BETHESDA, Md., Feb. 13, 2025 (GLOBE NEWSWIRE) -- Elme Communities (the "Company" or "Elme") (NYSE: ELME), a multifamily REIT with communities in the Washington, DC metro area and the Atlanta metro area, reported financial and operating results today for the quarter and year ended December 31, 2024:
Fourth Quarter Financial and Operational Highlights
- Net loss was $3.0 million, or $0.03 per diluted share
- Core FFO was $20.7 million, or $0.24 per diluted share
- Same-store multifamily NOI increased by 1.7% compared to the prior year quarter
- Average Effective Monthly Rent Per Home increased 1.9% compared to the prior year quarter for our Same-Store Portfolio
- Effective blended Lease Rate Growth was 1.3% for our Same-Store Portfolio during the quarter, comprised of effective new Lease Rate Growth of (3.6)% and effective renewal Lease Rate Growth of 5.1%
- Same-store Retention was 68%, up 3% compared to the prior year quarter
- Same-store multifamily Average Occupancy was 95.0% during the quarter, up 0.1% compared to the prior year quarter
- Same-store multifamily Ending Occupancy was 95.4%, up 0.1% compared to the prior year quarter and up 0.6% compared to the prior quarter.
Full-Year 2024 Financial and Operational Highlights
- Net loss was $13.1 million, or $0.15 per diluted share
- Core FFO was $81.8 million, or $0.93 per diluted share
- Same-store multifamily NOI increased by 1.4% compared to the prior year
- Same-store Average Effective Monthly Rent per Home increased 2.5% compared to the prior year
- Effective blended Lease Rate Growth was 2.3% for our Same-Store Portfolio during the year, comprised of effective new Lease Rate Growth of (1.7)% and effective renewal Lease Rate Growth of 5.1%.
- Same-store Retention was 66%, up 3% compared to the prior year
- Same-store multifamily Average Occupancy was 94.8% during the year, down 0.4% compared to the prior year
Balance Sheet
- Executed the first of two 1-year extension options on the $125 million term loan, which is now set to expire on January 10, 2026
- Available liquidity was approximately $330 million as of December 31, 2024, consisting of availability under the Company's revolving credit facility and cash on hand
- Annualized fourth quarter Net Debt to Adjusted EBITDA ratio was 5.7x
- The Company has a strong balance sheet with only $125 million of debt maturing before 2028 and no secured debt
Strategic Review
Elme also announced today that its Board of Trustees (the "Board") has initiated a formal evaluation of strategic alternatives in an effort to maximize shareholder value. The Board is working with independent financial and legal advisors to assess all options.
"Over the past several years, Elme has transformed into a multifamily REIT, expanded its footprint outside of the Washington Metro area and executed on platform initiatives to improve performance and profitability," said Paul T. McDermott, President and CEO. "However, shares of ELME continue to trade at a discount to indications of value in the private market. In light of this, and consistent with our focus on maximizing value, following extensive Board-led strategic planning, the Board has unanimously determined to undertake a formal strategic review. This Board-led process underscores our commitment to acting in the best interests of our Company and shareholders. We remain confident in the long-term growth potential of our portfolio and the ongoing success of our strategy, which focuses on providing quality homes that are affordable to an underserved segment of mid-market demand. We look forward to continuing this work while also advancing our process to determine the best path forward for Elme."
There can be no assurance that this process will result in the Company pursuing a transaction or any other strategic outcome. Elme does not intend to disclose developments related to the Board's process unless and until it determines that further disclosure is appropriate or necessary. Goldman Sachs & Co. LLC and Jones Lang LaSalle Securities, LLC, are serving as financial advisors to Elme, and Hogan Lovells US LLP is serving as legal counsel.
2025 Guidance
"Strong demand trends in our Washington Metro portfolio and business interruption insurance proceeds drove higher-than-expected same-store multifamily revenue growth in the fourth quarter, offset in part, by higher taxes due to the timing of potential tax appeals, which will now be recognized as a benefit in 2025," said Steven Freishtat, Executive Vice President and CFO. "Looking ahead, the stage is set for another solid year of growth driven by strong demand for value-oriented rental options, favorable supply/demand dynamics in the Washington Metro region, improving credit trends in Atlanta, and continued growth in fee income from our operating initiatives."
Elme is providing its guidance for 2025, including its full year 2025 outlook on key assumptions and matters. Elme expects Core FFO for 2025 to range from $0.91 to $0.97 per fully diluted share. The following assumptions are included in the Core FFO guidance for 2025:
| Full Year 2025 Outlook and Key Metrics | |
| Core FFO per diluted share (a) | $0.91 - $0.97 |
| Net Operating Income Assumptions | |
| 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 (b) | $11.5 million - $12.25 million |
| Additional Expense Assumptions | |
| Property management expense | $8.75 million - $9.25 million |
| G&A, net of core adjustments | $25.25 million - $26.25 million |
| Interest expense | $37.35 million - $38.35 million |
| (a) Does not consider any potential future acquisitions or dispositions in 2025 | |
| (b) Consists of Watergate 600 | |
Elme Communities' 2025 Core FFO guidance and outlook are based on a number of factors, many of which are outside the Company's control, including economic factors such as inflation and interest rate changes, and all of which are subject to change. Elme Communities may change the guidance provided during the year as actual and anticipated results vary from these assumptions, but Elme Communities undertakes no obligation to do so.
2025 Guidance Reconciliation Table
A reconciliation of projected net loss per diluted share to projected Core FFO per diluted share for the full year ending December 31, 2025 is as follows:
| Low | High | ||||||
| Net loss per diluted share | $ | (0.16 | ) | $ | (0.10 | ) | |
| Real estate depreciation and amortization | 1.07 | 1.07 | |||||
| NAREIT FFO per diluted share | 0.91 | 0.97 | |||||
| Core adjustments | - | - | |||||
| Core FFO per diluted share | $ | 0.91 | $ | 0.97 | |||
Dividends
On January 6, 2025, Elme Communities paid a quarterly dividend of $0.18 per share.
Elme Communities announced today that its Board of Trustees has declared a quarterly dividend of $0.18 per share to be paid on April 3, 2025 to shareholders of record on March 19, 2025.
Presentation Webcast and Conference Call Information
The Fourth Quarter 2024 Earnings Call is scheduled for Friday, February 14, 2025 at 10:00 A.M. Eastern Time. There will also be a webcast presentation with slides. Conference Call access information is as follows:
| USA Toll Free Number: | 1-888-506-0062 |
| International Toll Number: | 1-973-528-0011 |
| Conference ID: | 853210 |
The instant replay of the Earnings Call will be available until Friday, February 28, 2025. Instant replay access information is as follows:
| USA Toll Free Number: | 1-877-481-4010 |
| International Toll Number: | 1-919-882-2331 |
| Conference ID: | 51840 |
The live on-demand webcast of the Conference Call with presentation slides will be available on the Investor section of Elme Communities' website at www.elmecommunities.com. Online playback of the webcast and presentation slides will be available following the Conference Call.
About Elme Communities
Elme Communities is committed to elevating what home can be for middle-income renters by providing a higher level of quality, service, and experience. The Company is a multifamily real estate investment trust that owns and operates approximately 9,400 apartment homes in the Washington, DC metro and the Atlanta metro regions, and owns approximately 300,000 square feet of commercial space. Focused on providing quality, affordable homes to a deep, solid, and underserved base of mid-market demand, Elme Communities is building long-term value for shareholders.
Note: Elme Communities' press releases and supplemental financial information are available on the Company website at www.elmecommunities.com or by contacting Investor Relations at (202) 774-3200.
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 Elme Communities to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Additional factors which may cause the actual results, performance, or achievements of Elme Communities to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to: the risks associated with the outcome, objectives and timing of the strategic alternatives review, including the incurrence of costs and expenses and diversion of management's time in connection with such review; the risks associated with ownership of real estate in general and our real estate assets in particular; our ability to benefit from growth drivers across our Washington Metro region; whether credit trends will improve in Atlanta; the economic health of the areas in which our properties are located, particularly with respect to the greater Washington, DC metro and Sunbelt regions; risks associated with our ability to execute on our strategies, including new strategies with respect to our operations and our portfolio, including the acquisition of apartment homes in the Sunbelt markets and our ability to realize any anticipated operational benefits from our internalization of community management functions; the risk of failure to enter into and/or complete acquisitions and dispositions; changes in the composition of our portfolio; reductions in or actual or threatened changes to the timing of federal government spending; the economic health of our residents; the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdowns or recessions and geopolitical conflicts); risks related to our ability to control our expenses if revenues decrease; compliance with applicable laws and corporate social responsibility goals, including those concerning the environment and access by persons with disabilities; risks related to not having adequate insurance to cover potential losses; changes in the market value of securities; terrorist attacks or actions and/or cyber-attacks; whether we will succeed in the day-to-day property management and leasing activities that we have previously outsourced; the availability and terms of financing and capital and the general volatility of securities markets; the risks related to our organizational structure and limitations of share ownership; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2023 Form 10-K filed on February 16, 2024. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.
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 December 31, | Twelve Months Ended December 31, | ||||||||||||||
| OPERATING RESULTS | 2024 | 2023 | 2024 | 2023 | |||||||||||
| Revenue | |||||||||||||||
| Real estate rental revenue | $ | 61,264 | $ | 58,852 | $ | 241,935 | $ | 227,911 | |||||||
| Expenses | |||||||||||||||
| Property operating and maintenance (1) | 14,727 | 12,625 | 56,282 | 50,985 | |||||||||||
| Real estate taxes and insurance (1) | 8,015 | 7,629 | 32,419 | 28,845 | |||||||||||
| Property management | 2,233 | 2,226 | 8,861 | 8,108 | |||||||||||
| General and administrative | 6,281 | 5,996 | 24,969 | 25,887 | |||||||||||
| Transformation costs | - | - | - | 6,339 | |||||||||||
| Depreciation and amortization | 23,623 | 24,095 | 95,935 | 88,950 | |||||||||||
| Real estate impairment | - | - | - | 41,860 | |||||||||||
| 54,879 | 52,571 | 218,466 | 250,974 | ||||||||||||
| Real estate operating income (loss) | 6,385 | 6,281 | 23,469 | (23,063 | ) | ||||||||||
| Other income (expense) | |||||||||||||||
| Interest expense | (9,400 | ) | (9,386 | ) | (37,835 | ) | (30,429 | ) | |||||||
| Loss on extinguishment of debt | - | - | (147 | ) | (54 | ) | |||||||||
| Other income | - | - | 1,410 | 569 | |||||||||||
| (9,400 | ) | (9,386 | ) | (36,572 | ) | (29,914 | ) | ||||||||
| Net loss | $ | (3,015 | ) | $ | (3,105 | ) | $ | (13,103 | ) | $ | (52,977 | ) | |||
| Net loss | $ | (3,015 | ) | $ | (3,105 | ) | $ | (13,103 | ) | $ | (52,977 | ) | |||
| Depreciation and amortization | 23,623 | 24,095 | 95,935 | 88,950 | |||||||||||
| Real estate impairment | - | - | - | 41,860 | |||||||||||
| NAREIT funds from operations | $ | 20,608 | $ | 20,990 | $ | 82,832 | $ | 77,833 | |||||||
| Non-cash loss on extinguishment of debt | $ | - | $ | - | $ | 147 | $ | 54 | |||||||
| Tenant improvements and incentives, net of reimbursements | - | (267 | ) | - | (277 | ) | |||||||||
| Leasing commissions capitalized | (107 | ) | - | (137 | ) | (56 | ) | ||||||||
| Recurring capital improvements | (3,143 | ) | (2,642 | ) | (10,342 | ) | (8,592 | ) | |||||||
| Straight-line rents, net | 41 | (27 | ) | 107 | (187 | ) | |||||||||
| Non-real estate depreciation & amortization of debt costs | 1,303 | 1,217 | 5,058 | 5,108 | |||||||||||
| Amortization of lease intangibles, net | (184 | ) | (248 | ) | (710 | ) | (818 | ) | |||||||
| Amortization and expensing of restricted share and unit compensation | 1,504 | 1,508 | 5,217 | 5,474 | |||||||||||
| Adjusted funds from operations | $ | 20,022 | $ | 20,531 | $ | 82,172 | $ | 78,539 | |||||||
| ______________________________ | |||||||||||||||
| (1) Certain immaterial amounts in prior periods have been reclassified to conform with the current period presentation. | |||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| Per share data: | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Net loss | (Basic) | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.15 | ) | $ | (0.61 | ) | |||
| (Diluted) | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.15 | ) | $ | (0.61 | ) | ||||
| NAREIT FFO | (Basic) | $ | 0.23 | $ | 0.24 | $ | 0.94 | $ | 0.88 | |||||||
| (Diluted) | $ | 0.23 | $ | 0.24 | $ | 0.94 | $ | 0.88 | ||||||||
| Dividends paid | $ | 0.18 | $ | 0.18 | $ | 0.72 | $ | 0.72 | ||||||||
| Weighted average shares outstanding - basic | 87,955 | 87,788 | 87,920 | 87,735 | ||||||||||||
| Weighted average shares outstanding - diluted | 87,955 | 87,788 | 87,920 | 87,735 | ||||||||||||
| Weighted average shares outstanding - diluted (for NAREIT FFO) | 88,001 | 87,836 | 87,967 | 87,815 | ||||||||||||
| ELME COMMUNITIES AND SUBSIDIARIES | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (In thousands, except per share data) | |||||||
| (Unaudited) | |||||||
| December 31, 2024 | December 31, 2023 | ||||||
| Assets | |||||||
| Land | $ | 383,808 | $ | 384,097 | |||
| Income producing property | 1,999,525 | 1,960,020 | |||||
| 2,383,333 | 2,344,117 | ||||||
| Accumulated depreciation and amortization | (618,299 | ) | (528,024 | ) | |||
| Net income producing property | 1,765,034 | 1,816,093 | |||||
| Properties under development or held for future development | 30,980 | 30,980 | |||||
| Total real estate held for investment, net | 1,796,014 | 1,847,073 | |||||
| Cash and cash equivalents | 6,144 | 5,984 | |||||
| Restricted cash | 2,465 | 2,554 | |||||
| Rents and other receivables | 12,511 | 17,642 | |||||
| Prepaid expenses and other assets | 28,628 | 26,775 | |||||
| Total assets | $ | 1,845,762 | $ | 1,900,028 | |||
| Liabilities | |||||||
| Notes payable, net | $ | 522,953 | $ | 522,345 | |||
| Line of credit | 176,000 | 157,000 | |||||
| Accounts payable and other liabilities | 36,293 | 38,997 | |||||
| Dividend payable | 15,898 | 15,863 | |||||
| Advance rents | 6,257 | 5,248 | |||||
| Tenant security deposits | 6,283 | 6,225 | |||||
| Total liabilities | 763,684 | 745,678 | |||||
| Equity | |||||||
| Shareholders' equity | |||||||
| Preferred shares; $0.01 par value; 10,000 shares authorized; no shares issued or outstanding | - | - | |||||
| Shares of beneficial interest, $0.01 par value; 150,000 shares authorized: 88,029 and 87,867 shares issued and outstanding, as of December 31, 2024 and December 31, 2023, respectively | 880 | 879 | |||||
| Additional paid in capital | 1,740,078 | 1,735,530 | |||||
| Distributions in excess of net income | (646,095 | ) | (569,391 | ) | |||
| Accumulated other comprehensive loss | (13,066 | ) | (12,958 | ) | |||
| Total shareholders' equity | 1,081,797 | 1,154,060 | |||||
| Noncontrolling interests in subsidiaries | 281 | 290 | |||||
| Total equity | 1,082,078 | 1,154,350 | |||||
| Total liabilities and equity | $ | 1,845,762 | $ | 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 December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Net loss | $ | (3,015 | ) | $ | (3,105 | ) | $ | (13,103 | ) | $ | (52,977 | ) | |||
| Adjustments: | |||||||||||||||
| Property management expense | 2,233 | 2,226 | 8,861 | 8,108 | |||||||||||
| General and administrative expense | 6,281 | 5,996 | 24,969 | 25,887 | |||||||||||
| Transformation costs | - | - | - | 6,339 | |||||||||||
| Real estate depreciation and amortization | 23,623 | 24,095 | 95,935 | 88,950 | |||||||||||
| Real estate impairment | - | - | - | 41,860 | |||||||||||
| Interest expense | 9,400 | 9,386 | 37,835 | 30,429 | |||||||||||
| Loss on extinguishment of debt | - | - | 147 | 54 | |||||||||||
| Other income | - | - | (1,410 | ) | (569 | ) | |||||||||
| Total Net Operating Income (NOI) | $ | 38,522 | $ | 38,598 | $ | 153,234 | $ | 148,081 | |||||||
| Multifamily NOI: | |||||||||||||||
| Same-store Portfolio | $ | 34,250 | $ | 33,672 | $ | 135,200 | $ | 133,331 | |||||||
| Acquisitions | 1,390 | 1,633 | 5,605 | 1,669 | |||||||||||
| Development | (58 | ) | (56 | ) | (233 | ) | (224 | ) | |||||||
| Total | 35,582 | 35,249 | 140,572 | 134,776 | |||||||||||
| Other NOI (Watergate 600) | 2,940 | 3,349 | 12,662 | 13,305 | |||||||||||
| Total NOI | $ | 38,522 | $ | 38,598 | $ | 153,234 | $ | 148,081 | |||||||
| 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 December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net loss | $ | (3,015 | ) | $ | (3,105 | ) | $ | (13,103 | ) | $ | (52,977 | ) | ||||
| Add: | ||||||||||||||||
| Real estate depreciation and amortization | 23,623 | 24,095 | 95,935 | 88,950 | ||||||||||||
| Real estate impairment | - | - | - | 41,860 | ||||||||||||
| NAREIT funds from operations | 20,608 | 20,990 | 82,832 | 77,833 | ||||||||||||
| Add: | ||||||||||||||||
| Structuring expenses | 128 | - | 188 | 60 | ||||||||||||
| Loss on extinguishment of debt | - | - | 147 | 54 | ||||||||||||
| Severance expense | - | 391 | 77 | 785 | ||||||||||||
| Transformation costs | - | - | - | 6,339 | ||||||||||||
| Write-off of pursuit costs | - | 24 | - | 73 | ||||||||||||
| Relocation expense | - | 3 | - | 629 | ||||||||||||
| Gain on land easements | - | - | (1,410 | ) | - | |||||||||||
| Adjustment to deferred taxes | - | (526 | ) | - | (526 | ) | ||||||||||
| Core funds from operations | $ | 20,736 | $ | 20,882 | $ | 81,834 | $ | 85,247 | ||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| Per share data: | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| NAREIT FFO | (Basic) | $ | 0.23 | $ | 0.24 | $ | 0.94 | $ | 0.88 | |||||||
| (Diluted) | $ | 0.23 | $ | 0.24 | $ | 0.94 | $ | 0.88 | ||||||||
| Core FFO | (Basic) | $ | 0.24 | $ | 0.24 | $ | 0.93 | $ | 0.97 | |||||||
| (Diluted) | $ | 0.24 | $ | 0.24 | $ | 0.93 | $ | 0.97 | ||||||||
| Weighted average shares outstanding - basic | 87,955 | 87,788 | 87,920 | 87,735 | ||||||||||||
| Weighted average shares outstanding - diluted (for NAREIT and Core FFO) | 88,001 | 87,836 | 87,967 | 87,815 | ||||||||||||
| Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (in thousands): | |||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Net loss | $ | (3,015 | ) | $ | (3,105 | ) | $ | (13,103 | ) | $ | (52,977 | ) | |||
| Add/(deduct): | |||||||||||||||
| Interest expense | 9,400 | 9,386 | 37,835 | 30,429 | |||||||||||
| Real estate depreciation and amortization | 23,623 | 24,095 | 95,935 | 88,950 | |||||||||||
| Real estate impairment | - | - | - | 41,860 | |||||||||||
| Non-real estate depreciation | 168 | 158 | 636 | 886 | |||||||||||
| Severance expense | - | 391 | 77 | 785 | |||||||||||
| Transformation costs | - | - | - | 6,339 | |||||||||||
| Relocation expense | - | 3 | - | 629 | |||||||||||
| Structuring expenses | 128 | - | 188 | 60 | |||||||||||
| Loss on extinguishment of debt | - | - | 147 | 54 | |||||||||||
| Adjustment to deferred taxes | - | (526 | ) | - | (526 | ) | |||||||||
| Write-off of pursuit costs | - | 24 | - | 73 | |||||||||||
| Gain on land easements | - | - | (1,410 | ) | - | ||||||||||
| Adjusted EBITDA | $ | 30,304 | $ | 30,426 | $ | 120,305 | $ | 116,562 | |||||||
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 Elme Communities' operating portfolio and affect the comparative measurement of Elme Communities' operating performance over time): (1) gains or losses on extinguishment of debt and gains or losses on interest rate derivatives, (2) expenses related to acquisition and structuring activities, (3) non-share-based executive transition costs, severance expenses and other expenses related to corporate restructuring and executive retirements or resignations, (4) property impairments, casualty gains and losses, and gains or losses on sale not already excluded from Core AFFO, as appropriate, (5) relocation expense, (6) Transformation Costs, (7) write-off of pursuit costs, (8) adjustment to deferred taxes and (9) gain on land easements. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core AFFO serves as a useful, supplementary performance measure of Elme Communities' ability to incur and service debt, and distribute dividends to its shareholders. Core AFFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
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 Elme Communities' operating portfolio and affect the comparative measurement of Elme Communities' operating performance over time): (1) gains or losses on extinguishment of debt and gains or losses on interest rate derivatives, (2) expenses related to acquisition and structuring activities, (3) executive transition costs, severance expenses and other expenses related to corporate restructuring and executive retirements or resignations, (4) property impairments, casualty gains and losses, and gains or losses on sale not already excluded from NAREIT FFO, as appropriate, (5) relocation expense, (6) Transformation Costs, (7) write-off of pursuit costs, (8) adjustment to deferred taxes and (9) gain on land easements. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of Elme Communities' ability to incur and service debt, and distribute dividends to its shareholders. Core FFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
NAREIT Funds From Operations ("FFO") is defined by the 2018 National Association of Real Estate Investment Trusts, Inc. ("NAREIT") FFO White Paper Restatement, as net income (computed in accordance with generally accepted accounting principles ("GAAP") excluding gains (or losses) associated with sales of properties, impairments of depreciable real estate and real estate depreciation and amortization. We consider NAREIT FFO to be a standard supplemental measure for real estate investment trusts ("REITs"), and believe it is a useful measure because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. Our NAREIT FFO may not be comparable to FFO reported by other REITs. These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. NAREIT FFO is a non-GAAP measure.
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 Rent Per Home represents the average of effective rent (net of concessions) for in-place leases plus the market rent for vacant homes, divided by the total number of homes. We believe Average Effective Monthly Rent Per Home is a useful metric in evaluating the average pricing of our homes. It is a component of Residential Revenue, which is used to calculate our NOI. It does not represent actual rental revenue collected per unit.
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 B Value-Add and Class B. A community's class is dependent on a variety of factors, including its vintage, site location, amenities and services, rent growth drivers and rent relative to the market.
- 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 Washington metro region.
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:
Amy Hopkins
Vice President, Investor Relations
E-Mail: ahopkins@elmecommunities.com
www.elmecommunities.com
