Elme Communities' third quarter earnings call for 2024 presented a comprehensive review of the company's performance in the Washington Metro and Atlanta Metro regions. The call, led by CEO Paul McDermott, COO Tiffany Butcher, and CFO Steve Freishtat, highlighted key themes and trends that offer valuable insights into the company's financial health and growth prospects.
Strong Demand Dynamics
Demand dynamics were a major focus of the call, with Paul McDermott discussing the positive outlook for Elme's value-oriented price points. The company's markets in Washington Metro and Atlanta Metro have experienced strong absorption, driven by wage growth, stable employment, in-migration, and resident retention. The trend is expected to continue in the near and long term, with Atlanta Metro expected to outpace the U.S. with 5% population growth in the 20 to 34-year-old age bracket.
Supply Dynamics
Supply dynamics also played a significant role in the discussion, with McDermott highlighting the low competition for Elme's communities in the Washington Metro, particularly in the Northern Virginia submarkets. In contrast, Atlanta communities face more competition, leading to rent compression and concessions that have affected typical demand pools. However, the company expects supply to remain relatively flat in the near term, with a significant decline in units under construction and new starts across the Atlanta metro submarkets, indicating a low supply in 2026 and 2027.
Operational Trends
Tiffany Butcher provided an update on the company's operational trends, noting stronger-than-expected performance from the Washington Metro communities and slower-than-expected improvement in Atlanta. However, she expects to end the year in a good place with stable trends across the portfolio and a strong revenue growth outlook into 2025. The company's focus on customer service excellence and heightened focus on retention has resulted in a strong same-store retention rate of 66%, underscoring the longer-term nature of Elme's resident base.
Financial Performance
Steve Freishtat discussed the company's financial results, noting that while net income was down slightly year-over-year, adjusted funds from operations (AFFO) and adjusted EBITDA were up. The company is on track to meet its renovation targets for the year and expects to see a marked improvement in net operating income (NOI) growth in Atlanta in the near term.
Takeaways
The earnings call provided a comprehensive overview of Elme Communities' performance and outlook for the future. The company's strong demand dynamics, especially in the Washington Metro and Atlanta Metro regions, indicate a positive outlook for the company's value-oriented price points in the near and long term. However, the impact of supply dynamics on Atlanta communities presents a challenge that the company is addressing through strategic renovations and operational improvements. With a focus on customer service excellence and a strong focus on retention, Elme Communities is well-positioned to capitalize on the favorable demand trends and address the challenges presented by supply dynamics.