XML 29 R12.htm IDEA: XBRL DOCUMENT

REAL ESTATE

12 Months Ended

Dec. 31, 2024

NOTE 3: REAL ESTATE

As of December 31, 2024 and 2023, our real estate investment portfolio classified as income producing property that is held and used, at cost, consists of properties valued as follows (in thousands):


	December 31,
	2024		2023
Residential	$	2,289,044	$	2,249,833
Other (1)	94,289		94,284
	$	2,383,333	$	2,344,117

______________________________

(1) Consists of Watergate 600

Our results of operations are dependent on the overall economic health of our markets and residents which are affected by external economic factors, such as inflation, consumer confidence and unemployment rates, as well as changing residents and consumer requirements.

As of December 31, 2024, one property, Riverside Apartments, accounted for more than approximately 10% of total assets and more than approximately 10% of real estate rental revenue.

From time to time, we have properties under development/redevelopment and held for current or future development. The cost of our real estate portfolio under development or held for future development as of each of December 31, 2024 and 2023 was $31.0 million.

As of December 31, 2024, we have invested $30.4 million, including the cost of acquired land, in a residential development adjacent to Riverside Apartments. In 2022, we paused development activities at the aforementioned property and ceased associated capitalization of interest on spending and real estate taxes, though we still consider the future completion of this development to be probable. We also continue to capitalize qualifying costs on several other projects with minor development activity necessary to ready each project for its intended use.

Acquisitions

There were no acquisitions during 2024. Properties acquired during the two years ended December 31, 2023 were as follows:


Acquisition Date	Property	Type	# of Homes (unaudited)	Ending Occupancy	Contract Purchase Price (in thousands)
September 29, 2023	Elme Druid Hills	Residential	500	96.0%	$	108,000
			500		$	108,000

February 1, 2022	Elme Sandy Springs	Residential	389	90.7%	$	105,586
May 5, 2022	Elme Marietta	Residential	420	90.2%	107,900
May 5, 2022	Elme Cumberland	Residential	270	95.9%	69,750
			1,079		$	283,236

The results of operations from acquired operating properties are included in the consolidated statements of operations as of their acquisition dates.

The revenue and earnings of our acquisitions during their year of acquisition for the two years ended December 31, 2023 are as follows (in thousands):


	Year Ended December 31,
	2023		2022
Real estate rental revenue	$	2,549	$	14,937
Net loss	(1,511)		(11,126)

As discussed in note 2, we record the acquired physical assets (land and building) and in-place leases (absorption costs) and any other assumed liabilities by allocating the total cost of the acquisitions on a relative fair value basis.

We recorded the total cost of the above acquisitions as follows (in thousands):


	2023		2022
Land	$	25,249	$	50,547

Building	79,281		220,825

Absorption costs	3,660		7,300



Aggregate discount on assumed mortgages	—		5,042

Total acquisition cost	108,190		283,714
Outstanding balance on assumed mortgages	—		(76,554)
Total carrying amounts recorded	$	108,190	$	207,160

The difference in the total acquisition cost of $108.2 million for the 2023 acquisition and the cash paid for the 2023 acquisition per the consolidated statements of cash flows of $107.6 million is due to net credits received at settlement totaling $0.6 million.

The difference in the total cost of the 2022 acquisitions of $283.7 million for the 2022 acquisitions and the cash paid for the acquisitions per the consolidated statements of cash flows of $204.4 million is due to the assumption of two mortgage notes secured by Elme Marietta and Elme Cumberland for an aggregate outstanding balance of $76.6 million and credits received at settlement totaling $2.8 million. In September 2022, we extinguished the liabilities associated with the two mortgage notes though defeasance arrangements.

Fair Value of In-place Leases

Balances, net of accumulated depreciation or amortization, as appropriate, of the components of the fair value of in-place leases at December 31, 2024 and 2023 were as follows (in thousands):


	December 31,
	2024						2023
	Gross Carrying Value		Accumulated Amortization		Net		Gross Carrying Value		Accumulated Amortization		Net
Tenant origination costs	$	2,230	$	804	$	1,426	$	2,262	$	281	$	1,981
Leasing commissions/absorption costs	67,345		63,809		3,536		67,504		60,887		6,617

Net lease intangible liabilities	13,055		11,208		1,847		13,055		10,499		2,556

Amortization of these combined components during the three years ended December 31, 2024, was as follows (in thousands):


	Year Ended December 31,
	2024		2023		2022
Depreciation and amortization expense	$	3,894	$	4,530	$	12,604
Real estate rental revenue increase, net	(766)		(806)		(944)
	$	3,128	$	3,724	$	11,660

Amortization of these combined components over the next five years is projected to be as follows (in thousands):


	Depreciation and amortization expense		Real estate rental revenue, net increase		Total
2025	$	2,020	$	(709)	$	1,311
2026	1,922		(662)		1,260
2027	1,020		(476)		544
2028	—		—		—
2029	—		—		—

Properties Sold and Held for Sale

We intend to hold our properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing and owning our properties, and to make occasional sales of the properties that no longer meet our long-term strategy or return objectives and where market conditions for sale are favorable. The proceeds from the sales may be reinvested into other properties, used to fund development operations or to support other corporate needs or distributed to our shareholders. Depreciation on these properties is discontinued when classified as held for sale, but operating revenues, other operating expenses and interest continue to be recognized through the date of sale.

We sold no properties in 2024, 2023 or 2022.

Real Estate Impairment

No properties, including assets held for development, had any recognized impairment charges during 2024. Should external or internal circumstances change requiring the need to shorten holding periods or adjust future estimated cash flows from our properties, we could be required to record additional impairment charges in the future.

During 2023, we recognized an impairment charge of $41.9 million on Watergate 600 in order to reduce its carrying value to its estimated fair value, which declined due to changes in market conditions in the Washington, DC metro region office market. The estimated fair value is inherently subjective because there are few observable market transactions for similar office properties. This fair valuation fell into Level 3 in the fair value hierarchy due to its reliance on significant unobservable inputs (see note 9). In accordance with ASC 820, we estimated the fair value using a discounted cash flow model which required certain significant assumptions, including a discounted cash flow term of 5 years, an average economic occupancy of 80.5%, and a terminal capitalization rate of 7.5%.