Welcome to the Elme Community's second quarter 2023 earnings conference call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Amy Hopkins, Vice President, Investor Relations. Amy, please go ahead. Good morning. Thank you for joining our second quarter earnings call. Today's event is being webcast with a slide presentation that is available on the Investors section of our website and will also be available on our webcast replay. Before we begin our prepared remarks, I would like to remind everyone that this conference call contains forward-looking statements that involve known and unknown risks and uncertainties, which may cause actual results to differ materially, and we undertake no duty to update them as actual events unfold. We refer to certain of these risks in our SEC filings. Reconciliations of the GAAP and non-GAAP financial measures discussed on this call are available in our most recent earnings press release and financial supplement, which was distributed yesterday and can be found on the Investors page of our website. With that, I'd like to turn the call over to our CEO, Paul McDermott. Thanks, Amy. We delivered a very strong second quarter, with same-store multifamily NOI growth of 10.9% and Core FFO per share growth of 14.3% year-over-year. I am very pleased to share that we have officially completed the transition of community-level operations to Elme Management. We kicked off this strategy in 2021, and I want to thank all of the team members that contributed to countless hours to designing and implementing our new operating model. I would also like to welcome our newest community team members and thank them for all the hard work and dedication to customer service that they've shown throughout this transition. We launched our new platform with minimal disruption to our existing residents and very high community team retention. We are thrilled to have this transition behind us, and we look forward to turning our full attention to our operating initiatives. On that note, we welcomed a new Chief Operating Officer to our executive team in July. Tiffany Butcher brings extensive experience in multifamily operations that aligns well with our goals for our operating platform. I expect her leadership to enhance our ability to drive NOI growth and look forward to her participation on future earnings calls. Before I turn to our operating trends, I'd like to address our multifamily NOI guidance reduction. We had expected to see a more pronounced seasonal upswing into the spring and summer leasing seasons than we experienced in our markets. Additionally, our rebranding and transition activities had a greater impact on our ability to generate leads and push rents during the summer months than we had anticipated. These two impacts resulted in lower-than-expected new lease rate growth achieved during the second quarter and lower assumed new lease rate growth in the third quarter compared to our original expectations. As communities have transitioned, we have been closely monitoring community-level performance and have seen a rebound in our ability to drive rent growth as communities have restabilized under Elme Management. Additionally, our renewal rates and occupancy trend remain in line with our expectations. Therefore, we feel good about our outlook for high single-digit same-store multifamily NOI growth this year, which represents strong performance for our core business during a period when we were executing significant changes to our internal systems. With the execution risk related to the onboarding process now behind us, we are shifting our focus to realizing the full benefits of our new multifamily platform. Turning to operating trends, we generated effective blended lease rate growth of 3.7% during the quarter for our same-store portfolio, comprised of renewal lease rate growth of 6.4% and new lease rate growth of 0.4%. Renewal rates remained very strong throughout the summer months, and we signed renewal offers for July and August lease expirations of 5% on average, in line with our expectations for continued moderation in renewal rates over the course of the year. Our focus on occupancy continues to deliver good results, and we have driven occupancy gains across our entire portfolio since the end of last year. Same-store occupancy averaged 95.6% during the quarter, up 10 basis points compared to the prior quarter, and ending occupancy was 95.9%, up 30 basis points year-over-year. Retention remained strong at 63% during the quarter, up 200 basis points compared to the prior year, and above our historical average in the mid-50% range due to lower move-outs to own and our focus on maintaining strong retention throughout the portfolio transition to Elme Management. Our geographic expansion strategy has yielded solid results thus far, and our Atlanta communities are contributing very good growth. Revenue for our same-store Atlanta portfolio increased 15% year to date compared to prior year period, and NOI grew 24%. Occupancy for our entire Atlanta portfolio averaged 94.2% during the second quarter, 120 basis points above the market average, due to our focus on driving occupancy. Same-store multifamily revenue increased 9.6% in the second quarter compared to the prior year, comprised of approximately 9.5% growth from our D.C. metro portfolio and over 12% growth from our Atlanta portfolio. Our current rent levels translate to rental growth of approximately 5.6% year-over-year, which represents 90% of the rental rate growth we need to achieve the midpoint of our guidance. Turning to renovations, our price points provide the opportunity to offer like-new interiors at several hundred dollars below the monthly cost of Class A apartments, which allows us to generate cash-on-cash renovation premiums in the mid-teens. We have completed over 141 renovations year to date at an average ROI of approximately 14%. This return does not include the market rent growth that we achieved. By executing renovations on turn, we have the flexibility to increase or pull back the pace of renovations as revenue maximization opportunities shift. Given the very strong renewal rates we are seeing, we are strategically keeping turnover low and have therefore slowed down the pace of renovations as less homes have become available to renovate. While our total pipeline and value creation opportunity has not changed, we now expect to complete 300-350 renovations this year. With a 2,900 unit pipeline, we have more than enough runway to drive renovation-led value creation over the next several years. The rent-to-income ratio for new leases signed in the second quarter was in the mid-20s, consistent with our historical average, and the average income for those leases increased nearly 9% year-over-year, as we continue to see that income growth is keeping up with the pace of rent growth in our markets. For the first time since early 2021, the affordability outlook is improving nationwide as middle-class wages grew faster than the rate of inflation in May and June. Despite improving affordability, the cost of owning a home or living in recently built apartment communities remains unaffordable for mid-market renters in our markets. Near our communities, recent deliveries are priced $440-$680, or 28%-32% more than our rents. The cost of owning a home is an even higher differential compared to our mid-market rent levels. In addition to the relative insulation provided by our price points, most of our communities are not located in the path of new supply next year. While at the market level, annual supply will peak for Washington, D.C., and Atlanta in 3Q 2024, over 40% of Elme's communities are located in submarkets where supply is expected to peak this year. Overall, as we look towards 2024 and beyond, we see favorable demand dynamics for our price points, supported by the financial health of our residents and improving outlook for wage growth versus inflation, and the affordability of our rent levels for the deepest sections of the renter market. With that, I'd like to turn the call over to Steve Freishtat, our CFO, to discuss our transition to Elme Management and balance sheet and guidance updates. Thanks, Paul. I'll start by reiterating how pleased we are to have achieved our goal of having the full transition of community operations behind us by the end of July. Our focus on making this transition as seamless as possible to our residents supported very strong resident retention and renewal rate growth throughout the onboarding process. Thanks to the extensive amount of planning and relationship building done by our teams, 93% of our community-level staff chose to transition to Elme, which provided continuity for our residents during the transition. With the transition behind us, our teams now have significantly more capacity to focus on driving operational improvements and leveraging our new technology to increase our profitability. These operational upside initiatives include smart home packages that will drive higher rents and reduce operating expenses, reducing vacant days by implementing revised scheduling, policy, and process adjustments to manage our occupancy levels more effectively, fee income opportunities, cash management and expense initiatives, and centralizing resident accounts management, which represents phase one of our multiyear centralization initiative. We estimate the additional FFO that we expect to generate from these initiatives above what we would have otherwise generated from 2023 through 2025 to be between $4.25 million and $4.75 million. Furthermore, we have the opportunity to drive additional upside by centralizing renewal negotiations, leasing, and maintenance, and we look forward to providing more detail as we continue to make progress on our centralization plan. Moving on to our balance sheet. We are well positioned with limited exposure to interest rates and no debt maturity until 2025, with options to extend our 2025 term loan maturity another two years. Our annualized second quarter net debt to EBITDA was 4.8x, and we have over $680 million of availability on our line of credit as of quarter end. We are running below our targeted leverage levels with about $100 million-$150 million of investment capacity. We will continue to evaluate acquisition opportunities in our target markets as owners come to terms with the reality of an ongoing higher interest rate environment and will pursue further acquisitions when they create additional value for shareholders. Now, turning to our outlook for the balance of the year. We lowered the top end of our Core FFO guidance range to $0.96-$1.00 per fully diluted share. As Paul mentioned, the reduction in our same store and non-same store multifamily NOI growth guidance ranges are the result of lower than expected new lease rate growth expectations for the year. We have seen a sequential improvement in new lease rates in July and are seeing a favorable trend in August. Given our year-to-date growth achieved and the trends we are seeing heading into the fall, we feel good about our ability to achieve high single digit same store NOI growth for the year. We lowered our guidance for G&A by $750,000 at the midpoint, interest expense by $500,000 at the midpoint, and reiterated our guidance for Watergate 600. Watergate 600 is approximately 88% occupied. We have no remaining lease expirations this year and limited lease roll over the next few years. We continue to expect our Core AFFO payout ratio for this year to be at or below our mid-70s target, we are managing to an AFFO growth profile that should provide us with additional flexibility to grow the dividend over time. With that, I will now turn the call back to Paul. Thank you, Steve. To conclude, we remain on track to achieve very strong growth this year, despite some friction related to our community onboarding process. The onboarding process is now complete, and the execution risk related to transitioning our systems is behind us. We have been doing all our pricing and asset management in-house since 2017, but for the first time, we have the team and technology in place to take our platform to the next level. 93% of our community teams transitioned from our third-party managers to Elme. Our regional managers have over 20 years of experience in our markets, and we have a new COO with an extensive background in residential asset management. Given where we are today and the opportunity set ahead of us, we believe our value proposition is compelling, and we expect to earn a lower implied cap rate as we deliver the operational upside embedded in our platform. Now, operator, I'd like to open it up for questions. Thank you very much. At this time, we are opening the floor for questions. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate your line is in the queue. You may press star two if you would like to remove your question from the queue. For any participants using speaker equipment, it may be necessary to pick up your handset before you press the star keys. Please pause a moment while we poll for questions. Thank you. Your first question is coming from Jamie Feldman from Wells Fargo. Jamie, your line is live. Great. Thank you, good morning. I guess I know you gave some color on the guidance cut, but maybe if we could dig a little deeper. Can you just talk us through, you know, your initial guidance, your, your first guidance revision, and then this one, just in terms of what the process was to get the information and, you know, what you learned, you know, what, what, you know, what, what the process was that made you cut it again, just so we have some clarity on, you know, is this, is this the last time this will happen? Yeah, Jamie, this, this is Steve. I'll kind of, you know, going back to the beginning of the year, the initial guidance you spoke about. You know, we came out with an initial guidance back in September, reiterated it in, in February, you know, and saw, you know, more of a, you know, compared to where we are now, more demand in the, the spring leasing season, allowing us to drive rental growth on new lease rates than we did. When we got to April, we didn't see that early spring leasing season kind of kick in that would get us to the, the top end of our guidance. So to be transparent, we adjusted our guidance in April to reflect that. Now that we're sitting here on, on August 1st, you know, we've seen the demand trends for how we've been able to, you know, do lease rates and, and be able to push lease new lease rates. You know, we felt it appropriate to adjust it according to what we're seeing in the market, according to what we're seeing in our, you know, July and August, which, you know, as you said in our scripted marks, is, is trending better, but still not compared not up to what we, you know, had seen or what we were needed in order to hit our initial guidance. So this, you know, updated guidance, revised guidance, kind of reflects what we're seeing in the market, what we're seeing through August, and even, you know, having, you know, getting to see September, some early lease information there as well. As far as how we feel about the guidance, you know, we, we mentioned also in prepared marks that 90% of our rental rate growth is, is locked in at the end of June. You know, I mentioned being able to see lease rates now through August and September. The onboarding process is now complete and behind us, so the risks related to that, we've put that behind us and, and the impact on, on leasing. You know, we'll see a little bit of that in Q3 with the most recent onboardings, but should have that behind us, you know, here very quickly. On the expense side, that's been pretty constant for us, that we see, you know, expenses, pretty stable at this point in time, for the year. We feel pretty good about where we are and our ability to meet this revised guidance. Okay. Just to confirm, how much of the change is due to kind of bad information because, you know, pre-internalization, and how much of it is purely fundamentals? It sounds like it's mostly fundamentals from your answer. I just want to confirm that. Yeah, I mean, you know, we've looked into it. It's hard to quantify, you know, which of it is, is kind of the, the market growth versus the friction from onboarding. It both happened at the same time, during the spring leasing season. We certainly felt the impact of both. With the transition behind us, you know, as I said, we're now poised to drive growth with everything under own management. Our revised guidance reflects the more modest expectations for re- new lease rates, kind of trending throughout the rest of the year. Okay. What are your assumptions on rent growth in the third quarter and fourth quarter? Yeah, looking at, you know, as far as our renewals and, and new lease rate growth, when we talk about renewals, it's really, the renewals have, have stayed in line with how we saw them coming into the year. That high single digits at the beginning of the year, by the middle of the year, mid-single digits, and, and really trending down to the lower single digits towards the end of the year, and that's really been following that pattern. As far as new lease rate growth, you know, we've seen now, you know, July and August tick, tick up a bit from where the, the, the new lease rate growth has been, you know, around 1%, 1.5%. We've got it then, kind of coming down, towards the end of the year, and finishing the year just above flat. Do you think supply has an impact on that moderation? This is Grant. We, we definitely think that supply is having an effect on the overall market performance. You know, as we've messaged for a while, we've remained really disciplined in deploying our capital and really looking to stay below 95% of market median rents on the capital we have put out. We do think that's blunting the most direct impacts of new supply. You know, we have seen that the share of product that's in lease up or that is delivered since 2021, that's below that 95% threshold, has increased this year from around 3% to around 12%. Even so, when you look at the submarkets immediately surrounding our properties, there's still a significant gap. For Washington, that gap is around $450 or 24% versus Class A product, and in Atlanta, that's around $470 or 30%. We really don't see a lot of cross-shopping on our product within our Class B resident base. Okay, just one more for me. You know, you cut your G&A guidance, you know, how does that impact your ability to grow the platform? I think in the past you've said you can expand by 80% without adding more G&A. Does that lower that number? No, Jamie, I think that, you know, our, our movement in guidance this quarter for G&A is more impactful to just 2023 and not really ongoing. You know, what we've said before about the ability to nearly double the unit count of the company and keep G&A materially still the same, still, still applies here. We're still focused on growing the company, and this guidance adjustment hasn't changed that. Okay. Can I assume from your answer that it ramps back up in 2024, if it's just a 2023 G&A cut? we are not giving 2024 guidance right now, but, like I said, the, the impact that, we just adjusted for, this quarter for, for G&A is, is related, primarily just to 2023. What exactly is the cut? It's just a compensation adjustment, for 2023. Okay. All right. Thank you. Yep. Thank you very much. Our next question is coming from Alan Peterson from Green Street. Alan, your line is live. Hey, guys. Thanks for the time. Steve, within the NOI guidance change, I, I appreciate the comments on expenses. Is the 6%-6.5% expense range that you shared last quarter, is that still intact, or is there any idiosyncratic headwinds or tailwinds to expense growth this year, that you're not expecting to repeat? No, Alan, I think the 6%-6.5% still applies. That's where we're forecasting expenses to finish out the end of the year. Maybe there's some slight movements within some of those line items, but overall, that 6%-6.5% still applies. Understood. Then, maybe as you guys are setting out renewals today, appreciate the comments on 5% renewals in July and August. Can you give us a sense for where renewals are being sent out, within September and October, renewal, renewal negotiations? Yeah, we're still sending them out at 5%-6%. They're, We are seeing some, you know, negotiating, so that, that, you know, number could come down from what we're sending it out at. Again, like I said, we're really still seeing renewals trending in line with, with what we expected, as the year progressed, and still seeing it, you know, trending down to the low single digits by the end of the year. Understood. Then, as you guys round out the summer leasing season here, are you guys offering concessions across any of your properties on any specific floor plans or any specific communities? Yeah, Alan, you know, concessions overall remain low. However, we are seeing a slight uptick in the concessionary environment in some of our submarkets that, you know, we're, we're, we're needing to do that in order to maintain our favorable occupancy trend. You know, year to date, we're seeing concessions on about 11% of leases. When you look at across all new leases, that concession is less than half a week. Appreciate that. And last one from me, maybe for Paul. I, I know that there's an asset right now that's being marketed, some media outlets reported it, on the office market, on Eye Street, being not marketed at a low double-digit nominal cap rate. I understand that Watergate 600 has a better WALT and better occupancy today, but could we see a scenario where Watergate 600 could be marketed if it were to be today at a double-digit nominal cap rate versus inside 10%? Alan, that... I know the asset. I think, excuse me. I, I would say that that is really a apples and oranges comparison in terms of asset quality, location, the amount of CapEx that we've put back into our building, and as you highlighted, a different WALT structure, and also I would add, a different credit profile, with ours probably being superior to that. That is a bank-led note auction, which should say a lot, about, you know, those cap rates we continue to see. Quite frankly, the, the only fact pattern we do have here in Washington, D.C., has really been driven by bank auctions and note auctions at, at significant discounts. I don't think there is a comparison between the Watergate 600 and the asset on Eye Street that, that you're referencing. Obviously, you know, we'll have to wait and see, number one, if that asset, even clears the market, and number two, you know, we will, you know, take that information and probably interpolate a cap rate. Beyond that, it's really just speculation at this point, Alan. I appreciate that, Paul, and I appreciate the time, guys. Thanks. Thanks. Thank you very much. Your next question is coming from Tony Paolone from JP Morgan. Tony, your line is live. Hey, guys, you have Nahum on the line for Tony this morning. I guess, firstly, congratulations to Tiffany on joining the Elme team as COO. Just curious if you could speak to any near term, near term focuses you guys will have on the operations front? Sure, I'd be more than happy to speak to that. You know, I think a lot of the things that we were focusing on and will be focusing on going forward, were outlined in our prepared remarks and in our slides. We're obviously focused on finishing the year strong from an operations standpoint from both rent and occupancy. Then we're very excited now that we have the Elme Management in place to be able to start driving our operational upsides. We're really gonna be focusing on ways to bring down our average days of occupancy through changes to our policies and procedures, and how we're addressing move-outs, which we think will be a very strong help as we move into 2024. We're also focusing on our smart home technology, rolling that out, which, you know, obviously will help drive revenue and also, help on the expense side through some of the leak detectors and some of the, you know, other, smart thermostats that are part of that rollout. We're also testing managed Wi-Fi at one of our communities, which is a, a fee income opportunity. There's lots of operational upside, that we're working on right now that we're very excited about, that is part of that, you know, $4.25 million-$4.75 million, that Steve talked about in his remarks. Got it. Thank you. I guess one more, just from me. Maybe on the transaction market, you guys have been... I guess, like, guidance has been for acquisitions to be paused for the rest of the year, but I'm kind of curious with what you guys are seeing in terms of cap rates in the market, maybe if you could break it down just from, like, the Washington, D.C., area and then Atlanta. Sure, Nahum, this is Paul. Not a lot of movement. We haven't seen a tremendous amount of movement since our remarks in the first quarter. I would say, however, that, you know, of the brokers and even some of the operators we've screened, both in D.C. and in Atlanta, we believe that we're gonna see more product in September and towards the end of the year. Two of the brokers had commented that their BOV activity had doubled all over the last 30 days. I think just in terms of cap rates, kind of the Class A value add, we've seen trade in the low 4s and, you know, others, other Class A's, kind of in that 4.5%-4.75% range. Class B, I would go 25-50 bips on top of that. The going in yields have been fairly consistent, but where we're seeing the higher cap rate trends are lower growth, you know, kind of those outside markets. Again, that's gonna vary sub-market by sub-market and by vintage. When we look at the folks, you know, 'cause, Nahum, if we as we've said, we, we have stayed in the game, we track every deal that's out there. Our observation would be that the sellers, probably 80% of those sellers are, are institutional. We're seeing more and more closed-end fund activity or, folks trying to, fund another part of their business, in particular, you know, funding a redemption queue. On the buy side, we've seen kind of 80% of that be private and, with financing contingencies, and I'd say of that private, you know, that's really made up of high net worth, private syndicators, family offices, 1031s. The sweet spot we would observe in the marketplace right now, just appears to be that $40 million-$60 million deal, maybe, maybe even as high as $75 million. Those are candidly commanding kind of a scarcity premium right now. It, it looks like kind of a, the line in the sand is $100 million or over. I mean, we would've, we would also observe that that kind of $100 million-$120 million, all cash, really seems to be where the opportunity is. That's really because, number one, no financing contingency, offering certainty of execution being a cash buyer, and those large syndicators really cannot, really cannot syndicate, that big an equity component quick enough. The lender market, we, we've definitely seeing getting a little bit more aggressive. Lenders are really scrubbing current cash flows as we would expect them to, and adjusting for taxes and insurance. Fannie and Freddie are really not beating the market right now. I mean, they're really emphasizing, mission-driven aspects of higher quality, and affordable components. We've seen the debt funds really step up, you know, three-year deals in that 7% - 7.25% range. A lot of the deals with the private folks, we're seeing, people either buying down rate or trying to get more proceeds, you know, pushing for that higher LTV. Interestingly, those 7%-18% IRRs, we're quickly seeing turn into, you know, 12%-13%. Thank you very much. Your next question is coming from Michael Gorman, from BTIG. Michael, your line is live. Yeah, thanks. Good morning. Maybe if you could just kind of synthesize a few different things here. Paul, it sounds like you're starting to see some movement on the transaction side, which is obviously a, a potential positive as we get into the back half of the year. As you think about that, especially some of the potentially larger transactions, where maybe you have a competitive advantage, obviously, there's some capacity on the balance sheet side, but as you think about the cost of equity versus the potential proceeds from a sale of Watergate, even in a challenged market, how do you, how do you balance that out if you found a transaction where you, you needed some more equity funding? How do you think about the current value of the stock versus selling out of the Watergate 600? Well, let me, let me start off with just entering that, that entering cap rate, and then Steve can maybe talk about, you know, what we would look at in terms of, of funding sources or potentially other sources of equity. I think the, the first thing to, to say is, like, we don't just look at, you know, what the going-in cap rate is. We're investing for the long term, and our strategy has always been targeting the deepest and most underserved renter cohorts in submarkets, where we have high exposure to industries that'll benefit from job and productivity growth. You know, we've seen cap rates, Michael, just in, in the last several months, where you might be going into, in a mid-5 to upper 5, but you're quickly above a 6 in the first 9-12 months. Even as I think, as we talked about with some of our investors at Nareit, it-we're not kind of running the, the company on a quarter-by-quarter basis, but w-if we see a value creation opportunity, and there's some low-hanging fruit... I mean, just as recent as last month, you know, we, we, looked at an asset that did not have a daily pricing model, where we knew we could actually move the cap rate above, you know, over a 6, you know, in the first nine months. Those are, those are assets that we feel we feel, bear, you know, go through the underwriting process, and see if there's an opportunity to accelerate that. We are trying to create long-term value for our shareholders here. Just in our observations, when I talked about the transaction market, because we do have that capacity, and it appears that, you know, those deals over $100 million, the, the herd is really thinned out, both from, you know, buyers and lenders. The, you know, it's an opportunity that we think we would like to capitalize on, but we have to find the right transaction that fits the box. Steve, maybe you could talk about, you know, sources and. Yeah, I'll talk about the balance sheet and kind of where. Yeah ... where we get sources from, Michael Gorman. As you mentioned, you know, the first is, is our balance sheet. We're running below our targeted leverage level, so we can, of course, you know, draw on that $680 million availability on our line. You know, we can certainly go there. You mentioned the equity markets. Obviously, the capital markets have been disrupted for a while. You know, our focus is, as Tiffany Butcher pointed out, is, is executing on our plan for 23 and taking advantage of the upside that we have in front of us to be able to take... You know, to be able to bring down the implied cap rate, and be able to get, you know, equity to, you know, right now, it doesn't pencil out, but maybe to, in the future, get something where, where it might pencil out. You mentioned Watergate, but we also have, you know, other assets, you know, in, in the D.C. area, where, you know, maybe, you know, some of our multifamily assets are lower growth or maybe have a CapEx need that we could look to recycle out of, and that could be a source of capital as well, as we look to go into higher growth assets in, in the Sunb elt. You know, we've always said that we use the right capital for each opportunity, and, and that's not gonna change going forward. As we find opportunities, you know, that Paul, you know, discussed, you know, we'll, we'll look to each of these sources and, and pick the one that makes sense. Okay, thank you. Thank you very much. We appear to have reached the end of our Q&A session. I'd now like to turn the floor back over to the management for any closing comments. Thank you. Again, I would like to thank everyone for your time and interest today, and we look forward to speaking with many of you over the next several weeks. Please enjoy the rest of your summer. Thank you. Thank you very much. This does conclude today's-