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What changed in Elme Communities's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Elme Communities's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+301 added−297 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in Elme Communities's 2023 10-K

301 paragraphs added · 297 removed · 225 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeBozzuto and Greystar provide such services under individual community management agreements for each residential community, each of which is separately terminable by us or Bozzuto/Greystar, as applicable. Although they vary by community, on average, the fees charged by Bozzuto/Greystar under each agreement are approximately 3% of revenues at each residential community.
Biggest changePrior to the completion of our management internalization, Bozzuto Management Company ("Bozzuto") and Greystar Real Estate Partners ("Greystar") provided community management and leasing services at the majority of our residential communities. Bozzuto and Greystar provided such services under individual community management agreements for each residential community, each of which was separately terminable by us or Bozzuto/Greystar, as applicable.
We believe that our properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants.
We believe that our properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance with the ADA could result in an imposition of fines or an award of damages to private litigants.
We intend to continue providing an annual ESG report that includes disclosures aligned with Global Reporting Initiative Standards 2016, the United Nations Sustainable Development Goals, the Sustainability 6 Accounting Standards Board and the Task Force on Climate-Related Financial Disclosures. This report can be found online at https://www.elmecommunities.com/esg/.
We intend to continue providing an annual ESG report that includes disclosures aligned with Global Reporting Initiative Standards 2016, the United Nations Sustainable Development Goals, the Sustainability Accounting Standards Board and the Task Force on Climate-Related Financial Disclosures. This report can be found online at https://www.elmecommunities.com/esg/.
We acquire, develop, and renovate apartment communities that align with our research-led investment strategy, which is focused on the following: • targeting markets that have economies with diverse, innovative industries that drive outsized job creation, wage growth and in-migration, which we believe will benefit from these trends in the years to come; • targeting middle-income renters who make up the largest share of apartment demand in each of our current and target markets but for whom new apartment supply and the cost of owning a home is unaffordable; • executing value-add renovations that are tailored to each submarket, target renter group and individual community to provide an improved yet affordable living experience while enhancing shareholder value; and • targeting investment opportunities that have operating upside through community management strategies.
We acquire, develop, and renovate apartment communities that align with our research-led investment strategy, which is focused on the following: • targeting markets that have economies with diverse, innovative industries that drive outsized job creation, wage growth and in-migration, which we believe will benefit from these trends in the years to come; • targeting middle-income renters who make up the largest share of apartment demand in each of our current and target markets but for whom new apartment supply and the cost of owning a home is unaffordable; • executing value-add renovations that are tailored to each submarket, target renter group and individual community to provide an improved yet affordable living experience while enhancing shareholder value; and • targeting investment opportunities that provide the potential for significant appreciation in value and that have operating upside through community management strategies.
Major improvements and/or renovations to the properties during the three years ended December 31, 2022 are discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the heading “Capital Improvements and Development Costs.” Further description of the properties is contained in Item 2, Properties, and note 14 to the consolidated financial statements, Segment Information, and in Schedule III.
Major improvements and/or renovations to the properties during the three years ended December 31, 2023 are discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the heading “Capital Improvements and Development Costs.” Further description of the properties is contained in Item 2, Properties, and note 14 to the consolidated financial statements, Segment Information, and in Schedule III.
In addition, under various federal, state and local laws and regulations relating to the environment, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under, or migrating from such property, including costs to investigate and clean up such contamination and liability for natural resources damage.
In addition, under various federal, state and local laws and regulations relating to the environment, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under, or migrating from such property, including costs to investigate and remediate such contamination and liability for natural resources damage.
ITEM 1: BUSINESS Elme Communities Overview Elme Communities, a Maryland real estate investment trust (the "Company"), is a self-administered equity real estate investment trust ("REIT") and successor to a trust organized in 1960. Our business primarily consists of the ownership of apartment communities in the greater Washington, DC metro and Sunbelt regions.
ITEM 1: BUSINESS Elme Communities Overview Elme Communities, a Maryland real estate investment trust, formerly known as Washington Real Estate Investment Trust (the "Company"), is a self-administered equity real estate investment trust ("REIT") and successor to a trust organized in 1960. Our business primarily consists of the ownership of apartment communities in the greater Washington, DC metro and Sunbelt regions.
Our Board of Trustees (the “Board”) is responsible for corporate policy and management oversight to enhance long-term shareholder value. In 2020, our Board formalized the oversight, implementation, and improvement of ESG initiatives, recognizing that environmental and social matters—together with strong corporate governance—play a critical role in the execution of our ESG strategy.
Our Board is responsible for corporate policy and management oversight to enhance long-term shareholder value. In 2020, our Board formalized the oversight of ESG initiatives, recognizing that environmental and social matters—together with strong corporate governance—play a critical role in the execution of our ESG strategy.
Additionally, our mid-market price points have not directly competed with new supply, as our average monthly rent is generally several hundred dollars below the asking rent for new deliveries. Moreover, the national cost of owning a home compared to renting a single-family starter home is the highest it’s been in over 20 years.
Additionally, our mid-market price points generally do not compete with new supply, as our average monthly rent is generally several hundred dollars below the asking rent for new deliveries. Moreover, the national cost of owning a home compared to renting a single-family starter home is the highest it’s been in over 20 years.
Our portfolio's allocation in the Atlanta and Washington markets, and our focus on value-oriented price points, help enable our future growth, while also providing relative insulation during economic downturns. Over the past five and 10-year periods, Class B rent growth has outperformed Class A in both of our operating markets.
We believe our portfolio's allocation in the Atlanta and Washington, DC metro regions, and our focus on value-oriented price points, will help enable our future growth, while also providing relative insulation during economic downturns. Over the past five and 10-year periods, Class B rent growth has outperformed Class A in both of our operating markets.
During the three years ended December 31, 2022, we acquired five residential properties and placed one residential development project into service. During that same period, we sold fifteen office properties and eight retail properties. See note 14 to the consolidated financial statements for further discussion of our operating results by segment.
During the three years ended December 31, 2023, we acquired six residential properties and placed one residential development project into service. During that same period, we sold twelve office properties and eight retail properties. See note 14 to the consolidated financial statements for further discussion of our operating results by segment.
Community Engagement As a real estate investment trust, investing is at the core of what we do, but the most valuable investments we make are not in our buildings but in our people and our community. We are passionate about making a difference in the regions we call home.
Community Engagement As a REIT, investing is at the core of what we do, but the most valuable investments we make are not in our buildings but in our people and our community. We are passionate about making a difference in the regions we call home.
These communities are over twenty years old and can become Class B Value-Add depending on future market rents and renovation opportunities. 4 Regional Real Estate Markets (1) While we have historically focused our investments in the greater Washington, DC metro region, we began expanding into the Sunbelt region in 2021.
These communities are over twenty years old and can become Class B Value-Add depending on future market rents and renovation opportunities. 4 Regional Real Estate Markets (1) While we have historically focused our investments in the greater Washington, DC metro region, we expanded our footprint to the Atlanta metro region in 2021.
The percentage of total real estate rental revenue from continuing operations by property type for the three years ended December 31, 2022, and the average occupancy for the year ended December 31, 2022, were as follows: Average Occupancy, year ended December 31, 2022 % of Total Real Estate Rental Revenue 2022 2021 2020 95% Residential 91 % 89 % 82 % 92% Other 9 % 11 % 18 % 100 % 100 % 100 % Total real estate rental revenue from continuing operations for each of the three years ended December 31, 2022, was $209.4 million, $169.2 million and $176.0 million, respectively.
The percentage of total real estate rental revenue from continuing operations by property type for the three years ended December 31, 2023, and the average occupancy for the year ended December 31, 2023, were as follows: Average Occupancy, year ended December 31, 2023 % of Total Real Estate Rental Revenue 2023 2022 2021 95% Residential 92 % 91 % 89 % 90% Other 8 % 9 % 11 % 100 % 100 % 100 % Total real estate rental revenue from continuing operations for each of the three years ended December 31, 2023, was $227.9 million, $209.4 million and $169.2 million, respectively.
We trust, encourage, and support one another, driving our pursuit of excellence. 7 Human Capital Employees, Training and Development On February 14, 2023, we had 102 employees, including 43 persons engaged in community management functions who were hired in connection with the internalization of our community management functions, and 59 persons engaged in corporate, financial, asset management and other functions.
We trust, encourage, and support one another, driving our pursuit of excellence. 7 Human Capital Employees, Training and Development On February 13, 2024, we had 243 employees, including 175 persons engaged in community management functions who were hired in connection with the internalization of our community management functions, and 68 persons engaged in corporate, financial, asset management and other functions.
The DEIA Council tracks and monitors our diversity metrics and facilitates learning and training opportunities, including a diversity speaker series, targeted recruitment and relationship development with diverse industry groups for internships and employment opportunities and partnering with community-based non-profits for volunteer activities.
Our diverse Cultural Advisory Board ("CAB") is overseen by our senior leadership team and our Board. The CAB tracks and monitors our diversity metrics and facilitates learning and training opportunities, including a diversity speaker series, targeted recruitment and relationship development with diverse industry groups for internships and employment opportunities and partnering with community-based non-profits for volunteer activities.
Additionally, our equity and cash incentive plans are designed to attract, retain and reward our workforce through the granting of share-based and cash-based compensation awards, with the goal of motivating employees to perform to the best of their abilities and achieve our objectives, including increasing shareholder value.
Additionally, our compensation programs are designed to attract, retain and reward our workforce, with the goal of motivating employees to perform to the best of their abilities and achieve our objectives, including increasing shareholder value.
If we fail to comply with such laws, including if we fail to obtain any required permits or licenses, we could face substantial fines or possible revocation of our authority to conduct some of our operations.
The cost to comply with such laws and regulations may be significant, and such laws may become more stringent over time. If we fail to comply with such laws, including if we fail to obtain any required permits or licenses, we could face substantial fines or possible revocation of our authority to conduct some of our operations.
Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such contamination, and the liability may be joint and several. These liabilities could be substantial and the cost of any required remediation, removal, fines, or other costs could exceed the value of the property and/or our aggregate assets.
Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such contamination, and the liability may be joint and several.
These interest-free loans provide up to three months of rent relief, enabling residents to remain housed during difficult times. Residents can then work with our technology partner to set up a 12-month repayment plan for the loan. These programs support the short- and long-term financial well-being of our residents. We are committed to robust corporate governance and high ethical standards.
In addition to credit reporting, our technology partner's platform offers housing stability loans for residents experiencing financial hardship. These interest-free loans provide up to three months of rent relief, enabling residents to remain housed during difficult times. Residents can then work with our technology partner to set up a 12-month repayment plan for the loan.
Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures. 9 Availability of Reports Copies of this Annual Report on Form 10-K, as well as our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports are available, free of charge, on our website www.elmecommunities.com.
Availability of Reports Copies of this Annual Report on Form 10-K, as well as our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports are available, free of charge, on our website www.elmecommunities.com.
Some of the programs we offer throughout the year include biometric screenings, personal finance check-ups, and healthy lunch challenges. In our corporate office, we offer two wellness rooms for employees to take a break to decompress. Our technological capabilities allow our corporate-level employees the flexibility to work from anywhere at any time.
In our corporate office, we offer two wellness rooms for employees to take a break to decompress. Our technological capabilities allow our corporate-level employees the flexibility to work from anywhere at any time. This allows us to easily meet our residents’ needs as well as those of our employees.
In addition, environmental laws may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination.
In addition, environmental laws may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property may be used or 9 businesses may be operated, and these restrictions may require substantial expenditures.
As housing remains undersupplied and the cost of homeownership remains unaffordable for many median-income households, we expect to benefit from sustained demand for quality, affordable rental options. Washington, DC metro region (22 apartment communities) The apartment market in the Washington, DC metro region performed well in 2022, with moderation in fundamentals during the second half of the year.
As housing remains undersupplied, interest rates remain high and the cost of homeownership remains unaffordable for many median-income households, we expect to benefit from sustained demand for quality, affordable rental options.
No single tenant accounted for more than 5% of real estate rental revenue from continuing operations in any of the three years ended December 31, 2022. We enter into arrangements from time to time by which various service providers conduct day-to-day community management and/or leasing activities at our properties.
No single tenant accounted for more than 5% of real estate rental revenue from continuing operations in any of the three years ended December 31, 2023. In October 2022, we began a process to internalize our management operations, and this process was completed in July 2023.
We create an environment designed to encourage people to do what they do best, all while learning, growing, and contributing in meaningful ways to build a better company.
Our flat organizational structure facilitates frequent, meaningful interactions with Company executives, and our commitment to teamwork and entrepreneurial spirit enables employees at every level to conceptualize ideas and make them happen. We create an environment designed to encourage people to do what they do best, all while learning, growing, and contributing in meaningful ways to build a better company.
Social Among our social initiatives is a commitment to financial inclusion, which aims to increase the availability and equality of financial service opportunities, remove barriers to the financial sector, and enable individuals to improve their financial wellbeing. Beyond credit history, life-altering events can interrupt a resident’s ability to pay rent, including job loss, medical emergencies, domestic violence, and other hardships.
Social Among our social initiatives is a commitment to financial inclusion, pursuant to which we aim to increase the availability and equality of financial service opportunities, remove barriers to the financial sector, and enable individuals to improve their financial wellbeing.
This allows us to easily meet our residents’ needs as well as those of our employees. Diversity, Equity, Inclusion and Accessibility Our Diversity, Equity, Inclusion, and Accessibility Initiative ("DEIA") is a long-term commitment to promoting an environment where each individual feels comfortable being their most authentic selves.
Diversity, Equity, Inclusion and Accessibility Our Diversity, Equity, Inclusion, and Accessibility Initiative ("DEIA") is a long-term commitment to promoting an environment where each individual feels comfortable being their most authentic selves. We believe diversity of backgrounds, experiences, cultures, ethnicities, and interests leads to new ways of thinking and drives engagement and organizational success.
On October 20, 2022, the Company’s ticker symbol on the New York Stock Exchange changed from “WRE” to “ELME.” Business and Investment Strategy Our mission is to elevate the value living experience and create a place our residents are proud to call home by continuously focusing on service, efficiency, and innovation.
As of December 31, 2023, we owned 28 apartment communities and one office property. Business and Investment Strategy Our mission is to elevate the value living experience and create a place our residents are proud to call home by continuously focusing on service, efficiency, and innovation.
Over the past several years we have demonstrated continual progress in achieving reductions. We apply industry standard rating systems such as the Leadership in Energy and Environmental Design (“LEED”) and Building Research Establishment Environmental Assessment Method (“BREEAM”) to establish sustainable practices for building design, construction, operations, and maintenance.
We track annual asset-level performance of energy use, greenhouse gas emissions, and water consumption, utilizing ENERGY STAR Portfolio Manager as well as Measurabl ESG software. We apply industry standard rating systems such as the Leadership in Energy and Environmental Design (“LEED”) and Building Research Establishment Environmental Assessment Method (“BREEAM”) to establish sustainable practices for building design, construction, operations, and maintenance.
This no-cost amenity is available to 100% of our community residents. This initiative follows a “do no harm” mindset. Therefore, only on-time payments—not delinquencies—will be reported. In addition to credit reporting, our technology partner's platform offers housing stability loans for residents experiencing financial hardship.
Through this partnership, on-time rent payments are reported monthly to all three credit bureaus, providing an opportunity for residents to build their credit. This no-cost amenity is available to 100% of our community residents. This initiative follows a “do no harm” mindset. Therefore, only on-time payments—not delinquencies—are reported.
This can lead to delinquencies, increased interest rate debt, potential eviction, and situational unhousing. In 2022, we announced a partnership with a financial technology company to dismantle barriers to housing for working families. Through this partnership, on-time rent payments will be reported monthly to all three credit bureaus, providing an opportunity for residents to build their credit.
Beyond credit history, life-altering events can interrupt a resident’s ability to pay rent, including job loss, medical emergencies, domestic violence, and other hardships. This can lead to delinquencies, increased interest rate debt, potential eviction, and situational unhousing. In 2022, we announced a partnership with a financial technology company to dismantle barriers to housing for working families.
As of December 31, 2022, Bozzuto Management Company ("Bozzuto") and Greystar Real Estate Partners ("Greystar") provide community management and leasing services at the majority of our residential communities and Stream Realty Partners ("Stream") provides property management and leasing services at our sole office property, Watergate 600.
Although they varied by community, on average, the fees charged by Bozzuto/Greystar under each agreement were approximately 3% of revenues at each residential community. As of December 31, 2023, we have transitioned all of our residential communities to Elme management. Stream Realty Partners ("Stream") provides property management and leasing services at our sole office property, Watergate 600.
In the fourth quarter of 2022, asking rent growth remained strong at 8.6% year-over-year. ______________________________ (1) The source of all numerical data in this section is RealPage Market Analytics Our Portfolio As of December 31, 2022, we owned approximately 8,900 residential apartment homes in the Washington, DC metro and Sunbelt regions.
In the short term, rent change and occupancy are expected to remain muted and are expected to move closer to national norms in 2025, once the current supply wave moderates. ______________________________ (1) The source of all regional market numerical data in this section is RealPage Market Analytics 5 Our Portfolio As of December 31, 2023, we owned approximately 9,400 residential apartment homes in the Washington, DC metro and Sunbelt regions.
Meeting this goal will require that we fully integrate a focus on carbon reductions into our strategic approach and at all levels of our organization throughout our portfolio transformation. As a first step toward this goal, we are reevaluating the appropriate interim energy and greenhouse gas emissions targets in support of this long-term objective.
Meeting this goal requires that we fully integrate a focus on carbon reductions into our strategic approach and at all levels of our organization throughout our portfolio. 6 We implement sustainable policies and practices at all of our properties, for purposes of ensuring occupants and residents work and live in efficient, healthy spaces.
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In October 2022, the Company changed its name from Washington Real Estate Investment Trust to Elme Communities to reflect the Company’s transition into a focused multifamily company, and subsequent geographic expansion into Sunbelt markets.
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Atlanta offers a range of diverse, innovative industries which we believe are poised to benefit from substantial job creation, rising wages, and continued migration in the coming years. As of December 31, 2023, we have acquired six apartment communities in the Atlanta metro region and we remain optimistic about the near and longer-term demand drivers in the Atlanta metro region.
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Currently, approximately 20% of our residential homes are located in the Sunbelt region. We target markets that have economies with diverse, innovative industries that drive outsized job creation, wage growth and in-migration. Our current targeted expansion markets include Atlanta, Georgia, Dallas-Fort Worth, Texas, Raleigh/Durham, North Carolina, and Charlotte, North Carolina.
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Looking forward, we plan to continue to expand our footprint outside of the Washington, DC metro region. We intend to target markets with skilled labor development and in-migration, diverse economies with innovative industries, strong productivity and wage growth for middle income residents, and demand for affordable mid-market housing.
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As of December 31, 2022, we have acquired five apartment communities in the Atlanta metro region and expect to continue to invest in the Sunbelt region in the coming years. Our multifamily transformation and subsequent geographic expansion were designed to provide greater opportunities for growth as opposed to the headwinds facing the commercial office and retail sectors.
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Washington, DC metro region (22 apartment communities) In the fourth quarter of 2023, the Washington, DC metro region absorbed 1,600 units (the third highest 4th quarter performance on record for the Washington, DC metro region), as 4,000 units delivered concurrently. The rebound in demand in 2023 brought annual demand to 10,800 units, a top five performance nationwide.
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As expected, our portfolio experienced very strong rental rate growth during 2022. Our in-place rent growth accelerated during the second half of the year. Looking forward, we believe we are positioned with historically high embedded growth, which we expect will drive outsized revenue and net operating income growth in 2023.
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Despite healthy absorption, supply and demand remained imbalanced. As a result, occupancy ticked down 40 basis points over the year to 94.7%. Effective asking rents declined 0.4% in the fourth quarter of 2023 compared to the third quarter of 2023, averaging $2,110 per month, or $2.39 per square foot, pushing annual rent growth down to 2.5%.
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In the fourth quarter of 2022, annual demand was flat, and the softening in demand the past three quarters caused overall market occupancy to decline by 190 basis points year-over-year to 95.1%.
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Annual rent change, as of the fourth quarter of 2023, was highest among Class B multifamily properties at 3.7% with Class A multifamily properties trailing behind at 2.4%. Generally, rents grew most in low supply submarkets, whereas rent cuts were most common in higher supply areas. Occupancy remained strongest in Class B multifamily properties at 95.2%.
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Atlanta metro region (5 apartment communities) The apartment market in the Atlanta metro region performed well in 2021 and 2022 due to the economic recovery, higher household formation and higher in-migration. In the second half of 2022, the Atlanta apartment market experienced a cooling in demand relative to 2021, mirroring most national markets.
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The Washington, DC metro economy is considered to be recession-resistant due to a high concentration of government and government-affiliated jobs. Annual job growth for the Washington, DC metro region, as reported by the U.S. Bureau of Labor Statistics was 1.4% or, 48,400 jobs as of November 2023, year-over-year.
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As a result, overall market occupancy in the fourth quarter of 2022 decreased by 320 basis points year-over-year to 93.8%.
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The RealPage Market Analytics apartment market outlook points to a heavy construction pipeline with 29,400 units currently under construction, of which 18,200 are planned for delivery over the next year. Given the projected pipeline, rent and occupancy performance are expected to vary across submarkets, with market-level readings that roughly match the national average in the coming two to three-year window.
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Raleigh/Durham and Charlotte metro regions (targeted markets) The apartment markets in the Raleigh/Durham and Charlotte metro regions were also strong in 2022, though apartment demand in both markets began to pull back in the second quarter of 2022, with continued tapering for the remainder of the year.
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Atlanta metro region (6 apartment communities) In the fourth quarter of 2023, the Atlanta metro region absorbed 2,900 units (the fourth highest 4th quarter performance on record for the Atlanta metro region), as 5,400 units delivered concurrently. Quarterly occupancy in the market contracted 40 basis points year-over-year to about 92.3%.
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Overall market occupancy remained strong in the Raleigh/Durham and Charlotte markets, decreasing by 280 basis points to 94.4% and by 290 basis points to 94.2%, respectively, at the end of the fourth quarter of 2022, compared to the prior year.
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Annual demand rose to 9,700 units, a significant improvement from the annual net move-outs of 7,000 units recorded in the first quarter of 2023. The Atlanta metro region recorded an annual rent cut of 4.7%, with effective asking rents averaging $1,628 per month, or $1.60 per square foot.
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In the fourth quarter of 2022, asking rent growth was 7.1% and 8.1% in the Raleigh/Durham and Charlotte markets, respectively. 5 Dallas-Fort Worth metro region (targeted market) While annual demand cooled in the fourth quarter of 2022, the apartment market in the Dallas-Fort Worth metro region continued to lead the nation for new supply in absolute numbers.
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Class C multifamily properties saw the steepest rent decline of 6.6% on average, followed by Class B multifamily properties with rent cuts of 4.3% on average, and Class A multifamily properties with rent cuts of 3.6% on average. All but one of Atlanta’s 39 submarkets posted rent cuts on an annual basis.
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As a percentage of existing inventory, the region’s inventory growth is in line with other Sunbelt markets and is lower than many mid-sized markets. Overall market occupancy was approximately 94.1%, down 300 basis points from a year ago.
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Annual job growth for the Atlanta metro region as reported by the U.S. Bureau of Labor Statistics was 2.5%, or 76,500 jobs added as of November 2023, year-over-year. The RealPage Market Analytics apartment market outlook has 34,300 units currently under construction, of which 23,100 are planned for delivery over the next year.
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We are currently implementing a plan to perform day-to-day community management and leasing activities at our residential communities internally rather than outsource those activities. This process began in October of 2022 and is scheduled to be completed in 2023. As of December 31, 2022, 3 of our 27 residential communities were managed internally.
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In 2023, we joined the U.S. Department of Energy (DOE) Better Climate Challenge, further aligning greenhouse gas emission reduction with industry leaders.
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We implement sustainable policies and practices at all of our properties, for purposes of ensuring occupants and residents work and live in efficient, healthy spaces. We track annual asset-level performance of energy use, greenhouse gas emissions, and water consumption, utilizing ENERGY STAR Portfolio Manager as well as Measurabl ESG software.
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These programs support the short- and long-term financial well-being of our residents. In addition to financial wellness, we support our residents physical and mental health and wellness through on-site amenities such as gymnasiums, pools, playgrounds, and community rooms, as well as close access to bike lanes, walking/running paths, parks, and other outdoor amenities.
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We are made up of growth-oriented, hardworking individuals dedicated to transforming creative ideas into decisive action. Our flat organizational structure facilitates frequent, meaningful interactions with Company executives, and our commitment to teamwork and entrepreneurial spirit enables employees at every level to conceptualize ideas and make them happen.
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In 2023, we certified our first five communities to Fitwel Health and Wellness. The certification is awarded to buildings that promote occupant health and well-being by incorporating a number of evidence-based design and operations strategies that support the physical, mental, and social health of occupants.
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We expect the number of employees engaged in community management functions to increase throughout 2023 as we continue the internalization of community management services at our apartment communities.
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Governance At Elme, we hold ourselves, our suppliers, and the Board of Trustees (the "Board") to high ethical standards as we seek to increase shareholder value and foster a collaborative, innovative corporate culture. Our team is required to read and certify their knowledge on our Code of Ethics, in addition to receiving ethics training throughout the year.
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We believe diversity of backgrounds, experiences, cultures, ethnicities, and interests leads to new ways of thinking and drives engagement and organizational success. Our diverse DEIA Council is overseen by our senior leadership team and board of trustees.
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Some of our ESG policies, including our Human Rights Policy, Vendor Code of Conduct, and Environmental Sustainability Policy, can be found on our website at elmecommunities.com/esg/governance/. We are made up of growth-oriented, hardworking individuals dedicated to transforming creative ideas into decisive action.
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Of the 175 persons engaged in community management functions, 44 are employed in the Atlanta metro region at six different communities, with the remainder in the Washington, DC metro region.
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These liabilities for remediation could be substantial and the cost of any required remediation, fines, or other costs could exceed the value of the property and/or our aggregate assets.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, our acquisition activities and results may be exposed to the following risks: • we may have difficulty finding properties that are consistent with our strategies and meet our standards; • we may be unable to finance acquisitions on favorable terms or at all; • the occupancy levels, lease-up timing and rental rates of acquired properties may not meet our expectations; • even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition after making a non-refundable deposit and incurring certain other acquisition-related costs; • we may be unable to acquire a desired property at all or at the desired purchase price because of competition from other real estate investors, including publicly traded real estate investment trusts, institutional investment funds and private investors; • the timing of property acquisitions may lag the timing of property dispositions, leading to periods of time where projects’ proceeds are not invested as profitably as we desire; • we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations; • we may assume liabilities for undisclosed environmental contamination; • our estimates of capital expenditures required for an acquired property, including the costs of repositioning or redeveloping, may be inaccurate and the acquired properties may fail to perform as we expected in analyzing our investments; and • we could experience a decline in value of the acquired assets after acquisition. 14 We may also acquire properties subject to liabilities and without recourse, or with limited recourse with respect to unknown liabilities.
Biggest changeIn addition, our acquisition activities and results may be exposed to the following risks: • we may have difficulty finding properties that are consistent with our strategies and meet our standards; • we may be unable to finance acquisitions on favorable terms or at all; • the occupancy levels, lease-up timing and rental rates of acquired properties may not meet our expectations; 14 • even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition after making a non-refundable deposit and incurring certain other acquisition-related costs; • we may be unable to acquire a desired property at all or at the desired purchase price because of competition from other real estate investors, including publicly traded real estate investment trusts, institutional investment funds and private investors; • the timing of property acquisitions may lag the timing of property dispositions, leading to periods of time where projects’ proceeds are not invested as profitably as we desire; • we may fail to secure required zoning, occupancy or other governmental permits and authorizations or applicable zoning and land use laws may change; • we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations; • new acquisitions and developments may fail to perform as expected or we may underestimate costs necessary to bring an acquired property up to our standards; • we may assume liabilities for undisclosed environmental contamination; • our estimates of capital expenditures required for an acquired property, including the costs of repositioning or redeveloping, may be inaccurate and the acquired properties may fail to perform as we expected in analyzing our investments; and • we could experience a decline in value of the acquired assets after acquisition.
We face cybersecurity risks which have the potential to disrupt our operations, cause material harm to our financial condition, result in misappropriation of assets, compromise confidential information and/or damage our business relationships and can provide no assurance that the steps we and our service providers take in response to these risks will be effective.
We face cybersecurity risks which have the potential to disrupt our operations, cause material harm to our financial condition, result in misappropriation of assets, compromise confidential information and/or damage our business relationships and we can provide no assurance that the steps we and our service providers take in response to these risks will be effective.
These provisions include: 19 • a provision where a corporation is not permitted to engage in any business combination with any “interested stockholder,” defined as any holder or affiliate of any holder of 10% or more of the corporation’s stock, for a period of five years after that holder becomes an “interested stockholder,” and • a provision where the voting rights of “control shares” acquired in a “control share acquisition,” as defined in the MGCL, may be restricted, such that the “control shares” have no voting rights, except to the extent approved by a vote of holders of two-thirds of the common shares entitled to vote on the matter.
These provisions include: • a provision where a corporation is not permitted to engage in any business combination with any “interested stockholder,” defined as any holder or affiliate of any holder of 10% or more of the corporation’s stock, for a period of five years after that holder becomes an “interested stockholder,” and • a provision where the voting rights of “control shares” acquired in a “control share acquisition,” as defined in the MGCL, may be restricted, such that the “control shares” have no voting rights, except to the extent approved by a vote of holders of two-thirds of the common shares entitled to vote on the matter.
In addition, we will be subject to U.S. federal income tax at the regular corporate rate (currently 21%) to the extent that we distribute less than 100% of our net taxable income (including net capital gains) and will be subject to a 4% nondeductible excise tax on the 22 amount by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws.
In addition, we will be subject to U.S. federal income tax at the regular corporate rate (currently 21%) to the extent that we distribute less than 100% of our net taxable income (including net capital gains) and will be subject to a 4% nondeductible excise tax on the amount by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws.
Although the reduced rates applicable to dividend income from non-REIT C corporations do not adversely affect the taxation of REITs or dividends payable by REITs, these reduced rates could cause investors who are non-corporate taxpayers to perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT C corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common shares.
Although the reduced rates applicable to dividend income from non-REIT C corporations do not adversely affect the taxation of REITs or dividends payable by REITs, these reduced rates could cause investors who are non-corporate taxpayers to perceive 22 investments in REITs to be relatively less attractive than investments in the shares of non-REIT C corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common shares.
Any such failures could impair our ability to continue providing quality housing and consistent operation of our communities, which could adversely affect our business, financial condition and results of operations. 13 We face risks associated with property development/redevelopment, which could have an adverse effect on our financial condition, results of operations or ability to satisfy our debt service obligations.
Any such failures could impair our ability to continue providing quality housing and consistent operation of our communities, which could adversely affect our business, financial condition and results of operations. We face risks associated with property development/redevelopment, which could have an adverse effect on our financial condition, results of operations or ability to satisfy our debt service obligations.
Moreover, while we will attempt to ensure that our dealings with our taxable REIT subsidiary (and any taxable REIT subsidiary formed in the future) do not adversely affect our REIT qualification, we cannot provide assurances that we will successfully achieve that result. Partnership tax audit rules could have a material adverse effect on us.
Moreover, while we will attempt to ensure that our dealings with our taxable REIT subsidiary (and any taxable REIT subsidiary formed in the future) do not adversely affect our REIT qualification, we cannot provide assurances that we will successfully achieve that result. 23 Partnership tax audit rules could have a material adverse effect on us.
If some or all of these factors were to trend downward for a sustained period of time, our board of trustees could determine to reduce our dividend rate. If we do not maintain or increase the dividend rate on our common shares in the future, it could have an adverse effect on the market price of our common shares.
If some or all of these factors were to trend downward for a sustained period of time, our Board could determine to reduce our dividend rate. If we do not maintain or increase the dividend rate on our common shares in the future, it could have an adverse effect on the market price of our common shares.
Corporate social responsibility, specifically related to Environmental, Social and Governance, may constrain our business operations, impose additional costs and expose us to new risks that could adversely impact our results of operations and financial condition and the price of our securities. Environmental, social and governance matters have become increasingly important to investors and other stakeholders.
Corporate social responsibility, specifically related to ESG matters, may constrain our business operations, impose additional costs and expose us to new risks that could adversely impact our results of operations and financial condition and the price of our securities. Environmental, social and governance matters have become increasingly important to investors and other stakeholders.
Our business and reputation depend on providing our residents with quality housing including a wide variety of amenities such as covered parking, swimming pools, fitness facilities and similar features, highly reliable services, including water and electric power and the consistent operation of our communities.
Our business and reputation depend on providing our residents with quality housing including a wide variety of amenities such 13 as covered parking, swimming pools, fitness facilities and similar features, highly reliable services, including water and electric power and the consistent operation of our communities.
However, the share ownership limits on our shares and our enforcement of them might delay, defer, prevent, or otherwise inhibit a transaction or a change in control of Elme Communities, including a transaction that might involve a premium price for our common shares or that might otherwise be in the best interest of our shareholders.
However, the share ownership limits on our shares and our enforcement of them might delay, defer, prevent, or otherwise inhibit a transaction or a 20 change in control of Elme Communities, including a transaction that might involve a premium price for our common shares or that might otherwise be in the best interest of our shareholders.
Our board of trustees considers, among other factors, trends in our levels of funds from operations, together with associated recurring capital improvements, tenant improvements, leasing commissions and incentives, and adjustments to straight-line rents to reflect cash rents received to achieve a targeted payout ratio.
Our Board considers, among other factors, trends in our levels of funds from operations, together with associated recurring capital improvements, tenant improvements, leasing commissions and incentives, and adjustments to straight-line rents to reflect cash rents received to achieve a targeted payout ratio.
We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, real estate limited partnerships, and other entities engaged in real estate investment activities. Many of these entities have significant 11 financial and other resources, including operating experience, allowing them to compete effectively with us.
We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, real estate limited partnerships, and other entities engaged in real estate investment activities. Many of these entities have significant financial and other resources, including operating experience, allowing them to compete effectively with us.
It is our policy to retain independent environmental consultants to conduct Phase I environmental site assessments and asbestos surveys prior to our acquisition of properties. However, there is a risk that these assessments will not identify all potential environmental issues at a given property.
It is our policy to retain independent environmental consultants to conduct Phase I environmental site assessments and asbestos surveys prior to our acquisition of properties. However, there is a risk that these 16 assessments will not identify all potential environmental issues at a given property.
Accordingly, in the event that actions taken in good faith by any of our trustees or officers impede the performance of Elme Communities, your ability to recover 20 damages from such trustees or officers will be limited with respect to trustees and may be limited with respect to officers.
Accordingly, in the event that actions taken in good faith by any of our trustees or officers impede the performance of Elme Communities, your ability to recover damages from such trustees or officers will be limited with respect to trustees and may be limited with respect to officers.
These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development activities once undertaken. Some of these development/redevelopment risks may be heightened given current uncertain and potentially volatile market conditions.
These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development activities once undertaken. Some of these development/redevelopment risks may be heightened given uncertain and potentially volatile market conditions.
Additionally, Title 8, Subtitle 3 of the MGCL permits our board of trustees, without shareholder approval and regardless of what is currently provided in our declaration of trust or bylaws, to implement certain takeover defenses.
Additionally, Title 8, Subtitle 3 of the MGCL permits our Board, without shareholder approval and regardless of what is currently provided in our declaration of trust or bylaws, to implement certain takeover defenses.
This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code which include maintaining ownership of specified minimum levels of real estate-related assets, generating specified minimum levels of real estate-related income, maintaining certain diversity of ownership requirements with respect to our shares and distributing at least 90% of our "REIT taxable income" (determined before the deduction for dividends paid and excluding net capital gains) on an annual basis.
This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code which include maintaining ownership of specified minimum levels of real estate-related assets, generating specified minimum levels of real estate-related income, maintaining certain diversity of ownership requirements with respect to our shares and distributing at least 90% of our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) on an annual basis.
In addition to 9.8% (or any lower future percentage) share ownership limits, our charter also prohibits any person from (a) beneficially or constructively owning, as determined by applying certain attribution rules of the Code, our equity shares that would result in us being “closely held” under Section 856(h) of the Code (regardless of whether the interest is held during the last half of a taxable year) or that would otherwise cause us to fail to qualify as a REIT, or (b) transferring equity shares if such transfer would result in our equity shares being owned by fewer than 100 persons.
In addition to 9.8% (or any lower future percentage) share ownership limits, our declaration of trust also prohibits any person from (a) beneficially or constructively owning, as determined by applying certain attribution rules of the Code, our equity shares that would result in us being “closely held” under Section 856(h) of the Code (regardless of whether the interest is held during the last half of a taxable year) or that would otherwise cause us to fail to qualify as a REIT, or (b) transferring equity shares if such transfer would result in our equity shares being owned by fewer than 100 persons.
These factors may cause resale value of the property to be diminished because the market value of a particular property will depend principally upon the net revenues generated by the property. Further, costs associated with real estate investment generally are not reduced when circumstances, such as the ongoing pandemic, cause a reduction in income from the investment.
These factors may cause the resale value of properties to be diminished because the market value of a particular property will depend principally upon the net revenues generated by the property. Further, costs associated with real estate investment generally are not reduced when circumstances, such as a pandemic, cause a reduction in income from the investment.
As of December 31, 2022, four of our residential properties, each located within the Washington, DC metro region, were subject to such regulations. Our business and reputation depend on our ability to continue to provide high quality housing and consistent operation of our communities, the failure of which could adversely affect our business, financial condition and results of operations.
As of December 31, 2023, four of our residential properties, each located within the Washington, DC metro region, were subject to such regulations. Our business and reputation depend on our ability to continue to provide high quality housing and consistent operation of our communities, the failure of which could adversely affect our business, financial condition and results of operations.
Moreover, there can be no assurance that our hedging arrangements will qualify as highly effective cash flow hedges under Financial Accounting Standards Board (“FASB”), Accounting Standards Codification ("ASC") Topic 815, Derivatives and Hedging , or that our hedging activities will have the desired beneficial impact on our results of operations.
Moreover, there can be no assurance that our hedging arrangements will qualify as highly effective cash flow hedges under Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging , or that our hedging activities will have the desired beneficial impact on our results of operations.
In addition, we may be liable for the costs of investigating or remediating contamination at off-site waste disposal facilities to which we have arranged for the disposal, or treatment of hazardous substances without regard to whether we complied with environmental laws in doing so.
In addition, we may be liable for the costs of investigating or remediating contamination at off-site waste disposal facilities to which we have arranged for the disposal, or treatment of hazardous substances without regard to whether we complied with environmental laws i n doing so.
Should we desire to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our obligation under the hedging agreement. Loans under our credit facility may bear interest based on SOFR, but experience with SOFR based loans is limited.
Should we desire to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our obligation under the hedging agreement. Loans under our credit facility and term loan agreement may bear interest based on SOFR, but experience with SOFR based loans is limited.
In order to qualify as a REIT, we generally must distribute to our shareholders, on an annual basis, at least 90% of our "REIT taxable income," determined without regard to the deduction for dividends paid and excluding net capital gains.
In order to qualify as a REIT, we generally must distribute to our shareholders, on an annual basis, at least 90% of our “REIT taxable income,” determined without regard to the deduction for dividends paid and excluding net capital gains.
Moreover, if we have net income from "prohibited transactions," that income will be subject to a 100% tax. The need to avoid prohibited transactions could cause us to forego or defer sales of properties that might otherwise be in our best interest to sell.
Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. The need to avoid prohibited transactions could cause us to forego or defer sales of properties that might otherwise be in our best interest to sell.
A downturn or slowdown in the demand for multifamily housing may have more pronounced effects on our results of operations or on the value of our assets than when we had investments in more than one asset class. The multifamily industry is also highly competitive.
A downturn or slowdown in the demand for multifamily housing may have more pronounced effects on our results of operations or on the value of our assets than when we had investments in more than one asset class. 11 Additionally, the multifamily industry is also highly competitive.
We anticipate that only a small portion of the principal of our currently outstanding debt will be repaid prior to maturity. Therefore, we are likely to need to refinance a significant portion of our outstanding debt as it matures.
We anticipate that only a small portion of the principal of our currently outstanding debt, if any, will be repaid prior to maturity. Therefore, we are likely to need to refinance a significant portion of our outstanding debt as it matures.
Circumstances could again arise in which we may not be able to obtain debt financing in the future on favorable terms, or at all. If we were unable to borrow under our credit facility or to refinance existing debt financing, our financial condition and results of operations would likely be adversely affected.
Circumstances could again arise in which we may not be able to obtain debt financing in the future on favorable terms, or at all. If we are unable to borrow under our credit facility, obtain new debt financing or to refinance existing debt, our financial condition and results of operations would likely be adversely affected.
There can be no assurance that this provision will not be amended or eliminated at any time in the future by our board of trustees and may be amended or eliminated with retroactive effect.
There can be no assurance that this provision will not be amended or eliminated at any time in the future by our Board and may be amended or eliminated with retroactive effect.
Furthermore, we may be unable to build a significant market share or achieve a desired return on our investments in new markets. The occurrence of any of the foregoing risks could have a material adverse effect on us, the trading price of our shares and our ability to make distributions to our shareholders.
Furthermore, we may be unable to build a significant market presence or achieve a desired return on our investments in communities in new markets. The occurrence of any of the foregoing risks could have a material adverse effect on us, the trading price of our shares and our ability to make distributions to our shareholders.
Climate change (including rising sea levels, flooding, extreme weather, and changes in precipitation and temperature), may result in physical damage to, a decrease in demand for and/or a decrease in rent from and value of our properties located in the areas affected by these conditions (particularly in areas closer to coasts).
Climate change (including rising sea levels, flooding, prolonged periods of extreme temperature or other extreme weather, and changes in precipitation and temperature), may result in physical damage to, a decrease in demand for and/or a decrease in rent from and value of our properties located in the areas affected by these conditions (particularly in areas closer to coasts).
Additionally, any material increase in insurance rates or decrease in available coverage in the future could adversely affect our results of operations and financial condition. Certain federal, state and local laws and regulations may cause us to incur substantial costs or subject us to potential liabilities.
Additionally, any material increase in insurance rates or decrease in available coverage in the future could adversely affect our results of operations and financial condition. Compliance with certain federal, state and local laws and regulations could adversely affect our results of operation, and may cause us to incur substantial costs or subject us to potential liabilities.
Risks Related to Our Organizational Structure Our charter and Maryland law contain provisions that may delay, defer or prevent a change in control of Elme Communities, even if such a change in control may be in the best interest of our shareholders, and as a result may depress the market price of our common shares.
Risks Related to Our Organizational Structure Our declaration of trust and Maryland law contain provisions that may delay, defer or prevent a change in control of Elme Communities, even if such a change in control may be in the best interest of our shareholders, and as a result may depress the market price of our common shares.
The share ownership limits contained in our charter are based on the ownership at any time by any “person,” which term includes entities and certain groups. The share ownership limitations in our charter are common in REIT charters and are intended to provide added assurance of compliance with the tax law requirements.
The share ownership limits contained in our declaration of trust are based on the ownership at any time by any “person,” which term includes entities and certain groups. The share ownership limitations in our declaration of trust are common in REIT charters and are intended to provide added assurance of compliance with the tax law requirements.
To the extent that these markets become less desirable to operate in, our results of operations could be more negatively impacted than if we were more diversified within our markets.
To the extent that these markets become less desirable to operate in, our results of operations could be more negatively impacted than if we were more geographically diversified.
Provisions of the Maryland General Corporation Law ("MGCL") may limit a change in control which could prevent holders of our common shares from profiting as a result of such change in control.
Provisions of the Maryland General Corporation Law (“MGCL”) may limit a change in control which could prevent holders of our common shares from profiting as a result of such change in control.
Our ability to borrow under our credit facility is subject to compliance with our financial and other covenants. Failure to comply with any of the covenants under our unsecured credit facility or other debt instruments (including our indenture and our notes purchase agreement) could result in a default under one or more of our debt instruments.
Our ability to borrow under our credit facility is subject to compliance with our financial and other covenants. 19 Failure to comply with any of the covenants under our unsecured credit facility or other debt instruments (including our indenture, term loan agreement and our notes purchase agreement) could result in a default under one or more of our debt instruments.
Any of the following factors, among others, may adversely affect the cash flow generated by our apartment communities and ability to make distributions to our shareholders: • a decrease in demand for rental properties over home ownership resulting from, among other reasons, resident preferences, decreases in housing prices and mortgage interest rates, and government programs to promote home ownership or subsidize rental housing, slow or negative employment growth and household formation; • competition with other housing alternatives, including owner occupied single and residential apartment homes; • a return of the availability of low-interest mortgages or the availability of mortgages requiring little or no down payment for single family home buyers; • declines in the financial condition of our residents; • significant job losses in the regions in which we operate; • economic and market conditions including: migration to areas outside of major metropolitan areas where our portfolio is concentrated, new construction and excess inventory of residential and owned housing/condominiums, increasing portions of owned housing/condominium stock being converted to rental use; • our ability to integrate new technological innovations into our properties to attract residents; and • political conditions, civil disturbances, earthquakes and other natural disasters, terrorist acts or acts of war and actual or anticipated geopolitical instability.
Any of the following factors, among others, may adversely affect the cash flow generated by our apartment communities and ability to make distributions to our shareholders: • a decrease in demand for rental properties over home ownership resulting from, among other reasons, resident preferences, decreases in housing prices and mortgage interest rates, and government programs to promote home ownership or subsidize rental housing, slow or negative employment growth and household formation; • competition with other housing alternatives, including owner occupied single and residential apartment homes; • a return of the availability of low-interest mortgages or the availability of mortgages requiring little or no down payment for single family home buyers; • declines in the financial condition of our residents; • significant job losses in the regions in which we operate; • changes in interest rates and availability of financing; • economic and market conditions including: migration to areas outside of major metropolitan areas where our portfolio is concentrated, new construction and excess inventory of residential and owned housing/condominiums, increasing portions of owned housing/condominium stock being converted to rental use; • the effects of government regulation in the real estate industry; • our ability to integrate new technological innovations into our properties to attract residents; • our ability to attract and retain qualified personnel with knowledge of the market; and • political conditions, civil disturbances, earthquakes and other natural disasters, terrorist acts or acts of war and actual or anticipated geopolitical instability.
Our charter provides that no person (other than an excepted holder, as defined in our charter) may actually or constructively own more than 9.8% of the aggregate of our outstanding common shares by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the equity shares by value.
Our declaration of trust provides that no person (other than an excepted holder, as defined in our declaration of trust) may actually or constructively own more than 9.8% of the aggregate of our outstanding common shares by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the equity shares by value.
A pandemic and emergence of new variants could (as the current outbreak of COVID-19 has) negatively impact the global economy, disrupt financial markets and international trade, and result in varying unemployment levels, all of which could negatively impact the multifamily industry and our business.
A pandemic and emergence of new variants could (as the outbreak of COVID-19 did) negatively impact the global economy, disrupt financial markets and international trade, and result in varying unemployment levels, all of which could negatively impact the multifamily industry and our business.
We rely on borrowings under our credit facility, mortgage notes, and debt securities to finance acquisitions and development activities and for general corporate purposes.
We rely on borrowings under our credit facility, term loan, mortgage notes, and debt securities to finance acquisitions and development activities and for general corporate purposes.
The share ownership limits imposed by the Code for REITs and imposed by our charter may restrict our business combination opportunities that might involve a premium price for our common shares or otherwise be in the best interest of our shareholders.
The share ownership limits imposed by the Code for REITs and imposed by our declaration of trust may restrict our business combination opportunities that might involve a premium price for our common shares or otherwise be in the best interest of our shareholders.
Additionally, in the Washington, DC metro region, general economic conditions and local real estate conditions are dependent upon various industries that are predominant in the area (such as government and professional/business services). A downturn in one or more of these industries may have a particularly strong effect on the economic climate of the region.
Additionally, in the Washington, DC and Atlanta metro regions, general economic conditions and local real estate conditions are dependent upon various industries that are predominant in the area (such as, in Washington, D.C., government and professional/business services). A downturn in one or more of these industries may have a particularly strong effect on the economic climate of the region.
Although we are primarily in the residential rental business, we also own ancillary commercial space, primarily within our apartment communities, and own one office building that we lease to third parties. Gross rental revenue provided by leased commercial space in our portfolio represented 9% of our real estate rental revenue from continuing operations in 2022.
Although we are primarily in the residential rental business, we also own ancillary commercial space, primarily within our apartment communities, and own one office building that we lease to third parties. Gross rental revenue provided by leased commercial space in our portfolio represented 8% of our real estate rental revenue from continuing operations in 2023.
If market volatility causes economic conditions to remain unpredictable or to trend downwards, we may not achieve our expected returns on properties under development and we could lose some or all of our investments in those properties.
If market volatility causes economic conditions to remain unpredictable or to trend downwards, we may not achieve our expected returns on properties we develop and we could lose some or all of our investments in those properties.
In particular, if the agent under our credit facility determines that SOFR based rates cannot be determined or the agent or the lenders determine that SOFR based rates do not adequately reflect the cost of funding, outstanding SOFR based loans may be converted into base rate loans, which could result in increased borrowing costs.
In particular, if the agent under our credit facility or under our term loan agreement determines that SOFR based rates cannot be determined or the applicable agent or lenders determine that SOFR based rates do not adequately reflect the cost of funding, outstanding SOFR based loans may be converted into base rate loans, which could result in increased borrowing costs.
Our board of trustees has the authority under our charter to reduce these share ownership limits. Our board of trustees may, in its sole discretion, grant exemptions to the share ownership limits, subject to such conditions and the receipt by our board of trustees of certain representations and undertakings to ensure that our REIT qualification is not adversely affected.
Our Board has the authority under our declaration of trust to reduce these share ownership limits. Our Board may, in its sole discretion, grant exemptions to the share ownership limits, subject to such conditions and the receipt by our Board of certain representations and undertakings to ensure that our REIT qualification is not adversely affected.
In addition, we may fail to provide quality housing and continuous access to amenities, including government mandated closures due to health concerns, mechanical failure, power outage, human error, vandalism, physical or electronic security breaches, war, terrorism and similar events.
In addition, we may fail to provide quality housing and continuous access to amenities, including as a result of government mandated closures due to health concerns, mechanical failure, power outage, human error, vandalism, physical or electronic security breaches, war, terrorism and similar events.
You should refer to the explanation of the qualifications and limitations on such forward-looking statements beginning on page 38 .
You should refer to the explanation of the qualifications and limitations on such forward-looking statements beginning on page 42 .
These factors include: • level of institutional interest in us; • perceived attractiveness of investment in us, in comparison to other REITs; • perceived attractiveness of the Washington, DC metro and Sunbelt regions; • attractiveness of securities of REITs in comparison to other asset classes taking into account, among other things, that a substantial portion of REITs’ dividends may be taxed as ordinary income; • our financial condition and performance; • the market’s perception of our growth potential and potential future cash dividends; • investor confidence in the stock and bond markets generally; • national economic conditions and general stock and bond market conditions; • government uncertainty, action or regulation; • increases in market interest rates, which may lead investors to expect a higher annual yield from our distributions in relation to the price of our shares; • uncertainty around and changes in U.S. federal tax laws; • changes in our credit ratings; and • any negative change in the level of our dividend or the partial payment thereof in common shares. 21 Risks Related to Taxes and our Status as a REIT The loss of our tax status as a REIT would have significant adverse consequences to us and the value of our common shares.
These factors include: • level of institutional interest in us; • perceived attractiveness of investment in us, in comparison to other REITs; • perceived attractiveness of the Washington, DC metro and Sunbelt regions; • attractiveness of securities of REITs in comparison to other asset classes taking into account, among other things, that a substantial portion of REITs’ dividends may be taxed as ordinary income; • our financial condition and performance; • the market’s perception of our growth potential and potential future cash dividends; • investor confidence in the stock and bond markets generally; • national economic conditions and general stock and bond market conditions; • government uncertainty, action or regulation; 21 • increases in market interest rates, which may lead investors to expect a higher annual yield from our distributions in relation to the price of our shares; • uncertainty around and changes in U.S. federal tax laws; • changes in our credit ratings; and • any negative change in the level of our dividend or the partial payment thereof in common shares.
The impact of an ongoing pandemic and measures to prevent its spread could (and the current outbreak of COVID-19 has) 17 negatively impact and could continue to negatively impact our businesses in a number of ways, including shifts in consumer housing demand, our residents’ ability or willingness to pay rents and the demand for multifamily communities within the markets we operate.
The impact of an ongoing pandemic and measures to prevent its spread could (and the outbreak of COVID-19 did) negatively impact our businesses in a number of ways, including shifts in consumer housing demand, our residents’ ability or willingness to pay rents and the demand for multifamily communities within the markets we operate.
Additionally, as of December 31, 2022, substantially all of our investments are concentrated in the multifamily industry, and we are subject to risks inherent in investments in a single type of property.
As of December 31, 2023, substantially all of our investments are concentrated in the multifamily industry, and we are subject to risks inherent in investments in a single type of property.
However, our charter provides that our board of trustees may revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT.
However, our declaration of trust provides that our Board may revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT.
The maximum tax rate applicable to income from "qualified dividends" payable by non-REIT C corporations to U.S. shareholders that are individuals, trusts or estates generally is 20% (excluding the 3.8% net investment income tax).
The maximum tax rate applicable to income from “qualified dividends” payable by non-REIT C corporations to U.S. shareholders that are individuals, trusts or estates generally is 20% (excluding the 3.8% net investment income tax).
Additionally, a decline in the market value of real estate in the regions in which we operate may result in the carrying value of certain real estate assets exceeding their fair value, which may require us to recognize an impairment to those assets.
Additionally, a decline in the market value of real estate in the regions in which we operate may result in the carrying value of certain real estate assets exceeding their fair value, which has recently and in the future may require us to recognize an impairment to those assets.
We may also incur significant costs complying with other regulations. In addition, failure of our properties to comply with the Americans with Disabilities Act (“ADA”) could result in injunctive relief, fines, an award of damages to private litigants or mandated capital expenditures to remedy such noncompliance.
We may also incur significant costs complying with other regulations. In addition, failure of our properties to comply with the ADA could result in injunctive relief, fines, an award of damages to private litigants or mandated capital expenditures to remedy such noncompliance.
Any such incident may result in disruption of our operations, material harm to our financial condition, cash flows and the market price of our common shares, misappropriation of assets, compromise or corruption of confidential information collected in the course of conducting our business, liability for stolen information or assets, increased cybersecurity protection and insurance costs, regulatory enforcement, litigation and damage to our stakeholder relationships.
Any such cybersecurity incident, including those impacting personal information, may result in disruption of our operations, material harm to our financial condition, cash flows and the market price of our common shares, misappropriation of assets, compromise or corruption of confidential information collected in the course of conducting our business, liability for impacted information or assets, increased cybersecurity protection and insurance costs, regulatory scrutiny or enforcement, litigation and damage to our stakeholder relationships.
In addition, our charter authorizes and our bylaws require us to indemnify our trustees for actions taken by them in those capacities to the maximum extent permitted by Maryland law. Our bylaws also require us to indemnify our officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law.
In addition, our declaration of trust authorizes and our bylaws require us to indemnify our trustees for actions taken by them in those capacities to the maximum extent permitted by Maryland law. Our bylaws also require us to indemnify our officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law.
Our credit facility requires the applicable interest rate or payment amount by reference to SOFR ("Secured Overnight Financing Rate"). The use of SOFR based rates may result in interest rates and/or payments that are higher or lower than the rates and payments that we previously experienced under USD-LIBOR.
Our credit facility and term loan agreement requires the applicable interest rate or payment amount by reference to SOFR (“Secured Overnight Financing Rate”). The use of SOFR based rates may result in interest rates and/or payments that are higher or lower than the rates and payments that we previously experienced under USD-LIBOR.
Our bylaws currently provide that the foregoing provision regarding "control share acquisitions" will not apply to any acquisition by any person of shares of beneficial interest of Elme Communities.
Our bylaws currently provide that the foregoing provision regarding “control share acquisitions” will not apply to any acquisition by any person of shares of beneficial interest of Elme Communities.
In addition to these risks, we will not possess the same level of familiarity with the dynamics and market conditions of any new markets that we have entered in connection with our strategic transformation or that we may enter, which could adversely affect our ability to expand and success in expanding into those markets.
In addition to these risks, we will not possess the same level of familiarity with the dynamics and market conditions of any new markets that we have entered or that we may enter as we do with the Washington, DC market, which could adversely affect our ability to expand and success in expanding into those markets.
A low ESG score could result in a negative perception of the Company, exclusion of our securities from consideration by certain investors and/or cause investors to reallocate their capital away from the Company, each of which could have an adverse impact on the price of our securities. We face risks associated with property acquisitions.
A low ESG score could result in a negative perception of the Company, exclusion of our securities from consideration by certain investors and/or cause investors to reallocate their capital away from the Company, each of which could have an adverse impact on the price of our securities.
Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues are impacted by declines in market rents sooner than if our apartment leases were for longer terms.
Substantially all of our apartment leases are for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues are impacted by declines in market rents sooner than if our apartment leases were for longer terms.
A pandemic, including the outbreak of COVID-19, and measures intended to prevent its spread, could have a material adverse effect on our business, results of operations, cash flows and financial condition.
A pandemic and measures intended to prevent its spread, could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Our degree of leverage could limit our ability to obtain additional financing , affect the market price of our common shares or debt securities or otherwise adversely affect our financial condition. On February 14, 2023, our total consolidated debt was approximately $0.6 billion.
Our degree of leverage could limit our ability to obtain additional financing , affect the market price of our common shares or debt securities or otherwise adversely affect our financial condition. 18 On February 13, 2024, our total consolidated debt was approximately $0.7 billion.
Risks Related to our Business and Operations We may be unable to successfully expand our operations into new markets and submarkets, which could have a material adverse effect on us, the trading price of our shares and our ability to make distributions to our shareholders.
Risks Related to our Business and Operations We may be unable to successfully expand our operations into new markets and submarkets, which could have a material adverse effect on us, the trading price of our shares and our ability to make distributions to our shareholders. We intend to further expand our residential platform through acquisitions in Sunbelt markets.
In addition, we will be obligated to advance the defense costs incurred by our trustees and our executive officers, and may, in the discretion of our board of trustees, advance the defense costs incurred by our officers, our employees and other agents, in connection with legal proceedings.
In addition, we have agreed to obligations to advance the defense costs incurred by our trustees and our executive officers, and may, in the discretion of our Board, advance the defense costs incurred by our officers, our employees and other agents, in connection with legal proceedings.
In addition, various environmental laws impose liability on a current or former owner or operator of real property for investigation, removal or remediation of hazardous or toxic substances or petroleum products at our currently or formerly owned or leased real property, regardless of whether or not we knew of, or caused, the presence or release of such substances.
Various environmental laws impose liability on a current or former owner or operator of real property for investigation or cleanup of hazardous substances or petroleum products at, on, under or migrating from our currently or formerly owned or leased real property, regardless of whether or not we knew of, or caused, the presence or release of such substances or products.
Each of these factors could possibly limit our ability to retain our current residents, attract new ones or increase or maintain rents, which could lower the value of our properties and adversely affect our results of operations and our financial condition. Macroeconomic trends, including inflation and rising interest rates, may adversely affect our financial condition and results of operations.
Each of these factors could possibly limit our ability to retain our current residents, attract new ones or increase or maintain rents, which could lower the value of our properties and adversely affect our results of operations and our financial condition.
Pandemic o utbreaks could lead (and the current outbreak of COVID-19 has led) governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to mitigate its spread, including restrictions on freedom of movement and business operations such as issuing guidelines, travel bans, border closings, business closures, quarantine orders, and orders not allowing the collection of rents, rent increases, or eviction of non-paying residents and tenants.
Pandemic outbreaks could lead (and the outbreak of COVID-19 led) governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to mitigate its spread, including restrictions on freedom of movement and business operations such as orders not allowing the collection of rents, rent increases, or eviction of non-paying residents and tenants.
We are subject to certain compliance costs and potential liabilities under various U.S. federal, state and local environmental, health, safety and zoning laws and regulations.
We are subject to certain compliance costs and potential liabilities under various U.S. federal, state and local environmental, employment, health, safety and zoning laws and regulations that govern our and our tenants’ operations.
While we currently have no interests in joint ventures, we may from time to time invest in joint ventures in which we are not the exclusive investor or the only decision maker.
We may from time to time invest in joint ventures in which we are not the exclusive investor or the only decision maker.
Additionally, we are susceptible to adverse developments in the Washington, D.C. regulatory environment, such as increases in real estate and other taxes, the costs of complying with governmental regulations or increased regulations and actual or threatened reductions in federal government spending and/or changes to the timing of government spending, as has occurred during federal government shutdowns.
We are also susceptible to adverse developments in the regulatory environment of any of the markets in which we operate, particularly Washington, D.C., such as increases in real estate and other taxes, the costs of complying with governmental regulations or increased regulations, including zoning and tax laws, and actual or threatened reductions in government spending and/or changes to the timing of government spending, as has occurred during federal government shutdowns.
Using the closing share price of $19.04 per share of our common shares on February 14, 2023, multiplied by the number of our common shares, our consolidated debt to total consolidated market capitalization ratio was approximately 25% as of February 14, 2023.
Using the closing share price of $14.13 per share of our common shares on February 13, 2024, multiplied by the number of our common shares, our consolidated debt to total consolidated market capitalization ratio was approximately 36% as of February 13, 2024.
The presence or release of such toxic or 16 hazardous substances or petroleum products at our currently owned or leased properties could result in limitations on or interruptions to our operations, and releases at our currently or formerly owned or leased properties could result in in third-party claims for bodily injury, property or natural resource damages, or other losses, including liens in favor of the government for costs the government incurs in cleaning up contamination.
Releases of hazardous substances or petroleum products at our currently or formerly owned or leased properties could result in third-party claims for bodily injury, property or natural resource damages, or other losses, including liens in favor of the government for costs the government incurs in cleaning up contamination.
Unanticipated costs and operating expenses and decreased anticipated and actual revenue related to compliance with regulations, could negatively impact our future compliance with financial covenants of debt agreements and our ability to satisfy certain REIT-related requirements.
Unanticipated costs and operating expenses and decreased anticipated and actual revenue related to compliance with regulations could negatively impact our future compliance with financial covenants of debt agreements and our ability to satisfy certain REIT-related requirements. Risks Related to Financing Rising interest rates would increase our interest costs and negatively impact our cash flow.
As of December 31, 2022, 80% of our residential apartment homes were located in the Washington, DC metro region and 20% of our residential apartment homes were located in the Atlanta, Georgia metro region.
As of December 31, 2023, 75% of our residential apartment homes were located in the Washington, DC metro region and 25% of our residential apartment homes were located in the Atlanta, Georgia metro region.
As a result, if liability were asserted against us based upon the acquisition of a property, we may have to pay substantial sums to settle it, which could adversely affect our cash flow. We face risks associated with third-party service providers, which could negatively impact our profitability.
As a result, if liability were asserted against us based upon the acquisition of a property, we may have to pay substantial sums to settle it, which could adversely affect our cash flow.
While we are implementing a strategy of continued expansion into the Sunbelt region, our current concentration in just two geographic markets may expose us to a greater amount of market dependent risk than if we were more geographically diverse.
While we intend to continue expansion of our platform in the Sunbelt region, our current concentration in just two geographic metro regions may expose us to a greater amount of market-dependent risk than if we were more geographically diverse.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSchedule of Properties Properties Location Year Acquired Year Constructed/Renovated # of Homes Average Occupancy, year ended December 31, 2022 Ending Occupancy, as of December 31, 2022 Residential Communities Assembly Alexandria Alexandria, VA 2019 1990 532 95.2 % 95.3 % Cascade at Landmark Alexandria, VA 2019 1988 277 95.2 % 92.8 % Clayborne Alexandria, VA N/A 2008 74 95.9 % 94.6 % Riverside Apartments Alexandria, VA 2016 1971 1,222 95.0 % 96.1 % Bennett Park Arlington, VA N/A 2007 224 96.4 % 94.6 % Park Adams Arlington, VA 1969 1959 200 96.2 % 96.5 % The Maxwell Arlington, VA N/A 2014 163 95.9 % 96.3 % The Paramount Arlington, VA 2013 1984 135 95.4 % 96.3 % The Wellington Arlington, VA 2015 1960 711 95.4 % 94.9 % Trove Arlington, VA N/A 2020 401 95.0 % 96.8 % Roosevelt Towers Falls Church, VA 1965 1964 191 94.9 % 91.6 % Assembly Dulles Herndon, VA 2019 2000 328 95.1 % 96.3 % Assembly Herndon Herndon, VA 2019 1991 283 96.0 % 95.4 % Assembly Leesburg Leesburg, VA 2019 1986 134 96.4 % 97.0 % Assembly Manassas Manassas, VA 2019 1986 408 95.5 % 95.1 % The Ashby at McLean McLean, VA 1996 1982 256 95.5 % 94.9 % 3801 Connecticut Avenue Washington, D.C. 1963 1951 307 96.2 % 94.5 % Kenmore Apartments Washington, D.C. 2008 1948 374 96.0 % 94.1 % Yale West Washington, D.C. 2014 2011 216 95.9 % 95.4 % Bethesda Hill Apartments Bethesda, MD 1997 1986 195 95.3 % 93.8 % Assembly Germantown Germantown, MD 2019 1990 218 96.6 % 95.9 % Assembly Watkins Mill Gaithersburg, MD 2019 1975 210 96.3 % 96.2 % The Oxford Conyers, GA 2021 1999 240 94.9 % 94.6 % Marietta Crossing Marietta, GA 2022 1975 420 93.4 % 95.5 % Carlyle of Sandy Springs Sandy Springs, GA 2022 1972 389 94.6 % 95.1 % Alder Park Smyrna, GA 2022 1982 270 93.9 % 93.7 % Assembly Eagles Landing Stockbridge, GA 2021 2000 490 94.6 % 94.3 % Subtotal Residential Communities 8,868 95.3 % 95.2 % Property Location Year Acquired Year Constructed/Renovated Net Rentable Square Feet Percent Leased, as of December 31, 2022 (1) Ending Occupancy, as of December 31, 2022 (1) Office Building Watergate 600 Washington, D.C. 2017 1972/1997 300,000 92.6 % 92.6 % ______________________________ (1) Percent leased and ending occupancy calculations are based on square feet and includes temporary lease agreements for Watergate 600.
Biggest changeSchedule of Properties Properties Location Year Acquired Year Constructed/Renovated # of Homes Average Occupancy, year ended December 31, 2023 Ending Occupancy, as of December 31, 2023 Residential Communities Elme Alexandria Alexandria, VA 2019 1990 532 94.6 % 95.7 % Cascade at Landmark Alexandria, VA 2019 1988 277 96.2 % 97.5 % Clayborne Alexandria, VA N/A 2008 74 96.3 % 95.9 % Riverside Apartments Alexandria, VA 2016 1971 1,222 96.1 % 97.1 % Bennett Park Arlington, VA N/A 2007 224 95.7 % 96.4 % Park Adams Arlington, VA 1969 1959 200 96.4 % 96.0 % The Maxwell Arlington, VA N/A 2014 163 97.0 % 96.9 % The Paramount Arlington, VA 2013 1984 135 96.8 % 97.8 % The Wellington Arlington, VA 2015 1960 710 95.9 % 96.9 % Trove Arlington, VA N/A 2020 401 95.9 % 95.5 % Roosevelt Towers Falls Church, VA 1965 1964 191 96.0 % 97.9 % Elme Dulles Herndon, VA 2019 2000 328 96.0 % 97.3 % Elme Herndon Herndon, VA 2019 1991 283 96.0 % 96.5 % Elme Leesburg Leesburg, VA 2019 1986 134 95.7 % 97.0 % Elme Manassas Manassas, VA 2019 1986 408 94.2 % 93.1 % The Ashby at McLean McLean, VA 1996 1982 268 95.9 % 95.5 % 3801 Connecticut Avenue Washington, DC 1963 1951 307 96.5 % 96.4 % Kenmore Apartments Washington, DC 2008 1948 371 95.8 % 95.7 % Yale West Washington, DC 2014 2011 216 95.6 % 97.2 % Elme Bethesda Bethesda, MD 1997 1986 193 96.8 % 98.4 % Elme Watkins Mill Gaithersburg, MD 2019 1975 210 95.6 % 96.2 % Elme Germantown Germantown, MD 2019 1990 218 96.0 % 95.9 % Elme Conyers Conyers, GA 2021 1999 240 93.8 % 93.3 % Elme Eagles Landing Stockbridge, GA 2021 2000 490 92.4 % 89.0 % Elme Marietta Marietta, GA 2022 1975 420 92.4 % 90.7 % Elme Sandy Springs Sandy Springs, GA 2022 1972 389 93.4 % 91.3 % Elme Cumberland Smyrna, GA 2022 1982 270 93.3 % 91.1 % Elme Druid Hills Atlanta, GA 2023 1987 500 93.4 % 93.8 % Subtotal Residential Communities 9,374 95.2 % 95.2 % Property Location Year Acquired Year Constructed/Renovated Net Rentable Square Feet Percent Leased, as of December 31, 2023 (1) Ending Occupancy, as of December 31, 2023 (1) Office Building Watergate 600 Washington, DC 2017 1972/1997 300,000 87.8 % 87.8 % ______________________________ 27 (1) Percent leased and ending occupancy calculations are based on square feet and includes temporary lease agreements for Watergate 600.
ITEM 2: PROPERTIES The schedule on the following pages lists our real estate investment portfolio as of December 31, 2022, which consisted of 27 residential communities, one office building and land held for development. Cost information is included in Schedule III to our financial statements included in this Annual Report on Form 10-K.
ITEM 2: PROPERTIES The schedule on the following pages lists our real estate investment portfolio as of December 31, 2023, which consisted of 28 residential communities, one office building and land held for development. Cost information is included in Schedule III to our financial statements included in this Annual Report on Form 10-K.
Percent leased is the percentage of net rentable area for which fully executed leases exist and may include signed leases for space not yet occupied by the tenant. 24 ITEM 3: LEGAL PROCEEDINGS None. ITEM 4: MINE SAFETY DISCLOSURES None. 25 PART II
Percent leased is the percentage of net rentable area for which fully executed leases exist and may include signed leases for space not yet occupied by the tenant. ITEM 3: LEGAL PROCEEDINGS None.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Repurchases; Unregistered Sales of Securities: A summary of our repurchases of our common shares of beneficial interest for the three months ended December 31, 2022 was as follows: Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased October 1 - October 31, 2022 — $ — N/A N/A November 1 - November 30, 2022 — — N/A N/A December 1 - December 31, 2022 40,328 18.33 N/A N/A Total 40,328 18.33 N/A N/A ______________________________ (1) Represents restricted shares surrendered by employees to Elme Communities to satisfy such employees' applicable statutory minimum tax withholding obligations in connection with the vesting of restricted shares.
Biggest changeIssuer Repurchases; Unregistered Sales of Securities: A summary of our repurchases of our common shares of beneficial interest for the three months ended December 31, 2023 was as follows: Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased October 1 - October 31, 2023 — $ — 0 $50,000,000 November 1 - November 30, 2023 — — 0 50,000,000 December 1 - December 31, 2023 24,049 14.49 0 50,000,000 Total 24,049 $ 14.49 0 ______________________________ (1) Represents restricted shares surrendered by employees to Elme Communities to satisfy such employees' applicable statutory minimum tax withholding obligations in connection with the vesting of restricted shares.
This performance graph shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing by us under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. 26 ITEM 6: RESERVED
This performance graph shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing by us under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. 29 ITEM 6: RESERVED
The graph assumes that $100 was invested on December 31, 2017, in shares of our common shares and each of the aforementioned indices and that all dividends were reinvested without the payment of any commissions.
The graph assumes that $100 was invested on December 31, 2018, in shares of our common shares and each of the aforementioned indices and that all dividends were reinvested without the payment of any commissions.
Performance Graph: The following line graph sets forth, for the period from December 31, 2017, through December 31, 2022, a comparison of the percentage change in the cumulative total shareholder return on our common shares compared to the cumulative total return of the Standard & Poor's 500 Stock Index and the MSCI US REIT Index.
Performance Graph: The following line graph sets forth, for the period from December 31, 2018, through December 31, 2023, a comparison of the percentage change in the cumulative total shareholder return on our common shares compared to the cumulative total return of the Standard & Poor's 500 Stock Index and the MSCI US REIT Index.
ITEM 5: MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market and Shareholder Information: Our shares trade on the New York Stock Exchange under the symbol ELME. As of February 14, 2023, there were 2,843 shareholders of record.
ITEM 5: MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market and Shareholder Information: Our shares trade on the New York Stock Exchange under the symbol ELME. As of February 13, 2024, there were 2,651 shareholders of record.
Added
(2) On October 26, 2023, the Board authorized and approved a share repurchase program of up to $50.0 million of the Company’s common shares of beneficial interest over a period of two years, subject to any applicable limitations or restrictions set forth in our existing credit facility and other debt agreements.
Added
The share repurchase program is scheduled to expire on October 25, 2025, unless extended by the Board.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeInterest Expense : Interest expense by debt type for the year ended December 31, 2022 and 2021 was as follows (in thousands): Year Ended December 31, Debt Type 2022 2021 $ Change % Change Notes payable $ 20,458 $ 31,652 $ (11,194) (35.4) % Mortgage notes payable 1,014 — 1,014 100.0 % Line of credit 3,751 3,161 590 18.7 % Capitalized interest (283) (750) 467 62.3 % Total $ 24,940 $ 34,063 $ (9,123) (26.8) % • Notes payable : Decrease primarily due to the prepayment of $300.0 million of unsecured notes during the third quarter of 2021 that had been scheduled to mature in October 2022 and the prepayment of a $150.0 million portion of the 2018 Term Loan during the third quarter of 2021. • Mortgage notes payable : Increase due to the mortgages of $42.8 million and $33.7 million assumed in the acquisitions of Marietta Crossing and Alder Park, respectively, in the second quarter of 2022.
Biggest changeThe decrease is partially offset by higher depreciation and amortization at Elme Druid Hills ($3.1 million). 34 Interest Expense : Interest expense by debt type for the years ended December 31, 2023 and 2022 was as follows (in thousands): Year Ended December 31, Debt Type 2023 2022 $ Change % Change Notes payable $ 23,152 $ 20,458 $ 2,694 13.2 % Mortgage notes payable — 1,014 (1,014) 100.0 % Line of credit 7,277 3,751 3,526 94.0 % Capitalized interest — (283) 283 100.0 % Total $ 30,429 $ 24,940 $ 5,489 22.0 % • Notes payable : Increase primarily due to the $125.0 million 2023 Term Loan executed in January 2023, partially offset by prepayment of a $100.0 million portion of the 2018 Term Loan in January 2023. • Mortgage notes payable : Decrease due to the mortgages of $42.8 million and $33.7 million assumed in the acquisitions of Elme Marietta and Elme Cumberland, respectively, in the second quarter of 2022 and the extinguishment, in September 2022, of the liabilities associated with these mortgages though defeasance arrangements. • Line of credit : Increase primarily due to a weighted average interest rate of 6.2% and weighted average borrowings of $70.6 million in 2023, as compared to a weighted average interest rate of 4.2% and weighted average borrowings of $21.6 million in 2022. • Capitalized interest : Decrease primarily due to ceasing capitalization of interest on spending related to the multifamily development adjacent to Riverside Apartments due to a pause in development activities resulting from macroeconomic uncertainty.
Debt Financing We generally use unsecured or secured, corporate-level debt, including unsecured notes, our Revolving Credit Facility, bank term loans and mortgages, to meet our borrowing needs. Long-term, we generally use fixed rate debt instruments in order to match the returns from our real estate assets.
Debt Financing We generally use secured or unsecured, corporate-level debt, including unsecured notes, our Revolving Credit Facility, bank term loans and mortgages, to meet our borrowing needs. Long-term, we generally use fixed rate debt instruments in order to match the returns from our real estate assets.
However, as a result of general market conditions in the greater Washington, DC metro and Sunbelt regions, economic conditions affecting the ability to attract and retain residents and tenants or achieve anticipated rental rates, declines in our share price, unfavorable changes in the supply of competing properties, or our properties not performing as expected, we may not generate sufficient cash flow from operations and property sales or otherwise have access to capital on favorable terms, or at all.
However, as a result of the uncertainty of the general market conditions in the greater Washington, DC metro and Sunbelt regions, economic conditions affecting the ability to attract and retain residents and tenants or achieve anticipated rental rates, declines in our share price, unfavorable changes in the supply of competing properties, or our properties not performing as expected, we may not generate sufficient cash flow from operations and property sales or otherwise have access to capital on favorable terms, or at all.
We believe the following accounting estimates are the most critical to aid in fully understanding our reported financial results, 39 and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.
We believe the following accounting estimates are the most critical to aid in fully understanding our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.
We determine the fair value of land acquired based on comparisons to similar properties that have been recently marketed for sale or sold. The fair value of in-place leases is based upon our evaluation of the specific characteristics of the leases.
We determine the fair value of land 43 acquired based on comparisons to similar properties that have been recently marketed for sale or sold. The fair value of in-place leases is based upon our evaluation of the specific characteristics of the leases.
Historical Cash Flows Cash flows from operations are an important factor in our ability to sustain our dividend at its current rate. If our cash flows from operations were to decline significantly, we may have to reduce our dividend.
Historical Cash Flows Cash flows from operations are an important factor in our ability to sustain our dividend at its current rate. If our cash flows from operations were to decline significantly from current levels, we may have to reduce our dividend.
Issuances of our common shares are made at market prices prevailing at the time of issuance. We may use net proceeds from the issuance of common shares under this program for general business purposes, including, without limitation, working capital, the acquisition, renovation, expansion, improvement, development or redevelopment of income producing properties or the repayment of debt.
Issuances of our common shares are made at market prices prevailing at the time of issuance. We may use net proceeds from the issuance of common shares under this program for general business purposes, including, without limitation, working capital, the acquisition, renovation, expansion, improvement, development or redevelopment of income producing property or the repayment of debt.
Capital Requirements We do not currently have any debt maturities scheduled for 2023. We expect to have additional capital requirements as set forth on page 37 (Liquidity and Capital Resources - Capital Requirements). Results of Operations The discussion that follows is based on our consolidated results of operations for the two years ended December 31, 2022.
Capital Requirements We do not currently have any debt maturities scheduled for 2024. We expect to have additional capital requirements as set forth on page 37 (Liquidity and Capital Resources - Capital Requirements). 31 Results of Operations The discussion that follows is based on our consolidated results of operations for the two years ended December 31, 2023.
If capital were not available, we may be unable to satisfy the distribution requirement applicable to REITs, make required principal and interest payments, make strategic acquisitions or make necessary and/or routine capital improvements or 33 undertake improvement/redevelopment opportunities with respect to our existing portfolio of operating assets.
If capital were not available, we may be unable to satisfy the distribution requirement applicable to REITs, make required principal and interest payments, make strategic acquisitions or make necessary and/or routine capital improvements or undertake improvement/redevelopment 36 opportunities with respect to our existing portfolio of operating assets.
The 2023 Term Loan has a two-year term ending in January 2025, with two one-year extension options. We used the proceeds to prepay the $100.0 million 2018 Term Loan in full and a portion of our borrowings under our unsecured credit facility.
The 2023 Term Loan has a two-year term ending in January 2025, with two one-year extension options. We used the proceeds to prepay the $100.0 million 2018 Term Loan in full and a portion of our borrowings under our Revolving Credit Facility.
Off Balance Sheet Arrangements We have no off-balance sheet arrangements as of December 31, 2022 that are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Off Balance Sheet Arrangements We have no off-balance sheet arrangements as of December 31, 2023 that are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Net cash used in financing activities decreased in 2022 as compared to 2021 primarily due to a higher volume of debt repayments during 2021 and higher net proceeds from equity issuances and lower dividends paid in 2022.
Net cash (used in) provided by financing activities decreased in 2022 as compared to 2021 primarily due to a higher volume of debt repayments during 2021 and higher net proceeds from equity issuances and lower dividends paid in 2022.
Discussion of our business outlook, operating results, investment activity, financing activity and capital requirements to provide context for the remainder of MD&A. • Results of Operations. Discussion of our financial results comparing 2022 to 2021. • Liquidity and Capital Resources.
Discussion of our business outlook, operating results, investment activity, financing activity and capital requirements to provide context for the remainder of MD&A. • Results of Operations. Discussion of our financial results comparing 2023 to 2022. • Liquidity and Capital Resources.
The ability to issue preferred equity provides Elme Communities an additional financing tool that may be used to raise capital for future acquisitions or other business purposes. As of December 31, 2022, no preferred shares are issued and outstanding. Capital Commitments We will require capital for development and redevelopment projects currently underway and in the future.
The ability to issue preferred equity provides Elme Communities an additional financing tool that may be used to raise capital for future acquisitions or other business purposes. As of December 31, 2023, no preferred shares were issued and outstanding. Capital Commitments We will require capital for development and redevelopment projects currently underway and in the future.
Failure to comply with any of the covenants under our Revolving Credit Facility, our term loans, unsecured notes or other debt instruments could result in a default under one or more of our debt instruments.
Failure to comply with any of the covenants under our Revolving Credit Facility, 2023 Term Loan, unsecured notes or other debt instruments could result in a default under one or more of our debt instruments.
Assets held for sale are recorded at the lower of cost or fair value less costs to sell. 40
Assets held for sale are recorded at the lower of cost or fair value less costs to sell. 44
The weighted average maturity for our debt was 5.9 years as of December 31, 2022. If principal amounts due at maturity cannot 34 be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow may be insufficient to repay all maturing debt.
The weighted average maturity for our debt was 4.5 years as of December 31, 2023. If principal amounts due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow may be insufficient to repay all maturing debt.
There can be no assurance that our capital requirements will not be materially higher or lower than the above expectations. We currently believe that we will have enough cash on hand and/or will generate sufficient cash flow from operations and potential property sales and have access to the capital resources necessary to fund our requirements in 2023.
There can be no assurance that our capital requirements will not be materially higher or lower than the above expectations. We currently believe that we will generate sufficient cash flow from operations and potential property sales and have access to the capital resources necessary to fund our requirements in 2024.
From time to time, we may seek to repurchase and cancel our outstanding unsecured notes and term loans through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
From time to time, we may seek to repurchase and cancel our outstanding unsecured notes and term loans through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
A reconciliation of NOI to net income follows. 29 2022 Compared to 2021 The following tables reconcile net income to NOI and provide the basis for our discussion of our consolidated results of operations and NOI in 2022 compared to 2021. All amounts are in thousands except percentage amounts.
A reconciliation of NOI to net income follows. 32 2023 Compared to 2022 The following tables reconcile net income to NOI and provide the basis for our discussion of our consolidated results of operations and NOI in 2023 compared to 2022. All amounts are in thousands except percentage amounts.
As of December 31, 2022, we were in compliance with the covenants related to our Revolving Credit Facility, 2018 Term Loan and unsecured notes. Common Equity We have authorized for issuance 150.0 million common shares, of which approximately 87.5 million shares were outstanding at December 31, 2022.
As of December 31, 2023, we were in compliance with the covenants related to our Revolving Credit Facility, 2023 Term Loan and unsecured notes. Common Equity We have authorized for issuance 150.0 million common shares, of which approximately 87.9 million shares were outstanding at December 31, 2023.
Our issuances and net proceeds on the Equity Distribution Agreements in 2022 and 2021 and the Original Equity Distribution Agreements in 2020, respectively, were as follows (in thousands, except per share data): Year Ended December 31, 2022 2021 2020 Issuance of common shares 1,032 1,636 2,046 Weighted average price per share $ 26.27 $ 25.44 $ 23.86 Net proceeds $ 26,849 40,462 $ 48,355 We have a dividend reinvestment program, whereby shareholders may use their dividends and optional cash payments to purchase common shares.
Our issuances and net proceeds on the Equity Distribution Agreements in 2022 and 2021 and the Original Equity Distribution Agreements in 2021, were as follows (in thousands, except per share data): Year Ended December 31, 2023 2022 2021 Issuance of common shares — 1,032 1,636 Weighted average price per share $ — $ 26.27 $ 25.44 Net proceeds $ — 26,849 $ 40,462 We have a dividend reinvestment program, whereby shareholders may use their dividends and optional cash payments to purchase common shares.
The higher same-store NOI was primarily due to higher rental rates. Residential same-store average occupancy for our portfolio increased to 95.6% as of December 31, 2022 from 95.3% as of December 31, 2021.
The higher same-store NOI was primarily due to higher rental rates. Residential same-store average occupancy for our portfolio increased to 95.6% as of December 31, 2023 from 95.4% as of December 31, 2022.
Included in the capital improvement and development costs listed above are capitalized interest in the amount of $0.3 million, $0.8 million and $2.2 million for the three years ended December 31, 2022, respectively, and capitalized employee compensation in the amount of $1.1 million, $1.6 million and $2.0 million for the three years ended December 31, 2022, respectively.
Included in the capital improvement and development costs listed above are capitalized employee compensation in the amount of $2.3 million, $1.1 million and $1.6 million for the three years ended December 31, 2023, respectively, and while none for the year ended December 31, 2023, capitalized interest in the amount of $0.3 million and $0.8 million for the two years ended December 31, 2022, respectively.
Amounts include principal, interest and facility fees. In addition to our long-term debt, we have committed building capital expenditures of $4.9 million in 2023 based on contracts in place as of December 31, 2022, along with other various standing or renewable contracts with vendors.
Amounts include principal, interest and facility fees. In addition to our long-term debt, we have committed building capital expenditures of $2.0 million in 2024 based on contracts in place as of December 31, 2023, along with other various standing or renewable contracts with vendors.
Future determinations regarding the declaration and payment of dividends, if any, will be at the discretion of our board of trustees which considers, among other factors, trends in our levels of funds from operations and ongoing capital requirements to achieve a targeted payout ratio.
We will continue to assess the payment of our dividends on a quarterly basis. Future determinations regarding the declaration and payment of dividends, if any, will be at the discretion of our Board which considers, among other factors, trends in our levels of funds from operations and ongoing capital requirements to achieve a targeted payout ratio.
In addition, we incurred repair and maintenance expense of $5.0 million during 2022 to maintain the quality of our buildings.
In addition, we incurred repair and maintenance expense of $4.0 million during 2023 to maintain the quality of our buildings.
We analyze which source of capital we believe to be most advantageous to us at any particular point in time. As of February 14, 2023, we had cash and cash equivalents of approximately $15.8 million and availability under our Revolving Credit Facility of $657.0 million.
We analyze which source of capital we believe to be most advantageous to us at any particular point in time. As of February 13, 2024, we had cash and cash equivalents of approximately $5.8 million and availability under our Revolving Credit Facility of $535.0 million.
If we are unable to obtain capital from other sources, we may need to alter capital spending to be materially different than what is stated in the prior paragraph.
If we are unable to obtain capital from other sources, we may need to alter capital spending to be materially different than what is stated above.
The following table provides the calculation of our NAREIT FFO and a reconciliation of NAREIT FFO to net income for the three years ended December 31, 2022 (in thousands): Year Ended December 31, 2022 2021 2020 Net (loss) income $ (30,868) $ 16,384 $ (15,680) Adjustments: Depreciation and amortization 91,722 72,656 70,336 Loss on sale of depreciable real estate, net — — 15,009 Discontinued operations: Depreciation and amortization — 22,904 49,694 Gain on sale of depreciable real estate, net — (46,441) — NAREIT FFO $ 60,854 $ 65,503 $ 119,359 Critical Accounting Estimates We base the discussion and analysis of our financial condition and results of operations upon our consolidated financial statements, which have been prepared in accordance with GAAP.
The following table provides the calculation of our NAREIT FFO and a reconciliation of NAREIT FFO to net income for the three years ended December 31, 2023 (in thousands): Year Ended December 31, 2023 2022 2021 Net (loss) income $ (52,977) $ (30,868) $ 16,384 Adjustments: Depreciation and amortization 88,950 91,722 72,656 Real estate impairment 41,860 — — Discontinued operations: Depreciation and amortization — — 22,904 Gain on sale of depreciable real estate, net — — (46,441) NAREIT FFO $ 77,833 $ 60,854 $ 65,503 Critical Accounting Estimates We base the discussion and analysis of our financial condition and results of operations upon our consolidated financial statements, which have been prepared in accordance with GAAP.
Such improvements totaled $6.7 million in 2022, averaging approximately $1,860 per unit for the 41% of units which turned over relative to our total portfolio of apartment homes. Aside from improvements related to apartment turnover, these improvements include facade repairs, installation of new heating and air conditioning equipment, asphalt replacement, permanent landscaping, new lighting and new finishes.
Such improvements totaled $8.3 million in 2023, averaging approximately $2,200 per unit for the 42% of units which turned over relative to our total portfolio of apartment homes. Aside from improvements related to apartment turnover, these improvements include facade repairs, installation of new heating and air conditioning equipment, asphalt replacement, permanent landscaping, new lighting and new finishes.
Capital Improvements and Development Costs Our capital improvement, development and redevelopment costs for the three years ended December 31, 2022 were as follows (in thousands): Year Ended December 31, 2022 2021 2020 Accretive capital improvements and development costs: Acquisition related improvements $ 5,236 $ 7,218 $ 10,487 Expansions and major renovations 21,476 17,096 16,561 Development/redevelopment 698 8,406 28,812 Tenant improvements (including first generation leases) 1,337 2,427 21,785 Total accretive capital improvements (1) 28,747 35,147 77,645 Other capital improvements: 8,464 5,669 9,262 Total $ 37,211 $ 40,816 $ 86,907 ______________________________ (1) We consider these capital improvements to be accretive to revenue and not necessarily to net income.
Capital Improvements and Development Costs Our capital improvement, development and redevelopment costs for the three years ended December 31, 2023 were as follows (in thousands): Year Ended December 31, 2023 2022 2021 Accretive capital improvements and development costs: Acquisition related improvements $ 6,379 $ 5,236 $ 7,218 Expansions and major renovations 22,340 21,476 17,096 Development/redevelopment — 698 8,406 Tenant improvements (including first generation leases) 17 1,337 2,427 Total accretive capital improvements (1) 28,736 28,747 35,147 Other capital improvements: 9,482 8,464 5,669 Total $ 38,218 $ 37,211 $ 40,816 ______________________________ (1) We consider these capital improvements to be accretive to revenue and not necessarily to net income.
Accretive Capital Improvements Acquisition Related Improvements: Acquisition related improvements are capital improvements to properties acquired during the preceding three years which were anticipated at the time we acquired the properties. These types of improvements were made in 2022 to the Carlyle of Sandy Springs, Assembly Eagles Landing and The Oxford.
Accretive Capital Improvements Acquisition Related Improvements: Acquisition related improvements are capital improvements to properties acquired during the preceding three years which were anticipated at the time we acquired the properties. These types of improvements were made in 2023 to the Elme Cumberland, Elme Marietta, Elme Sandy Springs, Elme Eagles Landing and Elme Conyers.
Additional factors which may cause the actual results, performance or achievements of Elme Communities to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to: (a) the risks associated with ownership of real estate in general and our real estate assets in particular; (b) the economic health of the areas in which our properties are located, particularly with respect to greater Washington, DC metro and Sunbelt region; (c) risks associated with our ability to execute on our strategies, including new strategies with respect to our operations and our portfolio, including our ability to realize any anticipated operational benefits from our internalization of community management functions; (d) the risk of failure to enter into and/or complete contemplated acquisitions and dispositions, or at all, within the price ranges anticipated and on the terms and timing anticipated; (e) changes in the composition of our portfolio, including the acquisition of apartment homes in the Sunbelt markets; (f) risks related to changes in interest rates, including the future of the reference rate used in our existing floating rate debt instruments; (g) reductions in or actual or threatened changes to the timing of federal government spending; (h) the risks related to use of third-party providers; (i) the economic health of our residents; (j) the ultimate duration of the COVID-19 global pandemic, including any mutations thereof, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, the effectiveness and willingness of people to take COVID-19 vaccines, and the duration of associated immunity and efficacy of the vaccines against emerging variants of COVID-19; (k) the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts); (l) compliance with applicable laws and corporate social responsibility goals, including those concerning the environment 38 and access by persons with disabilities; (m) the risks related to not having adequate insurance to cover potential losses; (n) changes in the market value of securities; (o) terrorist attacks or actions and/or cyber-attacks; (p) whether we will succeed in the day-to-day property management and leasing activities that we have previously outsourced; (q) the availability and terms of financing and capital and the general volatility of securities markets; (r) the risks related to our organizational structure and limitations of share ownership; (s) failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and (t) other factors discussed under the caption “Risk Factors.” While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance.
Additional factors which may cause the actual results, performance or achievements of Elme Communities to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to: (a) the risks associated with ownership of real estate in general and our real estate assets in particular; (b) the economic health of the areas in which our properties are located, particularly with respect to the greater Washington, DC metro and Sunbelt regions; (c) risks associated with our ability to execute on our strategies, including new strategies with respect to our operations and our portfolio, including the acquisition of apartment homes in the Sunbelt markets and our ability to realize any anticipated operational benefits from our internalization of community management functions; (d) the risk of failure to enter into and/or complete acquisitions and dispositions; (e) changes in the composition of our portfolio; (f) reductions in or actual or threatened changes to the timing of federal government spending; (g) the economic health of our residents; (h) the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdowns or recessions and geopolitical conflicts); (i) risks related to our ability to control our expenses if revenues decrease; (j) compliance with applicable laws and corporate social responsibility goals, including those concerning the environment and access by persons with disabilities; (k) risks related to not having adequate insurance to cover potential losses; (l) changes in the market value of securities; (m) terrorist attacks or actions and/or cyber-attacks; (n) whether we will succeed in the day-to-day property management and leasing activities that we have previously outsourced; (o) the availability and terms of financing and capital and the general volatility of securities markets; (p) the risks related to our organizational structure and limitations of share ownership; (q) failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and (r) other factors discussed under the caption “Risk Factors.” 42 While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance.
Washington Street, Randolph Shopping Center, Montrose Shopping Center and Spring Valley Village Real Estate Rental Revenue Real estate rental revenue from our apartment communities is comprised of (a) rent from operating leases of residential apartments with terms of approximately one year or less, recognized on a straight-line basis, (b) revenue from the recovery of operating expenses from our residents, (c) credit losses on lease related receivables, (d) revenue from leases of retail space at our apartment communities and (e) parking and other tenant charges.
(3) Other (classified as continuing operations): Watergate 600 Real Estate Rental Revenue Real estate rental revenue from our apartment communities is comprised of (a) rent from operating leases of residential apartments with terms of approximately one year or less, recognized on a straight-line basis, (b) revenue from the recovery of operating expenses from our residents, (c) credit losses on lease related receivables, (d) revenue from leases of retail space at our apartment 33 communities and (e) parking and other tenant charges.
During 2023, we expect that we will have significant capital requirements, including the following: • Funding dividends and distributions to our shareholders (which we intend to continue to pay at or about current levels); • Approximately $15.0 - $20.0 million to invest in our existing portfolio of operating assets; • Less than $1.0 million to invest in our development and redevelopment projects; and • Funding for potential property acquisitions throughout 2023, offset by proceeds from potential property dispositions.
During 2024, we expect that we will have significant capital requirements, including the following: • Funding dividends and distributions to our shareholders (which we intend to continue to pay at or about current levels); • Approximately $34.0 - $39.0 million to invest in our existing portfolio of operating assets inclusive of $23.0 - $28.0 million of major capital expenditures; and • Funding for potential property acquisitions throughout 2024, offset by proceeds from potential property dispositions.
Debt Covenants Pursuant to the terms of our Revolving Credit Facility, our term loans and unsecured notes, we are subject to customary operating covenants and maintenance of various financial ratios.
The amounts involved may be material. 38 Debt Covenants Pursuant to the terms of our Revolving Credit Facility, 2023 Term Loan and unsecured notes, we are subject to customary operating covenants and maintenance of various financial ratios.
Development/Redevelopment: Development costs represent expenditures for ground up development of new operating properties. Redevelopment costs represent expenditures for improvements intended to reposition properties in their markets and generate more income than would be otherwise achievable. Development/redevelopment costs in 2022 include predevelopment costs for a future residential development adjacent to Riverside Apartments.
Redevelopment costs represent expenditures for improvements intended to reposition properties in their markets and generate more income than would be otherwise achievable. Development/redevelopment costs in 2022 and 2021 included predevelopment costs for a future residential development adjacent to Riverside Apartments, which is currently on hold.
The ability to compare one period to another is significantly affected by the strategic transformation in 2021 and other acquisitions completed and dispositions made during 2021 and 2022 (see note 3 to the consolidated financial statements).
The ability to compare one period to another is significantly affected by the acquisitions completed 2023 and 2022 (see note 3 to the consolidated financial statements).
Not all of the anticipated spending had been committed via executed construction contracts at December 31, 2022. We expect to fund these projects using cash generated by our real estate operations, through borrowings on our Revolving Credit Facility, or raising additional debt or equity capital in the public market.
We expect to fund these projects using cash generated by our real estate operations, through borrowings on our Revolving Credit Facility, or raising additional debt or equity capital in the public market.
Contractual Obligations As of December 31, 2022, certain contractual obligations will require significant capital as follows (in thousands): Payments due by Period Total Less than 1 year 1-3 years 4-5 years After 5 years Long-term debt (1) $ 694,269 $ 120,740 $ 111,318 $ 84,150 $ 378,061 ______________________________ (1) See notes 6 and 7 of the consolidated financial statements.
Contractual Obligations As of December 31, 2023, certain contractual obligations will require significant capital as follows (in thousands): Payments due by Period Total Less than 1 year 1-3 years 4-5 years After 5 years Long-term debt (1) $ 806,442 $ 25,308 $ 336,918 $ 80,470 $ 363,746 ______________________________ (1) See notes 6 and 7 of the consolidated financial statements.
Real estate expenses from same-store residential properties increased $2.3 million, or 4.6%, to $53.4 million for 2022, compared to $51.1 million for 2021, primarily due to higher administrative ($0.7 million), real estate tax ($0.6 million), utilities ($0.5 million), insurance ($0.3 million) and contract maintenance and supplies ($0.2 million) expenses.
Real estate expenses from same-store residential properties increased $2.2 million, or 3.6%, to $65.1 million for 2023, compared to $62.8 million for 2022, primarily due to higher utilities ($0.9 million), contract services ($0.5 million), real estate taxes ($0.5 million), marketing ($0.4 million) and insurance ($0.4 million) expenses.
Real estate rental revenue from same-store residential properties increased $10.2 million, or 7.3%, to $151.5 million for 2022, compared to $141.3 million for 2021, primarily due to higher rental income ($8.2 million), lower rent abatements ($1.6 million) and higher fee income ($0.4 million).
Real estate rental revenue from same-store residential properties increased $11.5 million, or 6.6%, to $186.0 million for 2023, compared to $174.5 million for 2022, primarily due to higher rental income ($10.4 million), higher recoveries ($1.1 million), lower rent abatements ($0.5 million) and higher fee and ancillary income ($0.8 million). The increase is partially offset by higher credit losses ($1.3 million).
Subsequent to the end of 2022, we executed an amendment to our revolving credit facility to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins. As of February 14, 2023, our Revolving Credit Facility has a borrowing capacity of $657.0 million.
During 2023, we executed an amendment to our Revolving Credit Facility to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins.
Costs related to the strategic transformation, including the allocation of internal costs, consulting, advisory and termination benefits, are included in Transformation costs on our consolidated statements of operations.
Costs related to the strategic transformation, including the allocation of internal costs, consulting, advisory and termination benefits, are included in transformation costs on our consolidated statements of operations. We recognized $6.3 million and $9.7 million of transformation costs, net of amounts capitalized, on the consolidated statements of operations during 2023 and 2022, respectively.
Net cash (used in) provided by investing activities decreased in 2022 as compared to 2021 and increased in 2021 as compared to 2020 primarily due to the sales of the Office Portfolio and the Retail Portfolio during 2021.
Net cash (used in) provided by investing activities decreased in 2022 as compared to 2021 primarily due to the sales of the Office Portfolio and the Retail Portfolio during 2021. These were partially offset by the acquisitions of Elme Conyers and Elme Eagles Landing during 2021 and acquisitions of Elme Marietta, Elme Cumberland and Elme Sandy Springs during 2022.
Net (loss) income, NOI and NAREIT FFO for the years ended December 31, 2022 and 2021 were as follows (in thousands, except percentage amounts): Year Ended December 31, 2022 2021 Change % Change Net (loss) income $ (30,868) $ 16,384 $ (47,252) (288.4) % NOI (1) $ 135,379 $ 108,369 $ 27,010 24.9 % NAREIT FFO (2) $ 60,854 $ 65,503 $ (4,649) (7.1) % ______________________________ (1) See page 29 of the MD&A for reconciliations of NOI to net (loss) income.
Net loss, NOI and NAREIT FFO for the years ended December 31, 2023 and 2022 were as follows (in thousands, except percentage amounts): Year Ended December 31, 2023 2022 Change % Change Net loss $ (52,977) $ (30,868) $ (22,109) 71.6 % NOI (1) $ 148,081 $ 135,379 $ 12,702 9.4 % NAREIT FFO (2) $ 77,833 $ 60,854 $ 16,979 27.9 % ______________________________ (1) See page 33 of the MD&A for reconciliations of NOI to net (loss) income.
Average occupancy for residential properties for 2022 and 2021 was as follows: December 31, 2022 December 31, 2021 Increase Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total 95.6 % 94.5 % 95.3 % 95.3 % 71.0 % 93.4 % 0.3 % 23.5 % 1.9 % The increase in same-store average occupancy was primarily due to higher average occupancy at The Kenmore, 3801 Connecticut Avenue, Assembly Germantown and Assembly Herndon, partially offset by lower average occupancy at Roosevelt Towers and Clayborne Apartments.
Average occupancy for residential properties for 2023 and 2022 was as follows: December 31, 2023 December 31, 2022 % Change Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total 95.6 % 93.1 % 95.2 % 95.4 % 94.2 % 95.3 % 0.2 % (1.1) % (0.1) % The increase in same-store average occupancy was primarily due to higher average occupancy at Elme Bethesda, The Paramount, Roosevelt Towers, Riverside Apartments and The Maxwell.
Net cash used in financing activities increased in 2021 as compared to 2020 primarily due to the repayment of $300.0 million of unsecured notes and higher net repayments on the Revolving Credit Facility during 2021.
Net cash provided by (used in) financing activities increased in 2023 compared to 2022 primarily due to executing the $125.0 million 2023 Term Loan and net borrowings on the Revolving Credit Facility during 2023 and the repayment of mortgage notes during 2022.
Loss on extinguishment of debt: During 2022, we extinguished the liabilities associated with mortgage notes payable for Marietta Crossing and Alder Park through defeasance arrangements, recognizing aggregate losses on extinguishment of debt of $4.9 million.
Loss on extinguishment of debt: During 2022, we extinguished the liabilities associated with mortgage notes payable for Elme Marietta and Elme Cumberland through defeasance arrangements, recognizing aggregate losses on extinguishment of debt of $4.9 million. Other income : Decrease of $0.1 million is due to lower tax refunds received in 2023 for office properties sold in prior years.
Real estate expenses from acquisitions increased $10.4 million due to the acquisitions of Carlyle of Sandy Springs ($2.6 million) during the first quarter of 2022, Marietta Crossing ($1.7 million) and Alder Park ($1.2 million) during the second quarter of 2022, Assembly Eagles Landing ($3.4 million) during the fourth quarter of 2021, and The Oxford ($1.5 million) during the third quarter of 2021.
Real estate expenses from acquisitions increased $3.5 million in 2023 due to the acquisitions of Elme Druid Hills ($0.9 million) during the third quarter of 2023, Elme Sandy Springs ($1.0 million) during the first quarter of 2022 and Elme Marietta ($0.9 million) and Elme Cumberland ($0.7 million) during the second quarter of 2022.
The higher NOI is primarily due to the acquisitions of Assembly Eagles Landing ($4.2 million) and The Oxford ($1.1 million) in 2021 and Carlyle of Sandy Spring ($4.0 million), Marietta Crossing ($3.2 million) and Alder Park ($2.2 million) in 2022, higher NOI from same-store properties ($7.9 million), higher NOI from Trove ($3.7 million), which achieved stabilization in the fourth quarter of 2021, and higher NOI at Watergate 600 ($0.7 million).
The higher NOI is primarily due to higher NOI from same-store properties ($9.2 million) and the acquisitions of Elme Marietta ($1.7 million) and Elme Cumberland ($1.0 million) in 2022 and Elme Druid Hills ($1.7 million) in 2023, partially offset by lower NOI at Watergate 600 ($0.3 million) and Elme Sandy Springs ($0.4 million).
The 2023 Term Loan has an interest rate of SOFR (subject to a credit spread adjustment of 10 basis points) plus a margin of 95 basis points. The interest rate swap effectively fixes a $100.0 million potion of the 2023 Term Loan at 2.16% through the interest rate swap's expiration date of July 21, 2023.
Following the prepayment of the 2018 Term Loan, the interest rate swap effectively fixed a $100.0 million portion of the 2023 Term Loan at 2.16% through the interest rate swap's expiration date of July 21, 2023.
We partially funded the defeasances with a $65.0 million draw on our unsecured revolving credit facility. Subsequent to the end of 2022, we entered into a $125.0 million unsecured term loan ("2023 Term Loan") with an interest rate of SOFR (subject to a credit spread adjustment of 10 basis points) plus a margin of 95 basis points.
Financing Activity Significant financing activity during 2023 included entering into a $125.0 million unsecured term loan (“2023 Term Loan”) with an interest rate of SOFR (subject to a credit spread adjustment of 10 basis points) plus a margin of 95 basis points (subject to adjustment depending on Elme Communities' credit rating).
Real estate rental revenue from acquisitions increased $25.1 million due to the acquisition of Carlyle of Sandy Springs ($6.6 million) during the first quarter of 2022, Marietta Crossing ($4.9 million) and Alder Park ($3.4 million) during the second quarter of 2022, Assembly Eagles Landing ($7.6 million) during the fourth quarter of 2021 and The Oxford ($2.6 million) during the third quarter of 2021.
Real estate rental revenue from acquisitions increased $7.5 million or 50.2% to $22.4 million for 2023, compared to $14.9 million for 2022, primarily due to the acquisitions of Elme Druid Hills ($2.6 million) during the third quarter of 2023, Elme Marietta ($2.6 million) and Elme Cumberland ($1.7 million) during the second quarter of 2022, and Elme Sandy Springs ($0.6 million) during the first quarter of 2022.
Expansions and major renovations during 2022 included unit, hallway, retaining walls renovations and SmartRent and wifi installations at Assembly Alexandria; retail space conversion into additional units and plaza restoration at The Ashby; unit renovations, roof and heating system replacement at Assembly Dulles; unit and facade renovations and fire alarm system replacement at Riverside Apartments; unit renovations and SmartRent installations at Assembly Manassas and unit renovations, roof awnings and 37 heating system replacement at The Wellington.
Expansions and major renovations during 2023 included facade and unit renovations and fire alarm system and flooring replacement at Riverside Apartments; unit and hallway renovations at Elme Alexandria; retail space conversion into additional units at The Ashby; unit renovations and SmartRent installations at Elme Dulles; roof replacement and unit renovations at Park Adams and unit and facade renovations at Elme Manassas. 41 Development/Redevelopment: Development costs represent expenditures for ground up development of new operating properties.
Depreciation and amortization : Increase of $19.1 million primarily due to the acquisitions of Assembly Eagles Landing ($5.3 million), Carlyle of Sandy Springs ($5.8 million), Marietta Crossing ($5.2 million), Alder Park ($3.1 million) and The Oxford ($0.3 million) and higher depreciation and amortization at Watergate 600 ($0.9 million).
Depreciation and amortization : Decrease of $2.8 million primarily due to lower depreciation and amortization at same-store residential properties ($2.0 million), the acquisitions of Elme Sandy Springs ($1.7 million), Elme Marietta ($1.5 million) and Elme Cumberland ($0.3 million) and lower depreciation and amortization at Watergate 600 ($0.4 million).
We recognized $9.7 million and $6.6 million of transformation costs, net of amounts capitalized, on the consolidated statements of operations during 2022 and 2021, respectively. Upon completion of the implementation in 2023, w e expect to realize significant operational benefits from this operating model redesign.
In connection with our strategic transformation, we redesigned our operating model for purposes of more efficiently and effectively supporting residential operations. We recognized $6.3 million and $9.7 million and $6.6 million of transformation costs, net of amounts capitalized, on the consolidated statements of operations during 2023, 2022 and 2021, respectively.
These were partially offset by higher NOI ($27.0 million), lower interest expense ($9.1 million), lower loss on extinguishment of debt ($7.8 million) and lower loss on interest rate derivatives ($5.9 million).
These were partially offset by higher NOI ($12.7 million), lower loss on extinguishment of debt ($4.9 million), lower transformation costs ($3.3 million), lower depreciation and amortization expenses ($2.8 million), and lower general and administrative expenses ($2.4 million).
As of December 31, 2022, our future debt principal payments are scheduled as follows (in thousands): Year Unsecured Notes Payable/Term Loans Revolving Credit Facility Total Debt Average Interest Rate 2023 $ 100,000 (1) $ — $ 100,000 2.3 % 2024 — — — — % 2025 — 55,000 55,000 5.2 % 2026 — — — — % 2027 — — — — % Thereafter 400,000 — 400,000 4.5 % Scheduled principal payments 500,000 55,000 555,000 4.2 % Premiums and discounts, net (116) — (116) Debt issuance costs, net (2,525) — (2,525) Total $ 497,359 $ 55,000 $ 552,359 4.2 % ______________________________ (1) Elme Communities entered into an interest rate swap to effectively fix a LIBOR plus 110 basis points floating interest rate to a 2.31% all-in fixed rate for the remaining $100.0 million portion of the 2018 Term Loan.
We may either hedge our variable rate debt to give it an effective fixed interest rate or hedge fixed rate debt to give it an effective variable interest rate. 37 As of December 31, 2023, our future debt principal payments are scheduled as follows (in thousands): Year Unsecured Notes Payable/Term Loans Revolving Credit Facility Total Debt Average Interest Rate 2024 — — $ — — % 2025 125,000 (1) 157,000 (2) 282,000 5.6 % 2026 — — — — % 2027 — — — — % 2028 50,000 — 50,000 7.4 % Thereafter 350,000 — 350,000 4.1 % Scheduled principal payments 525,000 157,000 682,000 4.9 % Premiums and discounts, net (94) — (94) Debt issuance costs, net (2,561) — (2,561) Total $ 522,345 $ 157,000 $ 679,345 4.9 % ______________________________ (1) During the first quarter of 2023, we entered into the $125.0 million 2023 Term Loan with an interest rate of SOFR (subject to a credit spread adjustment of 10 basis points) plus a margin of 95 basis points (subject to adjustment depending on Elme Communities’ credit rating).
These were partially offset by higher NOI ($27.0 million), lower interest expense ($9.1 million), lower loss on extinguishment of debt ($7.8 million) and lower loss on interest rate derivatives ($5.9 million).
The higher NAREIT FFO is primarily due to higher NOI ($12.7 million), lower loss on extinguishment of debt ($4.9 million), lower transformation costs ($3.3 million) and lower general and administrative expenses ($2.4 million). These were partially offset by higher interest expense ($5.5 million) and higher property management expenses ($0.7 million).
Transformation costs: Increase of $3.1 million primarily due to higher employee time allocations ($1.5 million) related to the strategic transformation, higher consulting costs ($1.1 million), higher software depreciation ($0.9 million) and higher software costs ($0.8 million), partially offset by lower severance expenses ($1.6 million).
Transformation costs: Decrease of $3.3 million primarily due to lower consulting ($1.9 million), lower accelerated depreciation ($0.9 million), lower salary, benefit, and incentive compensation ($0.6 million), lower software implementation ($0.5 million), and lower third-party management transition ($0.3 million) costs. The decrease is partially offset by higher signing bonuses for new employees ($0.9 million).
During 2022, we completed acquisitions of three apartment communities in Georgia with a combined total of 1,079 apartment homes for a total contract purchase price of $283.2 million. We believe the successful execution of this research-driven strategic shift will lead to greater, more sustainable growth.
We also own and operate approximately 300,000 square feet of commercial space in the Washington, DC metro region. During 2022, we completed acquisitions of three apartment communities in Georgia with a combined total of 1,079 apartment homes for a total contract purchase price of $283.2 million.
Consolidated cash flows for the three years ended December 31, 2022 were as follows (in thousands): 36 Year ended December 31, Variance 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Cash provided by operating activities $ 73,211 $ 89,156 $ 112,978 $ (15,945) $ (23,822) Cash (used in) provided by investing activities (241,163) 702,170 65,760 (943,333) 636,410 Cash used in financing activities (56,416) (565,396) (185,199) 508,980 (380,197) Net cash provided by operating activities decreased in 2022 as compared to 2021 and in 2021 as compared to 2020 primarily due to the sales of the Office Portfolio and the Retail Portfolio during 2021 (see note 3 to the consolidated financial statements) and costs associated with our strategic transformation.
Consolidated cash flows for the three years ended December 31, 2023 are summarized as follows (in thousands): Year ended December 31, Variance 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 Cash provided by operating activities $ 84,669 $ 73,211 $ 89,156 $ 11,458 $ (15,945) Cash (used in) provided by investing activities (146,221) (241,163) 702,170 94,942 (943,333) Cash provided by (used in) financing activities 60,238 (56,416) (565,396) 116,654 508,980 40 Net cash provided by operating activities increased in 2023 as compared to 2022 primarily due to higher rental revenue from the acquisitions of Elme Druid Hills in 2023 and Elme Sandy Springs, Elme Marietta and Elme Cumberland during 2022.
Net Operating Income NOI, defined as real estate rental revenue less direct real estate operating expenses, is a non-GAAP measure.
The ability to compare one period to another is significantly affected by the acquisitions completed during those years (see note 3 to the consolidated financial statements). Net Operating Income NOI, defined as real estate rental revenue less direct real estate operating expenses, is a non-GAAP measure.
The common shares sold under this program may either be common shares issued by us or common shares purchased in the open market. 35 Our issuances and net proceeds on the dividend reinvestment program for the three years ended December 31, 2022 were as follows (in thousands; except per share data): Year Ended December 31, 2022 2021 2020 Issuance of common shares 47 75 90 Weighted average price per share $ 22.40 $ 23.37 $ 24.12 Net proceeds $ 1,030 $ 1,744 $ 2,121 Preferred Equity Our board of trustees can, at its discretion, authorize the issuance of up to 10.0 million preferred shares.
Our issuances and net proceeds on the dividend reinvestment program for the three years ended December 31, 2023 were as follows (in thousands; except per share data): Year Ended December 31, 2023 2022 2021 Issuance of common shares 28 47 75 Weighted average price per share $ 17.64 $ 22.40 $ 23.37 Net proceeds $ 497 $ 1,030 $ 1,744 39 On October 26, 2023, the Board authorized and approved a share repurchase program of up to $50.0 million of the Company’s common shares of beneficial interest over a period of two years, subject to any applicable limitations or restrictions set forth in our existing credit facility and other debt agreements.
Real Estate Expenses Residential real estate expenses as a percentage of residential revenue for 2022 and 2021 were 36.1% and 36.8%, respectively.
The increase is partially offset by lower average occupancy at Elme Eagles Landing, Elme Manassas and Elme Conyers. Real Estate Expenses Residential real estate expenses as a percentage of residential revenue for 2023 and 2022 were 35.6% and 36.1%, respectively.
Gain on sale of real estate, net: The net gain during 2021 is due to the gain on sale of the Retail Portfolio ($57.7 million), partially offset by the loss on sale of the Office Portfolio ($11.2 million). 32 Liquidity and Capital Resources We believe we will have adequate liquidity over the next twelve months to operate our business and to meet our cash requirements, which include meeting our debt obligations, capital commitments and contractual obligations, as well as the payment of dividends, and funding possible growth opportunities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022. 35 Liquidity and Capital Resources We believe we will have adequate liquidity over the next twelve months to operate our business and to meet our cash requirements, including meeting our debt obligations, capital and contractual obligations, as well as the payment of dividends, and funding possible growth opportunities.
We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared.
We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared. Overview Our revenues are derived primarily from the ownership and operation of income producing property. As of December 31, 2023, we owned approximately 9,400 residential apartment homes in the Washington, DC and Atlanta metro regions.
We are currently engaged in predevelopment activities for the ground-up development of a residential property on land adjacent to Riverside Apartments. As of December 31, 2022, we had no outstanding contractual commitments related to our development and redevelopment projects and expect to fund less than $1.0 million of total development and redevelopment spending during 2023.
We previously engaged in predevelopment activities for the ground-up development of a residential property on land adjacent to Riverside Apartments, but as of the second quarter of 2022, we paused development activities.
Other NOI Other NOI classified as continuing operations increased due to higher NOI at Watergate 600 ($0.7 million).
Other NOI Other NOI decreased due to lower net operating income at Watergate 600 ($0.3 million).
Other Income and Expenses Property management expenses: Increase of $1.3 million primarily due to the acquisitions of The Oxford and Assembly Eagles Landing during the third and fourth quarters of 2021, the acquisitions of Carlyle of Sandy Springs, Marietta Crossing and Alder Park in 2022 and Trove reaching stabilization during the fourth quarter of 2021.
Other Income and Expenses Property management expenses: Increase of $0.7 million primarily due to higher management fee expenses at same-store properties ($0.4 million) and due to the acquisitions of Elme Druid Hills ($0.1 million) during the third quarter of 2023 and Elme Marietta ($0.1 million) and Elme Cumberland ($0.1 million) during the second quarter of 2022.
(2) See page 39 of the MD&A for reconciliations of NAREIT FFO to net (loss) income.
(2) See page 43 of the MD&A for reconciliations of NAREIT FFO to net (loss) income. The increase in net loss is primarily due to a real estate impairment in our office property ($41.9 million), higher interest expense ($5.5 million) and higher property management expenses ($0.7 million) in 2023.
Through our Office Portfolio and Retail Portfolio sales, which had a combined sale price of approximately $934.3 million, we executed strategic transactions that allowed us to expand into the Sunbelt regions. In connection with our strategic transformation, we are redesigning our operating model for purposes of more efficiently and effectively supporting residential operations.
During 2023, we completed the acquisition of Elme Druid Hills, a 500-unit apartment community in Atlanta, Georgia for a contract purchase price of $108.0 million. In connection with our strategic transformation, which shifted our business away from the commercial sector to the residential sector, we redesigned our operating model for purposes of more efficiently and effectively supporting residential operations.
We also believe we have adequate liquidity beyond 2023, with only $155.0 million of scheduled debt maturities prior to 2027. We will continue to assess the payment of our dividends on a quarterly basis.
W e expect to realize significant operational benefits from this operating model redesign. We also believe we have adequate liquidity beyond 2023, with no debt maturities until 2025 and only $282.0 million of scheduled debt maturities prior to 2028, based on current amounts outstanding under our Revolving Credit Facility.
Removed
Overview During the third quarter of 2021, we sold twelve office properties (the “Office Portfolio”) and eight retail properties (the “Retail Portfolio”) (see note 3 to the consolidated financial statements) for contract sale prices of $766.0 million and $168.3 million, respectively.
Added
This operating model redesign included insourcing the property-level management activities at our multifamily properties previously performed by third-party management companies. Community onboarding began in October 2022, and we have transitioned all of our residential communities to Elme management as of July 2023.
Removed
Both the Office Portfolio and Retail Portfolio meet the criteria for classification as discontinued operations in our consolidated financial statements. Our remaining office property, Watergate 600, does not meet the qualitative or quantitative criteria for a reportable segment (see note 14 to the consolidated financial statements).
Added
We do not anticipate incurring any additional transformation costs in the future. We expect to realize significant operational benefits from this operating model redesign. 30 Operating Results The discussion that follows is based on our Operating Results.
Removed
The dispositions of our office and retail properties are part of a strategic shift away from the commercial sector to the residential sector, which simplifies our portfolio to one reportable segment (residential) (the “strategic transformation”).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+1 added−2 removed4 unchanged
Biggest changeThe table below presents principal, interest and related weighted average interest rates by year of maturity, with respect to debt outstanding on December 31, 2022 (dollars in thousands). 2023 2024 2025 2026 2027 Thereafter Total Fair Value Unsecured fixed rate debt (1) Principal (2) $ 100,000 $ — $ — $ — $ — $ 400,000 $ 500,000 $ 454,564 Interest payments $ 19,340 $ 17,995 $ 17,995 $ 17,995 $ 17,995 $ 44,216 $ 135,536 Interest rate on debt maturities 2.3 % — % — % — % — % 4.5 % 4.2 % Unsecured variable rate debt Principal $ — $ — $ 55,000 $ — — $ — $ 55,000 $ 55,000 Variable interest rate on debt maturities 5.2 % 5.2 % ______________________________ (1) Includes a $100.0 million term loan with a floating interest rate.
Biggest changeThe table below presents principal, interest and related weighted average interest rates by year of maturity, with respect to debt outstanding on December 31, 2023 (dollars in thousands). 2024 2025 2026 2027 2028 Thereafter Total Fair Value Unsecured fixed rate debt Principal — $ 125,000 (1) $ — $ — $ 50,000 $ 350,000 $ 525,000 $ 466,668 Interest payments $ 23,908 $ 17,995 $ 17,995 $ 17,995 $ 16,155 $ 28,061 $ 122,109 Interest rate on debt maturities — % 5.6 % — % — % 7.4 % 4.1 % 4.9 % Unsecured variable rate debt Principal — $ 157,000 $ — — — $ — $ 157,000 $ 157,000 Variable interest rate on debt maturities 6.3 % 6.3 % ______________________________ (1) Represents a $125.0 million term loan with a floating interest rate.
The following table sets forth information pertaining to interest rate swap contract in place as of December 31, 2022 and 2021 and its respective fair value (dollars in thousands): Notional Amount Floating Index Rate Termination/ Fair Value as of: Fixed Rate Effective Date Expiration Date December 31, 2022 December 31, 2021 $ 100,000 1.205% One Month USD-LIBOR 3/31/2017 7/21/2023 $ 1,998 $ (821) We enter into debt obligations primarily to support general corporate purposes including acquisition of real estate properties, capital improvements and working capital needs. 41
The following table sets forth information pertaining to interest rate swap contract in place as of December 31, 2023 and 2022 and its respective fair value (dollars in thousands): Notional Amount Floating Index Rate Termination/ Fair Value as of: Fixed Rate Effective Date Expiration Date December 31, 2023 December 31, 2022 $ 100,000 1.205% USD-SOFR 3/31/2017 7/21/2023 $ — $ 1,998 75,000 3.677% USD-SOFR 7/21/2023 1/10/2025 740 — 50,000 3.676% USD-SOFR 7/21/2023 1/10/2025 494 — $ 1,234 $ 1,998 We enter into debt obligations primarily to support general corporate purposes including acquisition of real estate properties, capital improvements and working capital needs. 45
Removed
The interest rate on the $100.0 million term loan is effectively fixed by interest rate swap arrangements at 2.31%. Subsequent to the end of 2022, we prepaid the 2018 Term Loan with proceeds from the $125.0 million 2023 Term Loan which matures in 2025.
Added
A $100.0 million portion of the term loan was previously effectively fixed by an interest rate swap that expired on July 21, 2023. The full amount of the term loan is effectively fixed by two interest rate swaps that became effective on July 21, 2023 and expire on the loan’s maturity date of January 10, 2025.
Removed
(2) Subsequent to the end of 2022, we executed an amendment to our revolving credit facility to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins.

Other ELME 10-K year-over-year comparisons