Elme Communities

Welcome to the Elm Community's Third Quarter 2024 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, and thank you for joining our Third 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 be available on our webcast replay. Statements made during this call may constitute 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 investor's page of our website. Presenting on the call today will be Paul McDermott, our CEO, Tiffany Butcher, our COO, and Steve Freistadt, our CFO. And with that, I will turn the call over to Paul.

Thanks, Amy. Good morning, everyone, and thank you for joining our call on Election Day. This is an exciting day for our region, and we look forward to watching the results unfold. I hope you all have either voted or plan to do so. I will begin today's call by discussing the main factors driving our performance in our markets, including supply and demand dynamics and their implications for ELM. Tiffany will cover our operating trends and growth initiatives, and Steve will discuss our financial results and outlook. During the quarter, demand remained strong across the Washington Metro and Atlanta Metro regions. Absorption in our markets was the highest it's been since the fourth quarter of 2021, driven by wage growth, stable employment, in-migration, and resident retention. Wage growth has been outpacing rent growth for nearly two years in our markets, contributing to stable financial conditions for renters. Employment data shows that job growth, on average, is stronger for middle-income wage earners relative to higher-income segments in our markets, which is a favorable trend for Elm. Additionally, Elm's largest employment industries are either adding jobs or maintaining jobs, resulting in a stable base of employment for our residents. In migration, which is a more pronounced demand driver in the Atlanta region than the Washington region, is driving record levels of absorption. Atlanta metro in-migration is expected to have increased by over 20% by year-end 2024 compared to 2023, and the region is expected to outpace the U.S. through 2029, with 5% population growth in the 2020 to 34-year-old age bracket, according to Oxford Economics. Resident retention also plays a significant role in demand dynamics, and our retention rate remains very strong. Even if home purchasers return to a more normalized pattern, our value-oriented resident base tends to be stickier, with an average tenure of about 2.7 years. We believe that demand outlook for our value-oriented price points is positive both in the near and long term. Now, turning to supply. The impact of supply on our portfolio differs across our markets, as our Washington Metro communities are facing very low competition from new supply, especially in our Northern Virginia submarkets, while our Atlanta communities are feeling more of an impact. In the Washington Metro, annual net inventory growth was a healthy 1.8% during the third quarter, and annual net inventory growth for our Northern Virginia submarkets was just 1.1%. Looking ahead over the next year, Northern Virginia's inventory growth is expected to remain at 1.4%, which is well below the U.S. average of 3.1%. In addition to low supply overall, only a very small portion, or 4%, competes with our communities on price. For our Atlanta submarkets, net inventory ratios remained elevated at 4% during the third quarter. Additionally, we are seeing normal delays in deliveries, with some delivery estimates that were previously anticipated to occur in the fourth quarter, now expected in early 2025. While half of our Atlanta submarkets had no deliveries over the past year and only 10% of new supply in the third quarter was competitive with our communities, supply is having a more widespread impact as rent compression and concessions have caused temporary disruptions to typical demand pools. On average, we do not expect supply to increase above the current level in our submarkets. However, we expect the curve to be relatively flat between third quarter of 2024 and the first quarter of 2025. In 2025, two-thirds of our Atlanta submarkets are projected to have net inventory ratios that are less than 1.7%. and we expect the overall level of demand relative to supply to improve throughout the year. Units under construction and new starts continue to decline significantly across our Atlanta metro submarkets, pointing to a very low supply in 2026 and 2027. Given the improving supply dynamics and favorable demand trends, our medium and long-term outlook for Atlanta is strong. Furthermore, over the near term, we expect to deliver marked improvement in NOI growth in Atlanta, which Tiffany will discuss in more detail. And with that, I'll now turn it over to Tiffany.