Elme munities(ELME) - 2025 Q2 - Quarterly Results

Q2 2025 Highlights Elme Communities reported stable Q2 2025 results, consistent net loss per share, increased Core FFO, and a strategic plan to liquidate 19 communities for $1.6 billion Q2 2025 Financial Results Highlights | | Three months ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | | Net loss per diluted share | $ (0.04) | $ (0.04) | | Core FFO per diluted share | $ 0.24 | $ 0.23 | - Same-store multifamily NOI increased by 4.5% year-over-year[7] - Same-store Average Occupancy rose by 0.2% to 94.7%[7] - Effective blended Lease Rate Growth was 1.3%, driven by a 4.9% increase in renewals, offsetting a (3.3)% decline in new lease rates[7] - Entered into a Purchase and Sale Agreement to sell 19 multifamily communities for approximately $1.6 billion[6] - The Board of Trustees approved a voluntary plan of sale and liquidation for all remaining assets[6] - Maintains a strong balance sheet with $330 million in available liquidity and an annualized Net Debt to Adjusted EBITDA ratio of 5.6x[7] - Only $125 million of debt matures before 2028, with no secured debt[7] - Withdrew previous 2025 guidance and will not issue new guidance due to portfolio sale and liquidation plan[8] Financial Statements Consolidated financial statements show a Q2 2025 net loss of $3.6 million, total assets decreased to $1.81 billion, and liabilities remained stable Consolidated Statements of Operations Q2 2025 real estate rental revenue increased to $62.1 million, but higher expenses resulted in a net loss of $3.6 million or ($0.04) per share Q2 2025 vs Q2 2024 Operating Results (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Real estate rental revenue | $ 62,099 | $ 60,103 | | Total Expenses | $ 56,167 | $ 54,190 | | Real estate operating income | $ 5,932 | $ 5,913 | | Interest expense | $ (9,498) | $ (9,384) | | Net loss | $ (3,566) | $ (3,471) | Per Share Data (Diluted) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net loss per share | $ (0.04) | $ (0.04) | | NAREIT FFO per share | $ 0.23 | $ 0.23 | Consolidated Balance Sheets Total assets decreased to $1.81 billion as of June 30, 2025, with stable total liabilities of $763.7 million and $698.2 million in debt Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total real estate held for investment, net | $ 1,766,410 | $ 1,796,014 | | Cash and cash equivalents | $ 4,786 | $ 6,144 | | Total assets | $ 1,810,204 | $ 1,845,762 | | Notes payable, net | $ 523,196 | $ 522,953 | | Line of credit | $ 175,000 | $ 176,000 | | Total liabilities | $ 763,734 | $ 763,684 | | Total equity | $ 1,046,470 | $ 1,082,078 | Funds From Operations (FFO) & Non-GAAP Reconciliations Q2 2025 NAREIT FFO was $20.0 million, Core FFO increased to $21.5 million, and Total NOI grew to $39.4 million Net Loss to FFO and Core FFO Reconciliation Q2 2025 net loss of $3.6 million reconciled to NAREIT FFO of $20.0 million and Core FFO of $21.5 million or $0.24 per share Q2 FFO Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net loss | $ (3,566) | $ (3,471) | | Real estate depreciation and amortization | 23,560 | 23,895 | | NAREIT funds from operations | 19,994 | 20,424 | | Other non-operating expenses | 1,503 | 60 | | Severance expense | — | 64 | | Core funds from operations | $ 21,497 | $ 20,548 | Core FFO Per Diluted Share | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Core FFO per diluted share | $ 0.24 | $ 0.23 | Net Loss to NOI Reconciliation Total NOI for Q2 2025 increased to $39.4 million, driven by a 4.5% rise in same-store multifamily NOI to $36.5 million Q2 NOI Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net loss | $ (3,566) | $ (3,471) | | Adjustments (G&A, D&A, Interest, etc.) | ... | ... | | Total Net Operating Income (NOI) | $ 39,437 | $ 38,121 | | Same-store Multifamily NOI | $ 36,483 | $ 34,927 | | Other NOI (Watergate 600) | $ 3,015 | $ 3,251 | Net Loss to Adjusted EBITDA Reconciliation Adjusted EBITDA for Q2 2025 increased to $31.2 million, reflecting higher operating income and adjustments for non-operating expenses Q2 Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net loss | $ (3,566) | $ (3,471) | | Interest expense | 9,498 | 9,384 | | Real estate depreciation and amortization | 23,560 | 23,895 | | Other non-operating expenses | 1,503 | 60 | | Adjusted EBITDA | $ 31,193 | $ 30,129 | Portfolio Analysis Portfolio includes 9,374 multifamily homes and one office property, with same-store multifamily NOI up 4.5% and 94.7% average occupancy Same-Store Operating Results - Multifamily Q2 2025 same-store multifamily NOI increased 4.5% to $36.5 million, driven by 3.9% revenue growth, with 94.7% average occupancy Q2 2025 vs Q2 2024 Same-Store Multifamily Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $ 57,683 | $ 55,492 | 3.9% | | Operating Expenses | $ 21,200 | $ 20,565 | 3.1% | | Net Operating Income | $ 36,483 | $ 34,927 | 4.5% | | Average Occupancy | 94.7% | 94.5% | 0.2% | | Avg. Effective Rent/Home | $ 1,913 | $ 1,887 | 1.4% | - The Virginia portfolio was the primary driver of growth, with a 6.5% increase in NOI[56] - The DC/Maryland portfolio saw a slight NOI decrease of (0.2)%, while the Georgia portfolio's NOI was nearly flat with 0.2% growth[56] Same-Store Operating Expenses - Multifamily Q2 2025 same-store operating expenses rose 3.1% to $21.2 million, driven by increases in controllable expenses and utilities Q2 2025 Same-Store Operating Expense Breakdown (in thousands) | Expense Category | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Controllable operating expenses | $ 10,610 | $ 10,212 | 3.9% | | Real estate taxes | $ 6,099 | $ 6,060 | 0.6% | | Utilities | $ 3,255 | $ 3,102 | 4.9% | | Insurance | $ 1,236 | $ 1,191 | 3.8% | | Total same-store operating expenses | $ 21,200 | $ 20,565 | 3.1% | Schedule of Communities As of June 30, 2025, the portfolio comprised 9,374 multifamily homes with 94.7% average occupancy and one office property 82.3% leased - The total multifamily portfolio of 9,374 homes had an average occupancy of 94.7% and an ending occupancy of 95.0% as of June 30, 2025[61] - This portfolio accounts for 92% of the total portfolio NOI[61] - The single office property, Watergate 600, has 300,000 net rentable square feet and was 82.3% leased and occupied[66] - It contributes 8% of the total portfolio NOI[66] Capital Analysis As of June 30, 2025, total debt was $698.2 million at 4.9% weighted average interest, with $125 million maturing in 2026, and strong covenant compliance Long Term Debt Analysis & Maturities Total unsecured debt of $698.2 million as of June 30, 2025, has a 3.8-year weighted average maturity, with $125 million due in 2026 Debt Balances Outstanding (in thousands) | Debt Type | June 30, 2025 | | :--- | :--- | | Fixed rate bonds | $ 398,301 | | Term loan | $ 124,895 | | Credit facility | $ 175,000 | | Total | $ 698,196 | Debt Maturity Schedule (Principal Payments) (in thousands) | Year | Total Debt | | :--- | :--- | | 2025 | $ — | | 2026 | $ 125,000 | | 2027 | $ — | | 2028 | $ 225,000 | | Thereafter | $ 350,000 | | Total | $ 700,000 | Debt Covenant Compliance As of June 30, 2025, the company was in compliance with all debt covenants, with key metrics well within thresholds Key Debt Covenant Metrics (as of June 30, 2025) | Covenant | Actual | Requirement | | :--- | :--- | :--- | | % of Total Indebtedness to Total Assets | 34.4% | ≤ 65.0% | | Ratio of Income Available for Debt Service to Annual Debt Service | 3.1x | ≥ 1.5x | | % of Secured Indebtedness to Total Assets | 0% | ≤ 40.0% | | Ratio of Consolidated Adjusted EBITDA to Consolidated Fixed Charges | 3.63x | ≥ 1.50x | Capitalization and Dividend Payout Ratios As of June 30, 2025, total market capitalization was $2.1 billion, with dividend payout ratios of 73.5% (Core FFO) and 75.0% (Core AFFO) Market Capitalization (as of June 30, 2025) (in thousands) | Metric | Value | | :--- | :--- | | Equity Market Capitalization | $ 1,401,776 | | Total Debt | $ 698,196 | | Total Market Capitalization | $ 2,099,972 | | Total Debt to Market Capitalization | 0.33 : 1 | Dividend Payout Ratios (Six Months Ended June 30, 2025) | Basis | Payout Ratio | | :--- | :--- | | Core FFO basis | 73.5% | | Core AFFO basis | 75.0% | Definitions of Non-GAAP Financial Measures This section defines key non-GAAP financial measures like NOI, FFO, Core FFO, AFFO, and Adjusted EBITDA, along with operational metrics - Key non-GAAP measures are defined to provide insight into operating performance and the ability to service debt and pay dividends[29][32][33][35] - NOI (Net Operating Income): Measures property-level performance before corporate-level expenses, interest, and depreciation[29] - NAREIT FFO (Funds From Operations): Standard REIT metric excluding real estate depreciation and gains/losses from property sales from net income[32] - Core FFO: Adjusts NAREIT FFO for non-recurring items like severance, strategic review costs, and debt extinguishment losses to show ongoing operational performance[33] - Adjusted EBITDA: Measures earnings before interest, taxes, depreciation, and amortization, adjusted for certain non-cash and non-recurring items[35] - The report defines the Same-store Portfolio as properties owned for the entirety of the compared periods, excluding those under development or redevelopment, ensuring consistent performance comparison[45]