Elme Communities Q1 FY2025 earnings call

Paul's Statements - Kicked off the year with strong momentum in same-store revenue and NOI. Fundamentals in DMV portfolio remain solid. Northern Virginia has strong private sector job growth. Strategic review initiated by board to evaluate strategic alternatives. ### Tiffany's Updates - Strong operational start with occupancy and lease rate growth. Atlanta has better bad debt performance due to higher credit standards, process changes, etc. Renovations on track with 88 completed in Q1. Managed Wi-Fi rollout ahead of schedule. ### Steve's Updates - Strong Q1 results with same-store revenue growth of 3.9% and NOI growth of 5.5%. Better than expected performance from rent growth and tax appeals. Wi-Fi rollout going well, balance sheet in good shape with annualized net debt to adjusted EBITDA at 5.6 times.

Elme's same-store multifamily occupancy averaged 94.8% during the first quarter, in line with targeted range and up 50 basis points year over year. Same-store blended lease rate growth was 1.9% for the quarter, with initial estimated 2.6% for April. In the DMV portfolio, forward and renewal rates remain strong. In Atlanta, there are stable rent and occupancy trends and better than expected bad debt performance. 88 renovations were completed during the quarter with an ROI of approximately 18%, and the company is on track to complete over 500 full renovations in 2025. The managed Wi-Fi program is ramping up more quickly than anticipated, with expected additional NOI of $600,000 to $800,000 in 2025 from phase one and two, and potentially $1.5 million to $2 million per year by mid-2026 when phases one and two are fully integrated.

- Based on year-to-date performance and updated projections, only 50 to 60 basis points of additional revenue growth from rent and occupancy changes needed to reach midpoint of revenue forecast. ### - Balance sheet remains in very good shape with over 60% of total capacity available on line of credit and no secured debt. ### - Confident in delivering resilient performance due to strong portfolio fundamentals, value-add renovation pipeline, and platform initiatives.

- Uncertainty that the strategic review process will result in Elme pursuing a transaction or other strategic outcome. ### - Potential impact of economic volatility, employment losses, and slowdown in economic growth on the region.

Q: Talk about the multifamily transaction market in DC, including cap rates and deals.

A: Paul mentioned the living sector is doing well with continued capital flows, debt markets liquid, agencies aggressive, debt funds feeding higher LTV, life companies in 50-55% loan to value. Equity investors like odysseys reentering with strategic allocations. Cap rates as low as 4.25% to 5%, levered IRRs 9-15% depending on type. Discount to replacement cost shrinking in strong submarkets.

Q: Touch on addition of Ron to board and timing related to strategic review.

A: Strategic review announced last year from strategic retreat. Board does refreshment process, Ron was appropriate candidate with good skill sets and operating history.

Q: Elaborate on acceleration of Wi-Fi initiative income and rollout expenses.

A: Tiffany said Wi-Fi rollout started last year with first seven communities, phase two installation faster than anticipated. Steve added there will be associated expenses but to a lesser extent.

Q: Discuss shift in revenue composition and potential downside line items.

A: Steve said strong Q1, tracking in line with seasonal norms, still a lot of leases to turn over in spring/summer, guidance unchanged for now but more to know on Q2 call.