ELME - Earnings call 3 2023 | Elme Communities

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Operator

Hello, and welcome to the Elme Communities Third Quarter 2023 Earnings Conference Call.

As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Amy Hopkins, Vice President, Investor Relations. Amy, please go ahead.

Amy Hopkins

Good morning, and thank you for joining our third quarter earnings call. webcast webcast Investors slide and section be on being available that will is available the on of our event with presentation a is also Today's replay. our website

filings. unfold. no remarks, as results Before non-GAAP call we available on that our refer website. conference in SEC and to We McDermott. the uncertainties and over differ Reconciliations contains call earnings which supplement, measures would the of actual that, known most and undertake with Paul our to And statements involve risks distributed and the press are remind on like materially, this our that financial can of I call was duty forward-looking unknown statements begin page and to them found turn financial GAAP to which these everyone like Investors may events this of to recent I'd CEO, prepared release update our and to discussed cause our in we actual risks yesterday be

Paul T. McDermott

maintaining the tightening operating Therefore, delivered guidance We the performance for and expectations seeing that remainder with we quarter our are the FFO of operating guidance. Amy. solid today are and and third we align Thanks, the trends midpoint our year.

of talk our In out growth a more future acquisition Atlanta rounds suburbs we and complex for terms I'll September of million This updates, the footprint acquisition of acquisition the in $XXX about our closed in improves a inner profile. on recent company minute. apartment XXX home Atlanta XX. this our on

and leader brings a We expectations. balance discuss network multifamily Susan I'll estate operating of guidance who initiatives, Board. transaction experience sheet our Carras and trends insights to member relationships. updates. to new a future Steve in to extensive we Additionally, Board our growth of growth external forward will on valuable our acquisition remarks bring today my focus industry Trustees. is will real will she cover accomplished Tiffany the the our recent prepared look and deep and that an our welcomed and

acquired deal a X%, Turning we the expense leveraging were execution buyer acquisition, process provide We where as a awarded of advantage. of all-cash our ability bidding including to base. competitive our to our work Druid yield recent for forward existing Hills the above our Elme impact to certainty an at

for to become XX acquisition the months. real over attractive reasons. expect next an We Elme This the the accretive estate deal is following for

squarely B Hills are This construction rents within targets XX% opportunity the in room are strategy, market renovate homes into enough insulated A Class and homes a it levels median the First, time limited delivery without at new supply. new all a Class that supply with of Elme as XX% above priced Druid to value-add surrounding renovate with renovation return. to XX% directly over XXXX X new create targeted our leaving our the with radius. offers value to somewhat since which about area premium in-place fits Furthermore, rents, under only opportunity is and with potential. supply XXX new by and competing grow rent our area than the X-mile to communities more the provides capture

most radius and average average for over XX%. residents Children's investments. $XX,XXX Atlanta, targeted in of developments. Employment to with in in in rent-to-income grew of supporting Hill is household Briarcliff Elme base. a Hills XXX,XXX and generated Atlanta's it's to seamless an than offers ratio over close Druid has Healthcare's our over income $X XX% an more the band years where important the past Executive Second, which accessibility within billion X submarket, area Druid Park income is medical jobs new located affluent growing job X-mile expansion, North Emory a Healthcare

of Third, rent the approximately XX per market ratio second a a the inside an property XX-year find outperformed more property Elme community is Fourth, the new acreage within a is largest and for the unit on which significantly X-year than multifamily Druid a that location. Elme per and expansive a Druid and in radius, redevelopment a it Atlanta growth deliveries basis. has options. yielding homes perimeter fluid the This a submarket X-mile XX average at trailing is sits mature acre, is over X broader years Hills past Hills average nearly rare longer-term land acres. on offers

with and Finally, our acquisition this operating and that XX%, value. replacement perform of to existing Tiffany could management joins our residents. the long-term be operating to for platform The trends Druid is Druid community Hills an drive well leasing costs community over price and with we discount and Elme onto very shareholder retained not continuity time us providing this and team, that, it pleased We deep turn will entire local I'll believe discuss a And experience, Hills growth Elme we team and initiatives. to to onboarded representing exceptional welcome over to extensive company. our them more

Tiffany Butcher

expirations rate stable year the experience same-store the I'll November lease quarter. that the we effective rate lease of NOI lease rate of growth the during the offers X.X% quarter third very Renewal representing same-store transition. for start trend outlook throughout retention, reiterating remained new growth far, on XX% during by fall, Thus of compared averaging a growth remains portfolio of continue which to We single very in renewal our October we generated renewal performance for average. strong during high comprised and multifamily and strong X% to Thanks, and our represents of lease growth digits, blended quarter a X.X%. of average, the Paul. resident assigned strong X.X% for rates

the rates moderate to single the lease towards blended the over of expect low digits. We remainder year

range. quarter, third the to experience XX we pricing needed on to earlier XX.X% in targeted average occupancy good year X.X% prior points the rent up to year. Same-store to year. Our winter power basis into per position multifamily continue occupancy the building compared the in the maintain increased focus this effective us quarter compared put within our home heading Same-store occupancy during averaged prior the and

runway Turning to average pace pipeline value X,XXX achieved future. approximately XXX year-to-date, renovation complete we're starting drive the the our ROI more creation approximately which renovations Druid this in enough represents over XX% for an on Including expect year. at complete renovations renovations. to Hills renovation-led homes, foreseeable late than of and XXXX, at We now to stands we to

line to residents for affordable to strategy. indicating was Turning our rent income. signed the new in value remains with historical average. A The third quarter and compelling leases to our a our ratio to our versus rent for a in rent-to-income levels communities new ratio cornerstone product, offer that XX% proposition our rent-to-income Class Furthermore, continue new The of average residents. are

between supply communities Class communities and new than as particularly compression B between remains submarkets caused XX%. and in the in market, their new Class areas, has in A Even high supply lease-ups our greater gap rent our affordability

currently as below of durability and discipline, have to exist capital acquisition Only X/X our in The submarkets median are well gaps of that supply. these submarkets allocating due by a community market new lease-up. impacted not our targeting points price to communities

growth initiatives. to on our Moving

increase community-level the improvements profitability. focus now transition while on have to to of of XX% We us teams community driving our retaining which operational positioned operations completed has

way located far, accessing are income amongst payments on home process vendor through members advantage new began and we to opportunities, our in have team proximity, the we of identified opportunities our of savings Thus are rent to that by communities revised technology expense rollout. and earlier, payment smart interest take capitalizing achieved resources rebates, fee share close XX%

pleased continued have the progress excited thus and next We to make with progress far, the these we year. made and are are opportunity initial accomplishments about we

and based with $X.XX centralizing otherwise We outlook. above cover additional maintenance we we it our make million continue plans. on between expect look of And that to more with these FFO to continue We as million progress through from to Steve I'll our forward components to the to balance that, to over opportunity centralization generated beyond have turn sheet and generate what would of $X.XX process. providing on leasing initiatives details XXXX

Steven Freishtat

Tiffany. Thanks,

in with X maturities XXXX Our debt another very years. good with shape no secured XXXX, maturity and balance to loan term our debt is extend until options sheet no

our year-end. net adjusted in and range remains to by annualized Our with is line targeted expected debt-to-EBITDA mid-Xs to the trend

Druid Elme of total capacity acquisition remains strong $XXX million line our the liquidity approximately with of XX% Hills, our of credit. Following position available the or on

finding our geographic terms we focused opportunities expansion. to and communities strategy going In are higher furthering lower out on CapEx recycle capital growth, of capital our of allocation forward,

to Now outlook turning year. the the balance of for our

diluted guidance range to $X.XX our $X.XX tightening FFO are share. per We core fully to

and traffic our trending are Tiffany winter. As and with seeing the operating fundamentals trends discussed, we expectations, are stable in our into line occupancy

range for We the same-store we achieve X% are our high will NOI single-digit growth year, we and are guidance to of reiterating X%. that confident NOI same-store

Elme of Hills, Inclusive non-same-store million range million. multifamily our NOI now Druid expect from $XX $XX.XX to to we

our We and guidance NOI, tightening which Watergate ranges other XXX G&A. consists for of are same-store

interest Hills. the guidance reflect acquiring our expense updating to of are We Druid impact Elme

internalization continue our AFFO be us, we our operations transformation With no community-level below to will target. costs of the now expect to finally, longer behind at payout And year for core this we ratio forward. going mid-XXs be recognizing or

embedded we rate public business In markets our cap implied terms the range, are the mid-X% long-term multifamily valuation, do of value of believe portfolio. our which valuing reflects multifamily not an our at the in

operational earn As investments to over our open capitalize strong for grow smart lower to value-add and to up and questions. home like we improve a our now it on opportunities implied execute I'd and technology portfolio, and advance our cap And continue valuation expect rate we initiatives, improve time. to renovations returns, identify

Operator

Wells first Our Feldman Jamie Instructions] question coming is Fargo. from with [Operator

James Feldman

start, to on So you guess Atlanta good acquisition. I gave color just the

talk just I call more did we about they're you're on mean, just I of there? B a B. you Can potentially pressure on ago. so doing if just of seeing you the in even And more earnings. we've pressure heard seeing kind talked RealPage with couple more actually think narrative what about markets. weeks -- RealPage a far seeing in other out You leave

got market is aggressive thing, getting It what you saying across to tie tenants see just because those trying color in and the seeing you've I submarkets more taking they're away. it give that of sounds not developers acquisition new but that, you're can UDR just along fill of might really your like are into lines? the think supply same kind it you and

A. Grant Montgomery

Sure, Jamie.

is Grant So talking. this Montgomery

that between gap nationally. Class definitely rent of the into A you points supply to look we because that give and I a think their well wanted on really they of that heads that up that made is did that market, data one was on the B registered as Just new in the published an RealPage impact was into coming and level country depending there that closing across of

so X%, looked showed that And saw of a what annual is methodology. between supply, where markets we had supply, it inventory Class gap A Class in in they we ratios And X% some data, to at their similar net new a and you about XX% B. in measuring were they that

lease-ups of our methodology same we product. were looking that at submarkets, In having new our versus

We gap have actually XX% submarket. our in a

So at our part that that's so competing a XX% below the is that ourselves key of positioning really overall head-to-head. rents, been strategy we're meeting not market

most using really priced shows XX% the about example, that product about RealPage new we're Our analysis for recent competing, up of is only data of -- the in point. below against that Atlanta information

less been impact, although is priced those new points. low we've direct really having so since supply with where an direct are we and certainly in -- because head-to-head we the markets price beginning are significantly disciplined are seeing And

James Feldman

of Okay. renewals submarkets supply spreads new you that your sense. makes in lot in others, just on do of figured these Can and the I a different was lease Yes, portfolio? non-same-store it Atlanta but with to more No, very that's some blends risk the helpful. than comment had

Tiffany Butcher

Sure.

with the and in So start can same-store portfolio say I then we non-same-store. let's the move would -- into well,

trending X% D.C. we're the is same-store mid-single slightly the in Metro is negative, For the to to for rates, seeing we're Atlanta of effective range. continue lease by year-end. to kind and trending portfolio, digits X% then towards renewals trend expecting negative that new the And

basis, Metro D.C. be the approximately and a expecting to X% kind be we're to blended between of X% Atlanta on to So area X%.

that I Atlanta trends You the into see portfolio. same those for carrying non-same-store about talked would

James Feldman

Okay.

rates you're So are thoughts mean on are rents 'XX early negative? if seeing what I your

Tiffany Butcher

Yes.

going to our guidance February. we're in So give

head season. would market today able to by time. going on varies gradual more lot overall, trends and the submarket. be seeing continued I at normalization we're to leasing now, we detail by provide winter it typical is that rate So as right into the a a of What But say growth we're significantly

Our seen portfolio over performing our showing core we Metro we've the longer D.C. would is and in very stability the term. markets that expect and well that

of timing seeing work some the through standards. includes of an Atlanta, and addictions pipeline credit leases still were kind which impact of we more owned our underwritten improved we we're our In before as properties of addiction that

near-term So the has created impact impacts occupancies. vacancy of on rates more backfilling addiction-related and

very still Communities. renewal However, seeing in overall, our strong high very retention we're Atlanta rates and

And pipeline, XXXX. well set for which current so addiction we us working the going up are through to is

James Feldman

of organization? running Okay. kind done, And you or guess to me. I any quarter the the and then platform, I in expenses. from business anything sailing think mean other for I of the new there the last post was mean here terms is about just internalization get as just this first absolutely is internalization this left in initiatives

Steven Freishtat

cost really had as that don't in a now on on getting Steve. expect transformation efficiently, running costs Jamie, months. of million as $X.XX this far the business, the over and it $X.XX well the upside, From third is transformation the internalized that million Everything and achieving focused to our focused right. we're running about quarter, we and XX-plus perspective, next Tiffany saying in hit And anything and going place. forward. talked And we is procedures those you're are we policies

James Feldman

any are like... 'XX? that other are thinking you might you there come about in like up But Or Okay. guys do feel initiatives

Tiffany Butcher

upside, XX% And through million into And $X.XX technology of We've specifically, -- would our home operational to remainder first in see all, around $X.XX the upside. year. it units areas making that the I FFO complete that I as packages this we've of our revolves remarks, that initiatives different all X key of home really that installed up smart packages. the Yes, of said expect prepared smart more and kind already absolutely. of to we say think I million go creating

positive So will that a have in XXXX. starting impact

We're also very focused on occupancy.

procedures cetera, fee improve vacant. income different processes the are will that days and on around that premove-in into and et revenue new our We inspections, also a have marketing, looking strategically our working portfolio. we of then our changing occupancy bring to opportunities and help on And We're fee working we're at lot on we we cash management communities, and advantage to house, centralization earlier and opportunities are very in can other everything that of operations expense since to are initiatives share related we able we've the the collection take now advantage and take then have of which been rents across in-house. of focused now opportunities staff

FFO kind and before, are that key make And X the be said then So will those of of areas And be that across this 'XX. remainder year. XX% the we've up will recognized 'XX recognized about as upside. that

Operator

Peterson [Operator Alan Instructions] Our next question with Green from is Street. coming

Alan Peterson

you that the addictions still additional know or guys just bad that Is floor the the occupancy the incremental are to Tiffany, market. bad quarter. on occupancy a within issues I through Or debt on market? portfolio question touched XX.X% for you there. of at Atlanta debt issues? of Total due the end working

Tiffany Butcher

place improve in quickly vacancies. that to of overall, that new have as on end, also working in those marketing backfilling residents very the in important portfolio we also sure to the then say, think we would occupancy But that place incentives is addition as initiatives new drive put we're are that make those to putting are that, we I quality the criteria through lease are and to the vacancies help backfilling still of back screening note possible. the pipeline. And effective it's I in helping new addiction credit we credit

Alan Peterson

units how is still percentage So delinquent or the many Atlanta? what of of XX.X%, within portfolio out more that

Tiffany Butcher

the debt continue improve going within the bad year that to to as this XXXX. overall, to going to is we that Atlanta debt moderate portfolio the into into and think then of we continue month-over-month are I see bad remainder and head

Alan Peterson

the at guys it, or it X a know Maybe property. a upside. a to that the Understood. there's beyond the yield of I and And terms are you year some expansion densification XX that on at are like Paul, Is it potential over just yield X looking basis? thinking shifting that that you underwriting mentioned renovation you call about of in talked acquisition. some you the X% X% I year yield. guys And standpoint it, that even sounds about How months call over next, there? from know

Steven Freishtat

out Yes, expect Alan, talk on But of internal again, and yield XX the and start based is Paul the to to upside then months. we Steve, X% I'll in of transfer what over in is kind this kind with the the that years. first about an

think those we within So yes, months. year X, and this accretive that it's becomes XX

from excited to opportunities estate and where pretty excited talk about about we're perspective, to renovations over we about Paul And the the here. see I'll very a rate obviously it cap that. upside. So and We're turn real the

Paul T. McDermott

But Alan, deal. now. on units years. band bit little we've acquisitions the the acre Yes, think look in And looking only we we've our spread years, deliveries probably properties going itself, this Grant's last per a at draft and look the Hills profile we think was that, we has the it mean North look potential itself, all appropriately our to income the the Steve. property When aside with are and one we targeting months increased for Class estate property be amount we we at units the we're think set the Thanks, the at in gone RealPage the we're I this, plus the if per much at last XX% what acre. Druid market. it to X I dealing look continuing think around the capital he demographics I'm that over when go. that X I are The real credit that right of to going here XX demographics saw. and property bar off submarket to of seen where averaged We criteria, the is you jobs for at a higher this have has XX of As, in XX How high the had and between has from great XX in thought comments over a there,

But while, a So that banging been kind right opportunities at are as there be this we've for depending of and this market replacement at costs and believe we play. a densification now cetera, we we that a when somewhere really think this buying on looked do entitlements, $XXX just land for here land covered can us a I probably door, looked door. et it's at think and prices, $XXX $XXX between on

looked discount we a XX% So costs. at replacement to this as

because think the us nice on up I we of we tell to want So bidder some that there's just did moving gotten, the you, actually basis land densification et cetera, rates, a forward. not asset. were been cap highest were we've if we feedback for a the type highest But -- do this we sets of discussions about lot can not

being what we was distinguishing move cash, and for execution. offering feature our I the while all now think And certainty it value us observation the our to sellers could. create of was

Elme we Druid forward Hills. that's So why move with

Alan Peterson

on funding plan call just range it, a accretion to accretion lines there Druid and, and I Maybe, there, for a that you Hills? X% appreciate kind those funding yield guys that in Steve, gets comments the source. the terms of mid-X% the assuming line, mark drew the I'm down and longer-term of you comments. the Is

Steven Freishtat

Yes, Alan.

But could the of with evaluating now. at we're our And or of is out portion to balance debt. actually line X.XX% do as made, unsecured coming unsecured and secured a line certainly what the right our see we the Fed look does secured there but the out So challenging. options months. in term see debt And [indiscernible] credit far as is couple the market of and we'll pricing

make to. still we're to do term longer to our the So markets ample now, sense. keeping if wanted to line we balance the were to continue But something line, on have monitor capacity we the do if comfortable on and anything look certainly for we additional we'll and

Alan Peterson

scale All one out funds opportunities be understand of of the use would at? geographic expansion comments terms into buyback right. expansion. to the in it forward for Across me at stock I last best Maybe continue trading assets growth considering one geographic plans. of the platform or on recycling to where the higher is external into potentially CapEx today, look

Steven Freishtat

Alan. Yes,

is is at buybacks So our that look and maintaining a couple obviously, at remain and we we've the out on balance company. we One do looking stock of that. we focused look consider at But a strength scale But of the also to growth scalable built things. sheet. platform

said do, So additional year. can by that when about we think obviously, where end trending a to of we're mid-Xs that we we things the the

from we're So a where perspective. very leverage with comfortable trending we're

Additional got could could the recycle have we that in in needs might recycle that we assets higher lower assets diversification, certainly the D.C. growth, long-term Sunbelt. be area maybe some We've assets. CapEx into higher-growth

of that to million all the executing of million that, $X.XX kind we on. to but addition these, also on mentioned the operational focused upside, In we're we've have $X.XX

tours. of Druid renovation The pipeline now the and acquisition do rolling Phase started technology, we're we Elme that of going home us which have units. self-guided allow year, which doing to we this to out smart our continue II, X,XXX With Hills,

embedded makes think anticipate that that execute to drivers with pencil allow lower cost growth then sense. lot that, it our now, it of to we a we'll as of but it in looking cap us over Obviously, to future, look we've So well. grow certainly that look rate do to sense in we'll right capital will makes implied that when on earn got And a if that we're and the portfolio our time. doesn't

Operator

further like questions, closing management no for floor to any are back turn to comments. I'd the And over if there

Paul T. McDermott

and and we the and we'd seeing you, in over everyone person time to thank you. look speaking everyone. interest Again, Thank with to forward Thank few like you your next you for weeks. today,

Operator

for time, concludes your This conference, you today's you disconnect and this thank lines participation. you. at we your and may Thank

Elme Communities (ELME) 27 Oct 232023 Q3 Earnings call transcript