• Core FFO per Share Guidance: $0.92 to $0.94 per share, maintaining midpoint of $0.93 per share.
• Same-Store Multifamily NOI Growth Assumption: 1% to 1.5%.
• Non-Same-Store Multifamily NOI: $5.35 million to $5.75 million.
• Interest Expense: $37.5 million to $38 million.
• Annualized Net Debt to Adjusted EBITDA: 5.6 times at quarter-end.
• Liquidity Position: Over $330 million available on revolving credit facility.
• Same-Store Average Occupancy: Increased 60 basis points to 95.2%.
• Effective Blended Lease Rate Growth: 2.1% for same-store portfolio.
• Renovations Completed: 188 units with an average ROI of approximately 17%.
• Same-Store Retention Rate: 66% during the quarter.

• Warning! GuruFocus has detected 7 Warning Signs with ELME.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Strong demand in Washington and Atlanta Metro regions driven by wage growth, stable employment, and in-migration.
• Resident retention rates remain high, with an average tenure of 2.7 years, contributing to stable occupancy.
• Washington Metro communities face low competition from new supply, supporting stable occupancy and rent growth.
• Renovation initiatives are yielding a 17% ROI, with a robust pipeline of 3,000 homes for future renovations.
• Elme Communities maintains a strong liquidity position with over $330 million available on its revolving credit facility.

Negative Points

• Atlanta communities are experiencing slower-than-expected improvement due to elevated supply and rent compression.
• Higher-than-anticipated bad debt in Atlanta, driven by longer eviction timelines and new delinquencies.
• Negative new lease rate growth in Atlanta, with concessions offered on 58% of new leases.
• Operational expenses in Atlanta increased due to higher taxes, insurance costs, and legal fees related to evictions.
• Overall portfolio new lease rates are expected to remain negative through 2024, impacting revenue growth.

Q & A Highlights

Q: Could you provide an update on the bad debt situation in Atlanta and the rest of the portfolio, and what tailwinds are expected going into 2025? A: Tiffany Butcher, COO, explained that bad debt was approximately 2% of revenue in October, with Washington, D.C. showing normalized levels below 1%. Atlanta faced higher-than-expected bad debt due to longer eviction timelines and new delinquencies. Improvements have been seen recently with faster eviction processing and proactive resident moves. However, significant improvement in bad debt is not expected in Q4, with stabilization anticipated in 2025.

Q: Is the low occupancy in Atlanta more due to evictions and bad debts or elevated supply deliveries? Are concessions being offered? A: Tiffany Butcher noted that low occupancy is due to both supply-demand dynamics and eviction timelines. Concessions are being offered, with about 58% of new leases in Atlanta receiving concessions averaging 12 days. The focus is on occupancy over rate growth to drive NOI.

Q: What is implied in your guidance for blends and occupancy in the Washington Metro and Atlanta for Q4? A: In Washington Metro, occupancy is expected to remain strong, ending in the high 95% range, with new lease rate growth between 0% and -3%, and renewals at 4.5% to 5.5%. In Atlanta, occupancy is expected to remain in the low 90s, with new lease rates in the high-negative to low-negative double digits, and renewals at 2% to 3.5%.

Q: How do you view capital expenditures in the coming years? A: Steven Freishtat, CFO, stated that CapEx is driven by renovation initiatives and managed Wi-Fi rollouts, with returns expected in the 30% to 40% range. CapEx is expected to either maintain or slightly increase due to these initiatives.

Q: With the current market conditions, what are your thoughts on expansion into additional markets and strategic initiatives like selling Watergate? A: Paul McDermott, CEO, mentioned that Watergate is not a long-term hold, and they are pleased with current leasing execution. Expansion is favored in Sunbelt markets with strong job creation and wage growth. More data points are needed before making further decisions, with updates expected in February.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.