Elme Communities Q3 FY2024 earnings call

• Demand: Strong across Washington and Atlanta Metros, driven by wage growth, employment, in-migration, and resident retention. Wage growth outpaced rent growth in markets. - Supply: Washington Metro had low new supply competition, while Atlanta faced impact from delayed deliveries and elevated net inventory ratios. - Operating trends: Washington Metro occupancy was strong, Atlanta had slower improvement. Lease rates: renewal growth positive, new lease growth negative. Bad debt improvement expected in 2025. Renovations: 188 units renovated with 17% ROI. Operational initiatives: Smart home tech, fee strategies, payroll savings, and managed Wi-Fi rollout.

Demand remained strong across the Washington Metro and Atlanta Metro regions. In Washington Metro, absorption was the highest since Q4 2021, driven by wage growth, stable employment, in-migration, and strong retention. Occupancy in Washington Metro was a bright spot, with sequential growth. In Atlanta Metro, demand was driven by in-migration, but supply had an impact with elevated net inventory ratios. Blended lease rate growth for the same-store portfolio was 2.1% in Q3, with renewal lease rate growth at 4.5% and new lease rate growth negative 1.5%. Same-store occupancy in Washington Metro increased sequentially to 95.2%, while Atlanta's occupancy was affected by evictions and supply dynamics.

• Tightened 2024 core FFO per share guidance to $0.92-$0.94 per share, mid-point $0.93. - Tightened same-store multifamily NOI growth assumption to 1%-1.5%. - Non-same-store multifamily NOI range $5.35M-$5.75M. - Other same-store NOI (Watergate 600) range $12.5M-$12.75M. - Interest expense expected $37.5M-$38M.

• Bad debt not improving as expected in Atlanta. - Supply/demand dynamics impacting concessions in Atlanta. - Higher than expected tax assessment in non-same-store NOI, under appeal. - Interest rate cuts impacting line of credit.

Q: On bad debt in Atlanta and concessions.

A: Tiffany Butcher discussed bad debt improvement with faster evictions and internal process changes, noting concessions in Q3 were flat to Q2, more in Atlanta due to supply/demand dynamics.

Q: DMV and Atlanta blends and occupancy in Q4.

A: Tiffany Butcher said Washington occupancy to end in high 95%, blends 0%-3%; Atlanta occupancy in low-90s, blends negative 3%-5%.

Q: OpEx increase in Atlanta.

A: Steve Freishtat discussed taxes, insurance, and eviction-related OpEx impacts.

Q: CapEx and bad debt stabilization.

A: Steve Freishtat said CapEx likely to increase with renovations and managed Wi-Fi; Tiffany Butcher stated bad debt details to be provided in February.

Q: Election impact on D.C.

A: Paul McDermott said alignment drives demand, else short-term impacts.

Q: Atlanta occupancy and new lease growth.

A: Grant Montgomery and Tiffany Butcher discussed supply peaking, new lease growth to turn positive in 2025.

Q: Capital allocation and market pricing.

A: Paul McDermott discussed seller types, pricing, and buyer groups in markets.