This REIT Is Down 60% Since 2006, but a $9.2 Million Bet Says There’s Still Value
Key Points
New York City-based DSC Meridian Capital acquired 543,081 shares of Elme Communities in the third quarter.
The net position change from the previous period was about $9.2 million.
This was a new position for DSC Meridian, representing about 1.9% of overall assets under management.
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New York City-based DSC Meridian Capital initiated a new position in Elme Communities (NYSE:ELME), acquiring 543,081 shares valued at approximately $9.2 million, according to a November 14 SEC filing.
What Happened
According to a Securities and Exchange Commission (SEC) filing dated November 14, DSC Meridian Capital LP reported a new position in Elme Communities (NYSE:ELME). The fund acquired 543,081 shares during the third quarter, with the position valued at $9.2 million as of September 30. This addition brought the fund’s total number of reportable positions to 11.
What Else to Know
This new position represents 1.9% of DSC Meridian Capital's $493 million in reportable U.S. equity AUM as of September 30.
Top holdings after the filing:
- NYSEMKT: BKLN: $43.8 million (21.9% of AUM)
- NASDAQ: CORZ: $40.9 million (20.5% of AUM)
- NYSE: VST: $26.3 million (13.2% of AUM)
- NASDAQ: COOP: $22.9 million (11.5% of AUM)
- NYSE: TECK: $22.9 million (11.4% of AUM)
As of Wednesday, shares were priced at $17.41, up 10% over the past year and well underperforming the S&P 500, which is 12% in the same period.
Company Overview
| Metric | Value |
|---|---|
| Revenue (TTM) | $247 million |
| Net Income (TTM) | ($134.8 million) |
| Dividend Yield | 4.2% |
| Price (as of Wednesday) | $17.41 |
Company Snapshot
- Elme Communities owns and operates a diversified portfolio of multifamily, office, and retail real estate assets concentrated in the Washington Metro area, generating revenue primarily from property leasing and management.
- The company employs a real estate investment trust (REIT) model, focusing on acquiring, managing, and optimizing income-producing properties to generate stable rental income and long-term value appreciation.
- It serves a broad base of tenants, including residential renters, commercial office clients, and retail businesses, targeting both individuals and enterprises seeking prime locations in a competitive metropolitan market.
Elme Communities leverages decades of experience to create value through strategic property management and redevelopment initiatives in the Washington Metro area. Its focus on diversified asset types and prime locations provides a competitive edge in attracting and retaining tenants in one of the nation's most dynamic real estate markets.
Foolish Take
Elme Communities is not a clean growth story. It is a real estate platform navigating a transition, with its shares still roughly 60% below their mid-2000s levels and weighed down by years of underperformance. What makes the position interesting now is the disconnect between price, assets, and optionality.
Operationally, Elme’s portfolio remains stable. Same-store multifamily occupancy averaged 94.4% in the third quarter, with average effective monthly rent per home rising 1.1% year over year.
Meanwhile, core FFO came in at $0.22 per diluted share for the quarter, essentially flat from last year, underscoring the durability of cash flow despite higher expenses. The balance sheet also provides flexibility, with $321 million in available liquidity and no secured debt outstanding. The real catalyst is strategic. Elme sold 19 multifamily communities for approximately $1.6 billion in November. For a fund that typically favors volatile, event-driven positions across credit, energy, and special situations, this looks less like a traditional REIT bet and more like a potential liquidation value thesis. The takeaway for patient investors is simple: Downside appears more bounded than the stock’s history suggests, while outcomes hinge on execution rather than rent growth alone.
Glossary
13F reportable assets: Assets that institutional investment managers must report quarterly to the SEC, showing their U.S. equity holdings.
Assets under management (AUM): The total market value of investments managed by a fund or firm on behalf of clients.
Dividend yield: Annual dividend income expressed as a percentage of the stock's current price.
Trailing twelve months (TTM): The 12-month period ending with the most recent quarterly report.
Real estate investment trust (REIT): A company that owns, operates, or finances income-producing real estate and typically distributes most income as dividends.
Multifamily: Residential buildings or complexes containing multiple separate housing units for tenants.
Position: The amount of a particular security or asset held by an investor or fund.
Net position change: The difference in the number or value of shares held by a fund before and after a transaction.
Reportable position: A holding that must be disclosed in regulatory filings due to its size or regulatory requirements.
Stake: The ownership interest or share held in a company by an investor or fund.
Portfolio: A collection of financial assets, such as stocks, bonds, or real estate, held by an investor or fund.
Redevelopment initiatives: Projects aimed at improving or repurposing existing properties to increase their value or income potential.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool recommends Teck Resources. The Motley Fool has a disclosure policy.
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