Elme (ELME) Q2 Core FFO Rises 4%

Key Points

• Net loss per diluted share (GAAP) was ($0.04) in Q2 2025, matching last year's result. Core funds from operations (FFO) per share rose 4.3% to $0.24 compared to $0.23 in Q2 2024.

• Elme Communities announced a definitive agreement to sell nearly all assets and enter full liquidation, withdrawing forward guidance.

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Elme Communities (NYSE:ELME), a real estate investment trust (REIT) focused on providing affordable multifamily housing, issued its second quarter fiscal 2025 earnings results on August 5, 2025. The company reported a net loss per diluted share (GAAP) of ($0.04), matching the prior year. Real estate rental revenue (GAAP) was $62.1 million. Effective new lease rates for the same-store multifamily portfolio declined by 3.3% compared to Q2 2024. Core funds from operations (a non-GAAP profitability measure commonly used by REITs) rose 4.3% to $0.24 per diluted share compared to $0.23 in Q2 2024. The results reflected steady execution in core markets but were overshadowed by the announced asset sale and liquidity plan, which introduces significant uncertainty about the company's future.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About Elme Communities and Business Model

Elme Communities is a REIT that owns and operates a portfolio of apartment communities, with a focus on serving middle-income renters. Its primary markets are Washington, DC and Atlanta. The portfolio mainly consists of multifamily properties, supplemented by a small amount of commercial office exposure.

Elme's business model emphasizes providing affordable, high-quality rentals that appeal to cost-conscious households. Its approach is anchored in targeting the mid-market rental segment, where average monthly rents are positioned below new luxury supply. This strategy helps maintain high occupancy and steady resident retention. Recent business focuses include value-add renovations, self-management of properties, and integration of environmental and social principles (ESG) into daily operations.

Quarter in Review: Notable Events and Developments

Elme Communities reported modest gains across several operational metrics in Q2 2025. Rental revenue (GAAP) increased by 3.3% compared to Q2 2024, and same-store multifamily net operating income (NOI) (non-GAAP)—which tracks property-level profit from existing apartments—was also up 4.5%. Core funds from operations (Core FFO, non-GAAP), a critical REIT metric that strips out certain non-cash items, improved by 4.6% compared to Q2 2024.

Supported by regional job creation and limited new supply, in Virginia, average effective monthly rent per home climbed 3.5% to $2,077, and occupancy increased slightly. However, the Georgia submarket saw average rents fall by 5.1% to $1,466, while occupancy there ticked up to 90.2%. This points to uneven conditions across the portfolio. Blended lease rate growth, which includes both new and renewal leases, was 1.3%. Notably, new lease rates were down by 3.3%, while renewals rose by 4.9%. This suggests competitive pressures and limited pricing power on new rentals, especially outside core markets.

The company’s office exposure, through its single Watergate 600 property, remained a drag on performance. Net operating income (non-GAAP NOI) for this asset dropped by 7.3% year over year due to lower occupancy, which finished the quarter at 82.3%. Across the multifamily segment, average effective monthly rent in the same-store portfolio rose to $1,913 while resident retention stayed stable at 62%.

Same-store operating expenses rose 3.1% year over year, a pace close to revenue growth. Controllable costs—including payroll and property management—grew 3.9%. The operating margin (non-GAAP) for the same-store multifamily segment was 63%, unchanged from Q2 2024. However, there was no new update during the quarter on renovation ROI or completions, which had been a priority in previous periods.

The biggest event of the quarter diverged from operating details. On August 4, 2025, Elme announced a definitive agreement to sell 19 multifamily communities for approximately $1.6 billion and adopted a voluntary plan of liquidation. This means all remaining assets will be sold, and the company intends to dissolve. As a result, Elme withdrew all forward financial guidance for fiscal 2025 and beyond. The cash dividend remained steady, with a $0.18 per share distribution declared for the fourth quarter of 2025, keeping the payout ratio at a healthy 75% of Core FFO (non-GAAP) as of Q1 2025. The company’s solid liquidity of $330 million and minimal near-term debt maturities supported operations entering this transition.

Looking Ahead: Guidance Withdrawn and Key Watchpoints

Due to the announced asset sale and liquidation plan, Elme management has withdrawn all forward guidance for both fiscal 2025 and 2026. No projections were offered for revenue, earnings, or operational metrics. This marks a shift from prior updates, where management provided outlook ranges for funds from operations and key portfolio metrics.

Investors will need to focus on the realization of stated asset values, transaction timelines, and final distributions. Monitoring the progress of asset sales, tax treatment of liquidation proceeds, and any unexpected costs will remain critical in the coming months. ELME continues to pay a quarterly dividend, with $0.18 per share declared for the third quarter of 2025, but future policy will depend on the results of the liquidation.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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