Elme Communities Q1 FY2024 earnings call

• Paul discussed portfolio trends: Washington Metro well-positioned with solid demand, Atlanta improving absorption despite supply. - Tiffany covered operating trends: Lease rate growth, occupancy, credit metrics improving, renovation ROI, operational initiatives contributing to NOI/FFO. - Steve talked about balance sheet: Same-store NOI growth guidance, interest expense outlook, balance sheet metrics (net debt to EBITDA 5.7x, strong liquidity).

The Washington Metro portfolio comprised roughly 85% of multifamily NOI in the first quarter. It is well-positioned with solid demand and market rents above the U.S. average. Lease rate growth improved sequentially for both Washington Metro and Atlanta portfolios. Same-store occupancy in Washington Metro increased 30 basis points Y/Y to 96%, while Atlanta had an average same-store occupancy of 94.4% during the quarter, with improvement expected as supply peaks and absorption mitigates overhang. Renovation returns outperformed expectations, with an average ROI of ~17% on 120 home renovations in Q1, and plans to complete over 400 full renovations and 100 home upgrades this year.

• Same-store multifamily NOI growth expected to range from 0.25% to 2% in 2024, weighted to back half. - Interest expense guidance remains appropriate despite shifted rate expectations. - Balance sheet: Leverage expected to finish 2024 in mid-5x range, liquidity strong with ~$540M available on credit line.

• Eviction backlogs from ended rent assistance programs in Atlanta. - Supply-demand imbalances in Atlanta affecting occupancy. - Interest rate uncertainties impacting interest expense. - Market volatility affecting cap rates for Class B assets in some markets.

Q: Can you talk about Atlanta market occupancy and bad debt?

A: Bad debt in Atlanta portfolio is ~7.5% currently, trending down, expected to be 3%-4% by Q4. Occupancy expected to improve as eviction delays normalize.

Q: Thoughts on cap rates for Class B assets?

A: Cap rates for best markets' product at 4.5%-5%, B product with value-add at 5.25%-5.75%, with institutional capital back in the market.

Q: Interest rate outlook and capitalized interest?

A: Expect 1 rate cut in back half, no material impact from capitalized interest.

Q: Thoughts on Watergate transaction?

A: Positive discussions on rent roll extensions, seeing foreign capital, goal to monetize in 12-15 months.