 | 21,536 | |||||
| 55,076 | 52,567 | ||||||
| Real estate operating income (loss) | 4,437 | 3,242 | |||||
| Other income (expense) | |||||||
| Interest expense | (9,494 | ) | (6,831 | ) | |||
| Loss on extinguishment of debt | — | (54 | ) | ||||
| Other income | 1,410 | — | |||||
| (8,084 | ) | (6,885 | ) | ||||
| Net loss | $ | (3,647 | ) | $ | (3,643 | ) | |
| Net loss | $ | (3,647 | ) | $ | (3,643 | ) | |
| Depreciation and amortization | 24,943 | 21,536 | |||||
| NAREIT funds from operations | $ | 21,296 | $ | 17,893 | |||
| Non-cash loss on extinguishment of debt | $ | — | $ | 54 | |||
| Tenant improvements and incentives, net of reimbursements | — | (10 | ) | ||||
| Leasing commissions capitalized | — | (56 | ) | ||||
| Recurring capital improvements | (2,771 | ) | (2,004 | ) | |||
| Straight-line rents, net | 15 | (29 | ) | ||||
| Non-real estate depreciation & amortization of debt costs | 1,170 | 1,267 | |||||
| Amortization of lease intangibles, net | (162 | ) | (237 | ) | |||
| Amortization and expensing of restricted share and unit compensation | 1,090 | 1,188 | |||||
| Adjusted funds from operations | $ | 20,638 | $ | 18,066 | |||
| ______________________________ | |||||||
| (1) Certain immaterial amounts in prior periods have been reclassified to conform with the current period presentation. | |||||||
| Three Months Ended | ||||||||
| Per share data: | 2024 | 2023 | ||||||
| Net loss | (Basic) | $ | (0.04 | ) | $ | (0.04 | ) | |
| (Diluted) | $ | (0.04 | ) | $ | (0.04 | ) | ||
| NAREIT FFO | (Basic) | $ | 0.24 | $ | 0.20 | |||
| (Diluted) | $ | 0.24 | $ | 0.20 | ||||
| Dividends paid | $ | 0.18 | $ | 0.18 | ||||
| Weighted average shares outstanding - basic | 87,885 | 87,649 | ||||||
| Weighted average shares outstanding - diluted | 87,885 | 87,649 | ||||||
| Weighted average shares outstanding - diluted (for NAREIT FFO) | 87,897 | 87,840 | ||||||
| ELME COMMUNITIES AND SUBSIDIARIES | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (In thousands, except per share data) | |||||||
| (Unaudited) | |||||||
| Assets | |||||||
| Land | $ | 383,808 | $ | 384,097 | |||
| Income producing property | 1,966,412 | 1,960,020 | |||||
| 2,350,220 | 2,344,117 | ||||||
| Accumulated depreciation and amortization | (550,421 | ) | (528,024 | ) | |||
| Net income producing property | 1,799,799 | 1,816,093 | |||||
| Properties under development or held for future development | 30,980 | 30,980 | |||||
| Total real estate held for investment, net | 1,830,779 | 1,847,073 | |||||
| Cash and cash equivalents | 4,199 | 5,984 | |||||
| Restricted cash | 2,704 | 2,554 | |||||
| Rents and other receivables | 12,886 | 17,642 | |||||
| Prepaid expenses and other assets | 25,971 | 26,775 | |||||
| Total assets | $ | 1,876,539 | $ | 1,900,028 | |||
| Liabilities | |||||||
| Notes payable, net | $ | 522,539 | $ | 522,345 | |||
| Line of credit | 160,000 | 157,000 | |||||
| Accounts payable and other liabilities | 31,112 | 38,997 | |||||
| Dividend payable | 15,888 | 15,863 | |||||
| Advance rents | 4,361 | 5,248 | |||||
| Tenant security deposits | 6,235 | 6,225 | |||||
| Total liabilities | 740,135 | 745,678 | |||||
| Equity | |||||||
| Shareholders' equity | |||||||
| Preferred shares; | — | — | |||||
| Shares of beneficial interest, | 880 | 879 | |||||
| Additional paid in capital | 1,736,524 | 1,735,530 | |||||
| Distributions in excess of net income | (588,923 | ) | (569,391 | ) | |||
| Accumulated other comprehensive loss | (12,365 | ) | (12,958 | ) | |||
| Total shareholders' equity | 1,136,116 | 1,154,060 | |||||
| Noncontrolling interests in subsidiaries | 288 | 290 | |||||
| Total equity | 1,136,404 | 1,154,350 | |||||
| Total liabilities and equity | $ | 1,876,539 | $ | 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 | |||||||
| 2024 | 2023 | ||||||
| Net loss | $ | (3,647 | ) | $ | (3,643 | ) | |
| Adjustments: | |||||||
| Property management expense | 2,218 | 1,769 | |||||
| General and administrative expense | 6,196 | 6,841 | |||||
| Transformation costs | — | 2,900 | |||||
| Real estate depreciation and amortization | 24,943 | 21,536 | |||||
| Interest expense | 9,494 | 6,831 | |||||
| Loss on extinguishment of debt | — | 54 | |||||
| Other income | (1,410 | ) | — | ||||
| Total Net Operating Income (NOI) | $ | 37,794 | $ | 36,288 | |||
| Multifamily NOI: | |||||||
| Same-store Portfolio | $ | 33,020 | $ | 32,905 | |||
| Acquisitions | 1,550 | — | |||||
| Development | (57 | ) | (58 | ) | |||
| Total | 34,513 | 32,847 | |||||
| Other NOI (Watergate 600) | 3,281 | 3,441 | |||||
| Total NOI | $ | 37,794 | $ | 36,288 | |||
| 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 | ||||||||
| 2024 | 2023 | |||||||
| Net loss | $ | (3,647 | ) | $ | (3,643 | ) | ||
| Add: | ||||||||
| Real estate depreciation and amortization | 24,943 | 21,536 | ||||||
| NAREIT funds from operations | 21,296 | 17,893 | ||||||
| Add: | ||||||||
| Structuring expenses | — | 60 | ||||||
| Loss on extinguishment of debt | — | 54 | ||||||
| Severance expense | — | 394 | ||||||
| Transformation costs | — | 2,900 | ||||||
| Write-off of pursuit costs | — | 40 | ||||||
| Relocation expense | — | 186 | ||||||
| Gain on land easements | (1,410 | ) | — | |||||
| Core funds from operations | $ | 19,886 | $ | 21,527 | ||||
| Three Months Ended | ||||||||
| Per share data: | 2024 | 2023 | ||||||
| NAREIT FFO | (Basic) | $ | 0.24 | $ | 0.20 | |||
| (Diluted) | $ | 0.24 | $ | 0.20 | ||||
| Core FFO | (Basic) | $ | 0.23 | $ | 0.24 | |||
| (Diluted) | $ | 0.23 | $ | 0.24 | ||||
| Weighted average shares outstanding - basic | 87,885 | 87,649 | ||||||
| Weighted average shares outstanding - diluted (for NAREIT and Core FFO) | 87,897 | 87,840 | ||||||
| Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (in thousands): | |||||||
| Three Months Ended | |||||||
| 2024 | 2023 | ||||||
| Net loss | $ | (3,647 | ) | $ | (3,643 | ) | |
| Add/(deduct): | |||||||
| Interest expense | 9,494 | 6,831 | |||||
| Real estate depreciation and amortization | 24,943 | 21,536 | |||||
| Non-real estate depreciation | 111 | 215 | |||||
| Severance expense | — | 394 | |||||
| Transformation costs | — | 2,900 | |||||
| Relocation expense | — | 186 | |||||
| Structuring expenses | — | 60 | |||||
| Loss on extinguishment of debt | — | 54 | |||||
| Write-off of pursuit costs | — | 40 | |||||
| Gain on land easements | (1,410 | ) | — | ||||
| Adjusted EBITDA | $ | 29,491 | $ | 28,573 | |||
| 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
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
NAREIT Funds From Operations (“FFO”) is defined by the 2018
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
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
- 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
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: |
| Vice President, Investor Relations |
| E-Mail: ahopkins@elmecommunities.com |
2024 GlobeNewswire, Inc., source
