Elme munities(ELME) - 2023 Q2 - Quarterly Report

Part I: Financial Information Item 1. Consolidated Financial Statements (Unaudited) Elme Communities' unaudited consolidated financial statements for Q2 2023 report reduced net loss and improved comprehensive loss Consolidated Balance Sheets | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $1,838,499 | $1,872,606 | $(34,107) | (1.8%) | | Net Income Producing Property | $1,761,341 | $1,789,418 | $(28,077) | (1.6%) | | Cash and Cash Equivalents | $5,554 | $8,389 | $(2,835) | (33.8%) | | Total Liabilities | $607,571 | $608,820 | $(1,249) | (0.2%) | | Total Equity | $1,230,928 | $1,263,786 | $(32,858) | (2.6%) | Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | :------- | | Real Estate Rental Revenue | $56,599 | $51,380 | $5,219 | 10.2% | | Net Loss | $(2,611) | $(8,874) | $6,263 | (70.6%) | | Basic Net Loss Per Share | $(0.03) | $(0.10) | $0.07 | (70.0%) | | Diluted Net Loss Per Share | $(0.03) | $(0.10) | $0.07 | (70.0%) | | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | :------- | | Real Estate Rental Revenue | $112,408 | $99,184 | $13,224 | 13.3% | | Net Loss | $(6,254) | $(16,598) | $10,344 | (62.3%) | | Basic Net Loss Per Share | $(0.07) | $(0.19) | $0.12 | (63.2%) | | Diluted Net Loss Per Share | $(0.07) | $(0.19) | $0.12 | (63.2%) | Condensed Consolidated Statements of Comprehensive Income (Loss) | Metric | Three Months Ended June 30, 2023 (in thousands) | Three Months Ended June 30, 2022 (in thousands) | Change (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Net Loss | $(2,611) | $(8,874) | $6,263 | | Unrealized gain on interest rate hedges | $854 | $917 | $(63) | | Comprehensive Loss | $(1,248) | $(7,447) | $6,199 | | Metric | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Change (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Net Loss | $(6,254) | $(16,598) | $10,344 | | Unrealized gain on interest rate hedges | $521 | $2,842 | $(2,321) | | Comprehensive Loss | $(4,714) | $(12,736) | $8,022 | Consolidated Statements of Equity | Metric | Balance, December 31, 2022 (in thousands) | Balance, June 30, 2023 (in thousands) | Change (in thousands) | | :-------------------------------------- | :---------------------------------------- | :------------------------------------ | :-------------------- | | Total Shareholders' Equity | $1,263,488 | $1,230,634 | $(32,854) | | Total Equity | $1,263,786 | $1,230,928 | $(32,858) | | Equity Activity (Six Months Ended June 30, 2023) | Amount (in thousands) | | :--------------------------------------- | :-------------------- | | Net loss | $(6,254) | | Unrealized gain on interest rate hedges | $521 | | Amortization of swap settlements | $1,019 | | Dividends ($0.36 per common share) | $(31,677) | | Shares issued under Dividend Reinvestment Program | $497 | | Share grants, net | $3,040 | Consolidated Statements of Cash Flows | Cash Flow Activity (Six Months Ended June 30) | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net cash provided by operating activities | $46,250 | $33,979 | $12,271 | 36.1% | | Net cash used in investing activities | $(10,183) | $(217,129) | $206,946 | (95.3%) | | Net cash used in financing activities | $(38,478) | $(4,299) | $(34,179) | 795.0% | | Net decrease in cash, cash equivalents and restricted cash | $(2,411) | $(187,449) | $185,038 | (98.7%) | | Cash, cash equivalents and restricted cash at end of period | $7,441 | $46,771 | $(39,330) | (84.1%) | - Net cash used in investing activities decreased significantly primarily due to the absence of large real estate acquisitions in 2023, compared to $204.4 million in acquisitions during the 2022 Period[22][149] - Net cash used in financing activities increased substantially due to the repayment of the $100.0 million 2018 Term Loan and net repayments on the Revolving Credit Facility in 2023, partially offset by proceeds from the $125.0 million 2023 Term Loan[22][149] Notes to Consolidated Financial Statements NOTE 1: NATURE OF BUSINESS - Elme Communities operates as a Maryland real estate investment trust (REIT), primarily owning apartment communities in the greater Washington, DC metro and Sunbelt regions[27] - To maintain its REIT status, the company is required to distribute 90% of its REIT taxable income annually[28] - The company's taxable REIT subsidiary (TRS) had a fully reserved deferred tax asset of $1.4 million as of June 30, 2023, and December 31, 2022[29] NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATIONS - The consolidated financial statements are prepared in accordance with GAAP, with certain information condensed or omitted for interim reporting[33][34] - In Q1 2023, the company adopted ASU 2020-04 (Reference Rate Reform) to convert the benchmark interest rate of its $700.0 million unsecured revolving credit facility from LIBOR to an adjusted SOFR, which had no material impact on the financial statements[31] - Transformation costs are defined as expenses related to the strategic shift