Elme Communities (ELME) 2 May 242024 Q1 Earnings call transcript

Greetings. Welcome to Elme Communities First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Amy Hopkins, Vice President of Investor Relations.

You may begin.

you our thank call. quarter and morning, for first joining earnings Good no and available event a begin Investors on website with being our section also presentation our Today's would webcast available prepared risks them slide remarks, differ this may cause which is like actual conference that replay.Before our on webcast statements materially, everyone uncertainties we contains forward-looking update that that results and I is of to duty involve will events we be unfold. remind call known as and undertake and to to unknown the actual We refer certain these SEC risks in to filings. of our supplement, Reconciliations President found with are of our over press that, page most the financial measures GAAP financial yesterday to call our non-GAAP earnings Investors Paul website.And available was can and CEO, discussed which on on of distributed be in I'll and this our recent the McDermott. call and and turn the release

Steve good of joined balance our guidance Chief everyone. Grant and questions are seeing sheet to here cover initiatives, portfolio. points. level market-level Freishtat, will with during to and the and Montgomery, answer a Grant start trends Thanks, we I'm Officer; Tiffany Steve Tiffany Head and will is Q&A.I'll trends our today Butcher, high Chief and our speak of our Officer; overview across our Financial Amy, morning, Research. our Operating operating by

well is heading leasing very our portfolio Metro positioned Washington Our into months. busiest

trends, expect our the performance would stable see the from On delivering demand strategy. that we and our are solid communities side, mid-market we

outlook.In Washington for trend This be which multifamily shaping the our Atlanta, presence comprised the were that in our see improving, XX% we leasing while in region, expected NOI of our for are the the fundamentals Northern going further the U.S. on impact area absorption pleased in the reflect good knew positive pressure continued to roughly engine Virginia, experience the And quarter. We Metro, our uptick to and into seen April. momentum growth above the spring We first positive Metro season, is quarter, up very to in for significant enhances rents and market Washington supply. activity we of year to elevated the first a average. is have the in occupancy

of market balance the to had XXXX RealPage.While year Annual unprecedented demand by to limiting of prior increased supply nationally, period, and level in improving. terms we the submarkets QX inventory region, enter is our demand more in the Washington points X%, experiencing tools continue and markets within been net Subsequently, Metro in we Metro, positive overall a where Washington in summer during the at remarks.We of As and has equilibrium rent and and at to the line with our discuss currently detail ratio with moderate Metro more are are compared research our our Xx the the according supply, the absorption prepared to Washington supply portfolio supply-demand supply-demand our seasons, in best trends have will an coming almost positioned Atlanta has our drive been place that average. and and demand leasing submarkets has profitability, solid submarkets, which believe And market her of In we our dynamics and spring improve Tiffany demand one in accumulation monitor to markets the both Atlanta. growth. to long-term the market. the solid, the is supply

Atlanta should and and homes absorption XXXX are Elme than Furthermore, significantly, of to reach since XX% Metro XX% in XX% In even XX-year unit Atlanta almost peak fact, in submarkets the average, their XX% Washington pre-pandemic higher and Atlanta overhang supply below very in midyear a due are Atlanta well XX-year by being Starts into the out QX being in XXXX year, while the XX% under absorption reaching have XXXX period. in market-level is our conditions in especially are the to position the XXXX. that overhang by starts Washington under Units should And and markets QX to supply Elme's operating are supply late that XX% market-level Metro supply-demand over construction down starts submarket-level better at past higher absorption Metro is over nearly XX% remains construction better improving. Metro, year. significantly, completions nearly and down both XXXX.While of starts in XX% Washington their Atlanta. strong, while of this remains the units and Annual peak scheduled is as are reach a are perspective. versus in supply of by Washington in annual back from in Elme new QX more positioned average.Overall, the additional declined peak data equilibrium, pointing indicates declining submarkets,

As new normalization we the Atlanta.Turning strong job conditions rental ratio and communities Washington progress of in to was that initiatives. for continued drive our in-migration The growth our residents' discuss XX%, median in drive for demand trends for over affordable Metro our it with our financial I'll resident across and leases portfolio remain credit. the solid. our to reaffirming to anticipate rates that strong, status our through growth XXXX, turn residents.And our and to operating Tiffany growth is sectors Employment performance that, we and and remains a gradual belief new rent-to-income

initiatives to improved quarter. our are sequential and are results growth our implemented, and which trends rate enhancements fundamental for Metro the Traffic Atlanta the volumes Thanks, portfolios. for results.Turning of in both season. at a to our marketing include first our digital platform leasing seeing have spring and we strategy, delivering improved we're with Lease on good basis spreads and that marketing Washington April, blended the Paul. the the start Overall, in expectations recently that line

rate continued rate retention generated same-store we our X.X%.Same-store lease new an decline of quarter, XX% rate blended growth during reflecting quarter, first was focus homes, growth retention, Alongside delivering residents effective to growth on continue maximizing and for X.X% X.X% on comprised achieve of strength. strong resident prioritizing economics our the lease is rent the focus to turning of and portfolio renewal rate lease we of average renewals. we continue solid by better During than growth. renewal Retaining

Occupancy signing offset Atlanta part in to in to at occupancy portfolio. evictions Washington the XX%. of represents portfolio, the the trended and the May lease new Average quarter to quarter, daily point occupancy basis of up average Washington on average and compared rate the Metro pleased year-over-year to across XX towards for X.X%.Moving our XX.X%, basis very which driven slightly our June strong communities quarter.We're timing with of the we're XX.X% during seeing For demand Metro supply level levels our renewals the increased occupancy improvement by average occupancy. same-store declined impact XX Washington by patterns and expirations, an the portfolio, we're end of Metro in our to during that a points

a course the to while in stable elevated strong portfolio supply evictions slight in progresses. continue as occupancy drove the sequential the gradually expect over We Metro expect we the Atlanta, decline occupancy, of improve Washington year occupancy year.In and and to

work peak by when the mitigating Paul programs strong the to and supply the absorption supply credit metrics third As is we quarter, improving. XX% summer, eviction government are ended rent mentioned, should submarkets continue backlogs of overhang.While assistance last the reach through our Atlanta formed our

on and ID process Verify, Following of implementation of other new month-to-month training a technology, screening enhancements to is including the changes, declining number the delinquencies basis. and our and process credit new

pleased ruling which to to between the Additionally, a in of court Fulton possession. by County, see take expedites are time we backlog counties frame recent local the to and begin within address a evidenced as filing system obtaining steps writ the

protection combination forward, standards, believe bad our normalizing improving delays higher of Atlanta drive to lower Looking should fraud occupancy it's we and across eviction renovation. and debt credit a portfolio.Turning elevated

higher returns to renovation relative outperforming Class value our while for residents Our looking attracting income A. are expectations,

approximately XXX quarter, a average first the of generated During ROI on home we XX% renovations. strong

over full upgrades and XXX complete XXX home to renovations year. expect to over continue We this

forward, to a continue driver key Looking renovations Elme. for be growth

which X,XXX to over to runway our on foreseeable operational creation identified the for homes pipeline future.Moving enough portfolio, our than more upside. value of nearly renovation-led Our represents is deliver of XX%

a bottom line pace our initiatives income and progressing control through to healthy contributing at Our our additional efficiencies. operating and fee are expense and top through line

million to for of of communities, delivered We the XXXX total XX% million managed we're which our during portfolio, approximately XXXX.Furthermore, $X.XX the scheduled expect upside across of rolling million continue $X.XX XXXX to $X.X we quarter. to fourth represents to top FFO $X.X installation generate out starting with in X and million additional WiFi are on NOI that from million Combined, operational the of initiatives this year. last from $X.X between and

and the in renters. XXXX my to million should have targeted and call additional they upside commitment returns experience our beyond to to upside and I the want turn I to program that living WiFi the the to managed Steve, team beyond.Before extend Elme Our generate the dedication appreciation FFO for $X.XX over solid million $X.XX for shown elevating

customer to Our forward and sheet. better and over implementing, that, results, platform balance turn initiatives.And to cover service profitability our we're as it progress teams XXXX to are look continuing to we with Steve embracing the our drive I'll on and that we changes outlook

Thanks, Tiffany.

range from X.XX% NOI X% We XXXX. continue to multifamily expect to to same-store growth in

expectations NOI expect to be $XX.XX and $XX.XX year expense the to Metro weighted our to improving to trends year, portfolio in expect our we million Atlanta As we back interest Washington interest rate in of growth by we million. previously range half growth debt bad communicated, continue for the driven to the portfolio.While from shifted, have rent

in predicts now fewer cuts outlook rate XXXX. Our

offset expect feel appropriate.Turning Although guidance line to Annualized X.Xx at it being our balance. range we adjusted end, to focus our is current cash this with and this on year targeted sheet. the range. to interest continued balance our finish the by is our upward range, quarter still and ratio our continue debt expense, net We pressure partially managing in in EBITDA on to interest some puts debt expense mid-Xx leverage was

where shape.To XXXX $XXX strong this expected about XXXX. sheet XX% our total be up, maturities with extend no we are our end another or quarter maturity credit secured million point on remains and debt debt the options to term largely remains at until approximately at loan to year. With years, of in position X with capacity good liquidity we it available our in line of very wrap Our no the balance

and momentum renovations we are Our and mid-market are yielding compression and positioned, The improvements implemented have April. delinquencies, technology our lower expense driving process to we focus income, see returns. positive higher strong well fee are remains pleased in very and building

with platform.And season, to that, I peak on on upside revenue are we into questions. is leasing in head operational focused maximizing delivering for the up we our like that it would As open embedded and

Instructions] Anthony coming first question Morgan. is J.P. The [Operator today from Paolone from

a still to it of course real if over and was for of us cash about give trying you paying cash Can piece think much paying we sense occupancy to of is the delinquencies. could where we through of this there kind occupancy you think when debt? versus I wondering that a of like out look I'm just these kind Atlanta terms being you'll talk some at the of land year cleaning bit numbers of how bad the market just these portfolio, a more. now as just in

delinquencies a Tony. month-over-month I we've first quarter through this mentioned my prepared walk that. through in improvement the would I say, as debt our seen we Great remarks, to in our of in bad year. as moved question, have and Happy

If was that the quarter improvement saw about fourth end our the to we first to bad of the at back you look quarter, X.X%. debt the

quarter, between is in the down Atlanta debt seeing we the bad So X% X% Atlanta fourth X.X%. come of month-over-month, debt and expect be our about end that bad to currently at that in But the we portfolio the are portfolio. by will

We've average from about X% the about So And improvements of talked in range.But the in been we also the the that's for impact that to if month-over-month of process, partial helping delinquencies. has you fact credit of are have coming is we delinquencies, new of the approval clear a down to screening helped to in really payments, us a think seeing that I in lot encouraging. which which eviction year, lot initiatives process. which changes ending any of terms X% bring that speed to very an very and in policy made probably our is really the our we're

going and So the delinquencies. as improvement in work the we see system, debt bad to that through backlogs in court the to we're month-over-month continue

can new And blended like stuff of you for that's where sense think over caught you wondering I rates portfolio was I to for on X.X% you year, the us course where course then what's July, signed a an for And the as trend think I the right. being year. guide? and if you think it. the if update Got leases renewal Okay. give mentioned that just And the of over like the are full may the spreads June in

I'm Absolutely. to through sure. that. Yes, happy talk

where signing terms they're I my we're at of around X.X% in in the and renewals, So June mentioned prepared May remarks. that

As back blend about X.X%. half the blended will we X.X% renewals we we in renewals that through were to overall, spreads, the you at as of But do then ended the a X.X% be that the as year think year. will we trending we And think we year, the range. -- about as that moderate quarter about of move expect through likely, think

We in QX similar And QX. trend to there. up we improvement QX expect from and expect then

So blended X.X% we projecting year, to the spreads. for of kind are X.X%

And can Okay. for in I Paul, one if maybe. sneak

if where now curious market. in on Just the assets rates you type thoughts Class for right B any cap see

Tony. Sure,

move our landscape, at that that remain if about Let of talked where seeing was seen a we're private back even kind seeing of We've the equity.The recall my I definitely me seeing we XXXX, and say reversed. say looking capital right it's look little XX% XX% probably rates and what composition we're step XX% was has in out would think I what buyer you If XX% let's private definitely like. I there. kind remarks shift. That back about it has would we're talk now the a fundamental a bit from institutional And institutional, I institutional. -- cap trend equity healthy. XQ,

in some really they're to markets in some even underwriting recognize supply term from lack look are X.XX% the that nature. X.XX% X%. at and markets, in product to we seeing kind at that's around at issues of to And really the looking we're we're what that buyers we're X.X%, seeing a seeing. even basis distressed the the that still are maybe with value-add more we XX% B of a that they the significant to range. of widens, I the are place to price Druid from seeing and that pricing institutional back, we're think only a best X.X% I X.XX%. the recovery that they like, costs did as we The little a in inventory thing for anywhere in volatility retrading.I kind is is we're anywhere seeing of into For to and the characterize bit at would from on Hills, of really product And what more of where as to XXXX upwards plays to retrenchment Tony, components, discount that replacement compared XX% XX-year the the suffering markets note a are country short similar XXXX, used XXXX. They're feel to what looking in

that lot we I even to And pragmatic the life in of either nature, that just extension noticed more the harder dialogue Both agencies about have with exercise. talked being are think underwriting. in debt issues, fund harder the our heavy equity they event-driven are a maturities. agencies just the recaps, those with, we've options getting They're pipelines. and sellers

data that business set et just options, the higher rate people inventory pipeline deals still the for I have to and trying longer accommodate affordability prepayment has they're component. mission-driven the think are an -- I think I But by best cetera. buydowns, offering a think but look I But still are the wish we're on you we're back products. had that at but to offer right ones broader continuing rates, seeing now. I cap the a bit, I set to little what quoted

The Feldman Jamie next Fargo. will question from from be Wells

to balance expense I and outlook. the your on just want focus sheet interest

Or your ramp-up interest then now interest cuts guys a rate guidance. doing expense clean your outlook? the any terms with are I it the rate the rest to year your think in of assumed some had to of you of in outlook? interest the in are you number assuming Atlanta? you What any pretty guys capitalized in in get is you're past, And investment interest through thinking

Jamie. Yes,

we it's we our part back chatted is year, an cuts the latter as been when one assumed half I the in year manage we're, talked if call, debt the having now earlier. QX about as talked course, the of And had think outsized really then And of X and And in the about of cash in latter the Because year. case. So in it on it's that rate the balance. call, rate we the to there's Obviously, from chatter our cut base not of got interest guidance the still our as we half different impact Fed. we've appropriate. trying

far there's be we're projects material capitalized interest. we're As that interest, aware no that on, on as I'm sort working aware of, to any we're that of on working of have would going capitalized impact that a that really

So a clean from pretty interest it be year expense should an perspective.

thinking Okay. Watergate talked from transaction I and about I latest on That's just And about thoughts done the then or and liquidity. appetite potentially All investors -- buy market, right. thinking but know guess it, apartment getting to you any about helpful. how that Any you're timing?

It's Paul. Yes, Jamie.

wall note, on out positive what in say now, than capital clearly domestic Market of We that to say, start in We're of assets more are these roll coming there. transaction, more first seeing, into our current definitely this sold some extensions for the year. quarter the Square sale. right on trying have D.C. would foreign looking I our iconic with good, discussions to probably being did actually Watergate, with with we're pretty Just create rent first would I

a think an pickup the I accommodate months extensions, we've remains this trying asset to lending monetize not we challenge and definitely the be or in office I goal embrace with our we'll But think frame. able feel vehicle asset class to changed, a the and to community, next our really now. that XX right has interest, to in XX time as seen like

an cap so you then terms even value, or or would like do what rate even what think think to is in be just the And of what's about? range -- Okay. -- appropriate

we our that of targeting number the where where goes. off go -- took terms that write-down And shooting of to going we're it obviously I'm on asset. fourth be for will quarter markdown Well, the for a in

I think to a predicated now. lot of be going is that right

your have ball close to XX-year crystal as it. If But do going, as range on possible, is than to the obviously forecasting to Jamie. is hope better ours a to lot that going that's get where with we

Okay. to to get I numbers. be? just bit whatever more some level little about preferred And your on just or of start, I of debt as bad you rent then Great. a a revenue metric Well, rental guess, can of guess Atlanta percentage in absolute your might talk the granular today

Jamie. Yes. Sure,

As last the to come question, our at if first X.X% That bad has in answer down. look you I debt in Atlanta. was the mentioning was our quarter,

that are to say, And kind month-over-month second the we we're range into quarter. down I of So as on a come basis. mentioned, the, X.X% heading trending closer continuing to is as

X% X% fourth the X% average year, to bad head debt going we'll which in for range probably be as of to it's as revenue So the the quarter, an in we're you range. end be in year, of think if about as of a to the projecting the X% through percentage that the it we

you for and like you then between granular, the would and And know year. renewal get Okay. metrics? numbers. of thing also blends How for to break Atlanta new thinking just D.C. more the out and those lease I each that -- provided so the April same And about with

sure. happy to Yes, I'm that. give you

the back year Let's quarter. and talk then sort as I can with the whole, second about of start a and go

DMV are the negative we rate X% to X% you X% that say, X.X% to X.X% whole, Atlanta, Atlanta, is and But if range. in a look out growth as year to X.X% of, expecting think break new overall made expecting we're X% single in to about which the the up blends in to range. that X.X% a is in X% negative and And DMV, positive we're X% between X.X% negative are be If at assuming new to blend, blends renewals to to you that -- high negative X% single digits, which renewal. in X%, X.X% the say, if lease you portfolio

growth which made kind of between up.If where out we're very where you if the the to that blends that where of negative kind very a we're high is trending a that's the similar, good up negative into, we're X.X% sort X% blends and slightly year for of is to as QX, be DMV X% of into new to negative of is into trending we for new X% in a ahead to shape expecting the but expecting negative we're would say, about X% those QX. trending we're to new for whole. Atlanta, we're X% April say break blends, to rate digit you Atlanta, X.X% of full and expecting positive which at So look of growth. a negative renewal X% lease of of And growth XQ X% range X.X%. I in negative averages, to you X.X% single to if X% X% up the DMV renewal look X% made And to range, portfolio feel trending

then just the And Okay. benchmark.

of you're debt that bad number sort how number does comp? just XXXX, a year-over-year the bad in compare XXXX, debt the for to like So talking about

Yes. great No, question.

negative XX% a the you look were XXXX, the quarter for So fourth for we if at Atlanta. at

correct? talking portfolio, the Atlanta just You're

Correct.

Yes.

at mentioned. quarter showing improvement the So then to I the is that XX% Atlanta were for we quarter, fourth which first the in X.X% portfolio, negative the obviously

very If we year were of close you full X.X%. look XXXX, to the at QX number

For the year. full

Yes.

McDermott hand to questions Paul other time. the closing no would now call at were for there like And to Instructions] this remarks. [Operator back I

we and with today, would interest for speaking forward time to to over the Thank Again, next like and look everyone we you many you. weeks. thank few your you. of Thank

Thank today's conclude does This you. conference.

your You this Thank may participation. time. for disconnect your you lines at