Elme Communities · NYSE:ELME
Elme Communities — Washington Real Estate Investment Trust — Investor Presentation (March 2022)
50 slides from Elme Communities's investor presentation, Mar 4, 2022
Slide 1: Investor Presentation March 2022
1 WASHREIT washreit.com Investor Presentation March 2022
Slide 2: Disclaimer and Forward-Looking Statements
2 WASHREIT washreit.com This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities of WashREIT, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qua
Slide 3: Why Invest in WashREIT
3 WASHREIT washreit.com WHY INVEST IN WASHREIT WashREIT’s earnings momentum is building as Southeast acquisitions and historically high rent growth establish a higher baseline NOI level to grow from With a transformed operating platform and scalable G&A expense base, we expect to deliver improved op
Slide 4: Creating Value for Shareholders
4 WASHREIT washreit.com CREATING VALUE FOR SHAREHOLDERS MD Retail WashREIT’s value proposition reflects a track record of successful capital allocation, solid long-term growth and value-creation prospects, an investment-grade balance sheet and a scalable operating platform Growing Southeast Footprin
Slide 5: Transformation Update
5 WASHREIT washreit.com TRANSFORMATION UPDATE
Slide 6: Current Portfolio Mix and Acquisition Progress
6 WASHREIT washreit.com VA MDMD Retail Northern Virginia We have closed or been awarded exclusive negotiation rights for essentially all of our initial $450 million acquisition target and nearly two-thirds of our 2022 acquisition guidance. We are in discussions in pursuit of additional opportunities
Slide 7: Adding geographic diversity with strong demographic tailwinds
7 WASHREIT washreit.com VA Northern Virginia MD Adding meaningful geographic diversity with strong demographic tailwinds Acquired The Oxford, a 240-home Class B multifamily community in Conyers, GA on August 10th for $48 million Acquired Assembly Eagles Landing, a 490-home Class B multifamily co
Slide 8: Transformation timeline
8 WASHREIT washreit.com June 2021 Announced agreement to sell office portfolio to Brookfield for $766 million in gross proceeds Announced LOI to dispose of 8 retail assets in Q3 2021 for approximately $168 million in gross proceeds Closed on office portfolio sale on July 26th Closed on first
Slide 9: Atlanta Portfolio
9 WASHREIT washreit.com ATLANTA PORTFOLIO Legend Class A Class A- Class B Value-Add Class B >4% Combined Cap Rate 21.6% YTD Effective New Lease Rate Growth1 >$350 Average difference in our monthly rent vs new deliveries in each submarket The Oxford Source: RealPage Market Analytics; February 2022. 1
Slide 10: Capital Markets
10 WASHREIT washreit.com VA Northern Virginia MDMD Retail Northern Virginia CAPITAL MARKETS Redeemed $300 million of senior unsecured notes due in 2022 on August 26th Repaid $150 million of amounts outstanding on the $250 million unsecured term loan maturing in 2023 in September Renewed the $7
Slide 11: Research-Led Capital Allocation
11 WASHREIT washreit.com RESEARCH-LED CAPITAL ALLOCATION
Slide 12: Competitive Differentiation
12 WASHREIT washreit.com COMPETITIVE DIFFERENTIATION VAMD Retail We have a disciplined strategy that targets the deepest part of the demand curve, in economically dynamic markets and submarkets. These generators of strong demand coupled with price point supply insulation result in a track record of
Slide 13: Mid Market Renter Demand: Deep and Underserved
13 WASHREIT washreit.com MID MARKET RENTER DEMAND: DEEP AND UNDERSERVED Source: American Housing Survey, US Census, WashREIT Research; March 2022. 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Atlanta Charlotte Raleigh/Durham Washington $25,000 to $34,999 $35,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999
Slide 14: Economically Dynamic Markets & Submarkets
14 WASHREIT washreit.com ECONOMICALLY DYNAMIC MARKETS & SUBMARKETS WashREIT’s market and submarket selection targets economies with diverse, innovation industries that drive outsized job creation, wage-growth and in-migration. Dynamic economies provide the strong foundation of demand upon which we g
Slide 15: Price Point Supply Insulation
15 WASHREIT washreit.com PRICE POINT SUPPLY INSULATION Our disciplined approach to market pricing position of our community acquisitions provides considerable mitigation of supply pressures from new product while simultaneously maintaining an affordability gap, enabling targeted renovation programs.
Slide 16: Target Vintage Rent Growth Outperformance
16 WASHREIT washreit.com TARGET VINTAGE RENT GROWTH OUTPERFORMANCE Older vintages of communities in our target markets have a track record of effective rent growth outperformance. Note: Product delivered in the 2010s. Source: Real Page, WashREIT Research; March 2022. 0 50 100 150 200 250 300 350 400
Slide 17: Employment within commute sheds
17 WASHREIT washreit.com Oxford • Over 73,000 jobs at targeted incomes are within a 30-minute commute • This deep demand segment is projected to grow by another 12.5% by 2025. • Rivian electric automotive plant, adding 7,500+ jobs in $50K range, announced in December 2021. 30-min. commute shed Sourc
Slide 18: Operational Update
18 WASHREIT washreit.com OPERATIONAL UPDATE
Slide 19: Earnings Momentum
19 WASHREIT washreit.com EARNINGS MOMENTUM 2022 will be a year of building momentum as Southeast acquisitions drive higher NOI growth and our same-store portfolio captures outsized market rent growth. As NOI ramps up throughout the year, we will be establishing a significantly higher earnings run ra
Slide 20: Same Store Lease Rates Continue to Grow
20 WASHREIT washreit.com SAME STORE LEASE RATES CONTINUE TO GROW We are positioned well heading into the spring leasing season with double digit lease rate growth on our most recent new lease executions. Our blended lease rate growth is outperforming the DC Metro average as reported by RealPage tran
Slide 21: Inflection Timing Pushed Growth into 2022 and 2023
21 WASHREIT washreit.com 0 200 400 600 800 1,000 1,200 1,400 $1,550 $1,600 $1,650 $1,700 $1,750 $1,800 $1,850 $1,900 $1,950 $2,000 2021 Average Same-Store Asking Rent 2021 Leasing Volume 2022 Lease Expirations INFLECTION TIMING PUSHED GROWTH INTO 2022 AND 2023 The timing of the 2021 recovery in mark
Slide 22: Atlanta Portfolio is Outperforming
22 WASHREIT washreit.com ATLANTA PORTFOLIO IS OUTPERFORMING Initial acquisitions are generating very strong growth with average new lease executions up over 21% on a year-to-date basis -5% 5% 15% 25% $1,225 $1,305 $1,385 $1,465 $1,545 $1,625 $1,705 Atlanta Metro Effective Rents Year Over Year Effect
Slide 23: Retention and Occupancy
23 WASHREIT washreit.com RETENTION AND OCCUPANCY 51% 51% 57% 60% 72% 0% 10% 20% 30% 40% 50% 60% 70% 80% Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Same-Store Retention Retention was a very strong 72% during the fourth quarter, higher than expected, and a significant increase compared to 51% in Q4 2020.
Slide 24: Same Store Loss to Lease
24 WASHREIT washreit.com $10,000,000 $10,500,000 $11,000,000 $11,500,000 $12,000,000 $12,500,000 $13,000,000 Same-Store Portfolio Market Rent Total Lease In-Place Total • Washington Metro average effective year-over-year rent growth throughout 2022 is projected to be ~7%, according to RealPage • Cur
Slide 25: Urban vs Suburban Portfolio Trends
25 WASHREIT washreit.com 93.0% 93.5% 94.0% 94.5% 95.0% 95.5% 96.0% 96.5% 97.0% Daily Occupancy Same-store Portfolio Urban Suburban URBAN VS SUBURBAN PORTFOLIO TRENDS -16% -12% -8% -4% 0% 4% 8% 12% Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Effective Blended Lease Rate Growth Same
Slide 26: Cash NOI Growth
26 WASHREIT washreit.com 0% 10% 20% 30% 40% 50% 60% 70% $- $200 $400 $600 $800 $1,000 $1,200 Same-Store New Lease Concessions By Lease Commencement Date Average Concessions Per Unit % of New Leases w/ Concession CASH NOI GROWTH Same-store NOI increased 8% year-over-year on a cash basis in Q4 2021 dr
Slide 27: Trove Development
27 WASHREIT washreit.com • Class A product for the value seeking renter • 401 units; 95% occupied at year-end • Rooftop pool with views overlooking a golf course and DC monuments • Proximate to some of the largest employers in the region • 6-minute drive to Pentagon City and Amazon HQ2 • Achieved LE
Slide 28: Value-Add Programs
28 WASHREIT washreit.com VALUE-ADD PROGRAMS FULL RENOVATION KEY METRICS Avg. cost per unit $18-$22,000 $10-$13,000 $5-$7,000 Avg. monthly premium $260 $110 $100 ROI 14%-15% 10%-11% 18%-20% BEFORE UNIT UPGRADES Current Opportunity + ~2,900-unit renovation pipeline + Target 2022 full renovation spend
Slide 29: Watergate 600
29 WASHREIT washreit.com ACCENT IMAGE Place and image in this space. Resize and use the crop tool to fit on top of this box. + Watergate 600 is our sole remaining commercial asset + We continue to benefit from owning and operating Watergate 600 and have grown occupancy steadily over the course of th
Slide 30: Multifamily Portfolio
30 WASHREIT washreit.com MULTIFAMILY PORTFOLIO
Slide 31: Multifamily property list
31 WASHREIT washreit.com Note: Refer to slide 2 for certain disclosures regarding Forward-Looking Statements. 1 For multifamily buildings, ending occupancy based on units. For Watergate 600, ending occupancy based on square feet that includes temporary lease agreements. As of December 31, 2021 Prope
Slide 32: Multifamily Unit Distribution in Washington Metro
32 WASHREIT washreit.com 96.0% Occupancy1 ~$111k 3 Mi. Avg. HHI Amounts and percentages as of December 31, 2021 1Excludes Trove, The Oxford, Assembly Eagles Landing and Carlyle of Sandy Springs Source: ESRI. 2 Same-store new lease rate growth 33% / 67% Suburban vs. Urban Washington Metro Multifamily
Slide 33: Portfolio Strategies
33 WASHREIT washreit.com Vintage: 2000’s Rent Growth Drivers: Operational Improvements, Unit Upgrades, Prop-Tech, Submarket Rent Growth, Future Renovations Price Point: 100%-110% of market median rent Vintage: 1980’s, 1990’s, 2000’s Rent Growth Drivers: Operational Improvements, Full Renovations, Su
Slide 34: Renter profiles by class
34 WASHREITwashreit.com CLASS A- RENTERS CLASS B VALUE-ADD RENTERS CLASS B RENTERS • Mix of single householders and married couples in their mid-20s to late-30s. • Environmentally, health, and image conscientious – all impacting their purchasing decisions. • Household income is generally between $60
Slide 35: Acquisitions Aligned with Strategy: The Oxford
35 WASHREIT washreit.com ACQUISITIONS ALIGNED WITH STRATEGY The Oxford Atlanta Metro Class B Acquired: August 2021 Purchase Price: $48 million Vintage: 1999 Number of Homes: 240 Rent Growth Drivers: Operational Improvements, Submarket rent growth, future renovations 5-Mi Projected 21-26
Slide 36: Acquisitions Aligned with Strategy: Assembly Eagles Landing
36 WASHREIT washreit.com ACQUISITIONS ALIGNED WITH STRATEGY Acquired: November 2021 Purchase Price: $106 million Vintage: 1997, 2000 Number of Homes: 490 Rent Growth Drivers: Operational Improvements, Submarket rent growth, future renovations 5-Mi Projected 21-26 HH Growth: 1.26%/yr. 5
Slide 37: Acquisitions Aligned with Strategy: Carlyle of Sandy Springs
37 WASHREIT washreit.com ACQUISITIONS ALIGNED WITH STRATEGY Acquired: February 2022 Purchase Price: $106 million Vintage: 1970 Number of Homes: 389 Rent Growth Drivers: Operational Improvements, Submarket rent growth, Value- add renovation program of ~270 homes 3-Mi Projected 21-26 HH Gr
Slide 38: $1.6 Billion of Value-Oriented Multifamily Investments since 2015
38 WASHREIT washreit.com $1.6 Billion of Value-Oriented Multifamily Investments since 20151 + Expanded into the Southeast beginning in 2021 and have closed three acquisitions in Atlanta, Georgia. + Completed approximately 2,000 renovations of varying scopes since 2015, at average cash-on-cash return
Slide 39: Environmental Social Governance
39 WASHREIT washreit.com ENVIRONMENTAL SOCIAL GOVERNANCE
Slide 40: Integrating Climate Risk
40 WASHREIT washreit.com INTEGRATING CLIMATE RISK Climate risk assessments are fully integrated into our acquisition process, from deal identification to underwriting, due diligence, and investment committee. We evaluate the physical risks impacting property operations and expenses and the transitio
Slide 41: Appendix
41 WASHREIT washreit.com APPENDIX
Slide 42: Financials from Q4 2021 Supplement
42 WASHREIT washreit.com FINANCIALS FROM Q4 2021 SUPPLEMENT (1) See “Definitions” for the definitions of NAREIT FFO and Core FFO. (2) Adjustments to the numerators for FFO and Core FFO per share calculations when applying the two-class method for calculating EPS.
Slide 43: Financials from Q4 2021 Supplement
43 WASHREIT washreit.com FINANCIALS FROM Q4 2021 SUPPLEMENT
Slide 44: Financials from Q4 2021 Supplement
44 WASHREIT washreit.com FINANCIALS FROM Q4 2021 SUPPLEMENT (1) See “Definitions” for the definitions of NAREIT FFO and Core FFO. (2) Adjustments to the numerators for FFO and Core FFO per share calculations when applying the two-class method for calculating EPS.
Slide 45: Financials from Q4 2021 Supplement
45 WASHREIT washreit.com 1) For a list of non same-store, discontinued operations and other properties, see “Same-Store Portfolio Net Operating Income (NOI) Growth 2021 vs 2020” FINANCIALS FROM Q4 2021 SUPPLEMENT
Slide 46: Financials from Q4 2021 Supplement
46 WASHREIT washreit.com FINANCIALS FROM Q4 2021 SUPPLEMENT
Slide 47: Financials from Q4 2021 Supplement
47 WASHREIT washreit.com FINANCIALS FROM Q4 2021 SUPPLEMENT
Slide 48: Definitions
48 WASHREIT washreit.com DEFINITIONS Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain/loss on sale of real estate, casualty gain/loss, real estate impairment, gain/loss on extinguishment of debt, gain/loss on interest rate derivatives, severance expense, a
Slide 49: Definitions
49 WASHREIT washreit.com DEFINITIONS Average Effective Monthly Rent Per Home represents the average of effective rent (net of concessions) for in-place leases and the market rent for vacant homes. Average Occupancy is based on average daily occupied homes as a percentage of total homes. Current Stra
Slide 50: Investor Relations Contact
50 WASHREIT washreit.com Investor Relations Contact: Amy Hopkins ahopkins@washreit.com Rooftop pool overlooking the Air Force Memorial Trove, Arlington, Virginia
Washington Real Estate Investment Trust — Investor Presentation (March 2022) on 6ix