Elme munities(ELME) - 2025 Q1 - Quarterly Results

First Quarter 2025 Results & Outlook Financial and Operational Highlights Elme Communities reported a net loss of $0.05 per diluted share, with Core FFO per diluted share increasing to $0.24, driven by strong operational performance Q1 2025 Financial Results per Diluted Share | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss per diluted share | $(0.05) | $(0.04) | | Core FFO per diluted share | $0.24 | $0.23 | - The CEO noted that while federal workforce reductions are a factor, the company's focus on mid-market rents and its strong presence in Northern Virginia are expected to support resilient performance[4] - Same-store multifamily NOI increased by 5.5% year-over-year[5] - Same-store multifamily Average Occupancy rose by 0.5% to 94.8% year-over-year[5] - Effective blended Lease Rate Growth was 1.9%, driven by 5.0% growth on renewals, offset by a (2.0)% decline on new leases[5] - The company maintained a strong balance sheet with $324 million in available liquidity and an annualized Net Debt to Adjusted EBITDA ratio of 5.6x[5] Strategic Review & 2025 Guidance The Board initiated a strategic review to maximize shareholder value, while the company reiterated its full-year 2025 Core FFO per diluted share guidance - The Board of Trustees has initiated a formal review to evaluate strategic alternatives for the company, which is currently ongoing[6] Full Year 2025 Guidance (in millions) | Metric | Guidance Range | | :--- | :--- | | Core FFO per diluted share | $0.91 - $0.97 | | Same-store multifamily Revenue growth | 2.1% - 3.6% | | Same-store multifamily Expense growth | 2.75% - 4.25% | | Same-store multifamily NOI growth | 1.5% - 3.5% | | Other same-store NOI (Watergate 600) | $11.5 - $12.25 | | G&A, net of core adjustments | $25.25 - $26.25 | | Interest expense | $37.35 - $38.35 | 2025 Guidance Reconciliation: Net Loss to Core FFO per Share | | Low | High | | :--- | :--- | :--- | | Net loss per diluted share | $(0.17) | $(0.11) | | Real estate depreciation and amortization | 1.05 | 1.05 | | NAREIT FFO per diluted share | 0.88 | 0.94 | | Core adjustments | 0.03 | 0.03 | | Core FFO per diluted share | $0.91 | $0.97 | Dividends Elme Communities declared a quarterly dividend of $0.18 per share, payable on July 3, 2025, to shareholders of record as of June 17, 2025 - The Board of Trustees declared a quarterly dividend of $0.18 per share[11] - The dividend will be paid on July 3, 2025, to shareholders of record on June 17, 2025[11] Financial Statements and Key Data Consolidated Statements of Operations Elme reported Q1 2025 total real estate rental revenue of $61.5 million, with a net loss of $4.7 million, primarily due to higher general and administrative expenses Q1 2025 Statement of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Real estate rental revenue | $61,493 | $59,513 | | Total Expenses | $56,708 | $55,076 | | Real estate operating income | $4,785 | $4,437 | | Interest expense | $(9,460) | $(9,494) | | Net loss | $(4,675) | $(3,647) | Per Share Data | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss (Diluted) | $(0.05) | $(0.04) | | NAREIT FFO (Diluted) | $0.21 | $0.24 | | Dividends paid | $0.18 | $0.18 | Consolidated Balance Sheets As of March 31, 2025, Elme's total assets were $1.83 billion, with total liabilities at $764.4 million and total equity at $1.06 billion Balance Sheet Highlights (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total real estate held for investment, net | $1,778,889 | $1,796,014 | | Cash and cash equivalents | $6,396 | $6,144 | | Total assets | $1,827,579 | $1,845,762 | | Notes payable, net | $523,061 | $522,953 | | Line of credit | $182,000 | $176,000 | | Total liabilities | $764,378 | $763,684 | | Total equity | $1,063,201 | $1,082,078 | Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO) In Q1 2025, NAREIT FFO was $18.6 million, while Core FFO increased to $21.6 million and Core AFFO reached $21.2 million Q1 2025 FFO Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(4,675) | $(3,647) | | Real estate depreciation and amortization | 23,239 | 24,943 | | NAREIT FFO | 18,564 | 21,296 | | Other non-operating expenses | 3,041 | — | | Gain on land easements | — | (1,410) | | Core FFO | $21,605 | $19,886 | Q1 2025 AFFO Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | NAREIT FFO | $18,564 | $21,296 | | Recurring capital improvements | (2,917) | (2,771) | | Other adjustments | 2,555 | 2,113 | | AFFO | 18,202 | 20,638 | | Other non-operating expenses | 3,041 | — | | Gain on land easements | — | (1,410) | | Core AFFO | $21,243 | $19,228 | Portfolio Analysis Same-Store Multifamily Operating Results Same-store multifamily NOI grew 5.5% to $36.5 million in Q1 2025, driven by revenue growth and improved average occupancy of 94.8% Q1 2025 Same-Store Multifamily Performance vs. Q1 2024 | Region | Revenue % Chg | Expense % Chg | NOI % Chg | Avg Occupancy % | Avg Rent % Chg | | :--- | :--- | :--- | :--- | :--- | :--- | | Virginia | 4.5% | 0.4% | 6.5% | 96.5% | 3.5% | | DC / Maryland | 2.0% | 2.2% | 1.9% | 94.9% | 1.9% | | Georgia | 3.6% | 2.4% | 4.6% | 90.6% | (4.4)% | | Total | 3.9% | 1.2% | 5.5% | 94.8% | 1.7% | - Sequentially, total same-store NOI increased by 2.3% from Q4 2024, largely due to a significant 11.2% decrease in operating expenses in the Georgia portfolio[60] - Blended lease rate growth for the quarter was 1.9%, composed of a 5.0% increase on renewals and a (2.0)% decrease on new leases[57] Same-Store Operating Expenses - Multifamily Total same-store operating expenses increased by 1.2% year-over-year in Q1 2025, driven by controllable expenses but offset by lower real estate taxes Q1 2025 Same-Store Operating Expense Changes (YoY) (in thousands) | Expense Category | Q1 2025 | % Change vs Q1 2024 | | :--- | :--- | :--- | | Controllable operating expenses | $9,685 | 5.5% | | Real estate taxes | $5,878 | (7.3)% | | Utilities | $3,747 | 4.6% | | Insurance | $1,236 | 3.7% | | Total same-store operating expenses | $20,546 | 1.2% | Schedule of Properties Elme's portfolio includes 9,374 multifamily homes with 94.8% average occupancy and the Watergate 600 office property, which is 82.3% leased - The total multifamily portfolio comprises 9,374 apartment homes with an average occupancy of 94.8% for Q1 2025[65] - A fire at the Elme Marietta property on March 24, 2024, has left 24 units unavailable. These units are expected to be back in service by the end of Q4[67] Office Property - Watergate 600 | Property | Net Rentable SF | Leased % | Ending Occupancy % | % of Total Portfolio NOI | | :--- | :--- | :--- | :--- | :--- | | Watergate 600 | 300,000 | 82.3% | 82.3% | 8% | Capital Analysis Adjusted EBITDA Adjusted EBITDA for Q1 2025 increased to $31.3 million, primarily driven by higher operating income and adjustments for non-operating expenses Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(4,675) | $(3,647) | | Interest expense | 9,460 | 9,494 | | Real estate depreciation and amortization | 23,239 | 24,943 | | Other non-operating expenses | 3,041 | — | | Other adjustments | 199 | (1,299) | | Adjusted EBITDA | $31,264 | $29,491 | Long Term Debt Analysis As of March 31, 2025, Elme's total unsecured debt was $705.1 million with a 4.9% weighted average interest rate and a well-staggered maturity profile Debt Composition as of March 31, 2025 (in thousands) | Debt Type | Balance Outstanding | Weighted Avg. Interest Rate | | :--- | :--- | :--- | | Fixed rate bonds | $398,212 | 4.5% | | Term loan | $124,849 | 5.8% | | Credit facility | $182,000 | 5.3% | | Total | $705,061 | 4.9% | Future Debt Maturities (in thousands) | Year | Total Debt | | :--- | :--- | | 2025 | $— | | 2026 | $125,000 | | 2027 | $— | | 2028 | $232,000 | | Thereafter | $350,000 | | Total | $707,000 | - The company is in compliance with all its unsecured public and private debt covenants, with significant headroom on key metrics such as leverage and debt service coverage[84] Capitalization and Dividend Payout Ratios As of March 31, 2025, Elme's total market capitalization was $2.24 billion, with a debt to market capitalization ratio of 0.31:1 and a Core FFO dividend payout ratio of 75.0% Market Capitalization as of March 31, 2025 (in thousands) | Metric | Value | | :--- | :--- | | Equity Market Capitalization | $1,533,932 | | Total Debt | $705,061 | | Total Market Capitalization | $2,238,993 | | Total Debt to Market Capitalization | 0.31 : 1 | Q1 2025 Dividend Payout Ratios | Basis | Payout Ratio | | :--- | :--- | | Payout Ratio (Core FFO basis) | 75.0% | | Payout Ratio (Core AFFO basis) | 75.0% | Definitions Non-GAAP Financial Measures The company uses non-GAAP measures like NAREIT FFO, Core FFO, AFFO, Core AFFO, NOI, and Adjusted EBITDA to clarify operating performance and dividend capacity - NAREIT FFO: Calculated as net income excluding gains/losses from property sales, real estate impairments, and real estate depreciation and amortization[33] - Core FFO: Adjusts NAREIT FFO for items not indicative of operating portfolio performance, such as gains/losses on debt extinguishment, acquisition-related expenses, and costs from the strategic review[32] - NOI: Defined as real estate rental revenue less direct real estate operating expenses, used for assessing property-level performance[35] Other Definitions Key operational metrics defined include Average Occupancy, Lease Rate Growth, and Same-store Portfolio, providing clarity on performance analysis - Average Occupancy: Based on the average daily occupied apartment homes as a percentage of total apartment homes[37] - Lease Rate Growth: The average percentage change in rent for a new or renewed lease compared to the prior lease, with the 'blended' rate being a weighted average of new and renewal growth[41] - Same-store Portfolio: Includes properties owned for the entirety of the years being compared, excluding properties under development, redevelopment, or those recently acquired or sold[45]