Elme Communities Reaches Deal To Sell $1.6B Portfolio, Plans Liquidation

Elme Communities, the Bethesda-based real estate investment trust formerly known as WashREIT, is moving to dissolve. The company is selling two-thirds of its portfolio to another multifamily firm and putting the rest on the market.

The multifamily owner has reached an agreement to sell 19 of its properties to Atlanta-based Cortland for $1.6B in cash and plans to put the 10 other properties in its portfolio on the market, Elme announced Monday morning. 

Of the properties Cortland would acquire, 16 are in the greater D.C. metro area, and three are in the greater Atlanta market. Elme is putting the rest of its real estate holdings — nine multifamily properties in those two markets and one office property, Watergate 600 in D.C. — up for sale. 

It comes after the company announced on its earnings call in February that it had initiated a “formal evaluation of strategic alternatives.”

“Following a thorough Board-led process, and despite our successful transformation into a focused multifamily platform with strong operating capabilities, market conditions have not allowed us to lower our cost of capital in a way that supports accretive growth,” Elme President and CEO Paul McDermott said a release Monday.

Elme is under a purchase and sale agreement with Cortland that is expected to close in the fourth quarter, subject to shareholder approval, the release says. 

Elme plans to sell the rest of its properties over the next 12 months and is poised to receive $520M in debt financing from Goldman Sachs for those assets, it said. 

The lead independent trustee of Elme’s board, Benjamin Butcher, said in the release that the board unanimously decided that the chosen path is “most likely to result in the greatest value for shareholders” compared to other alternatives considered, including continuing to operate the business. 

The company said shareholders will receive $14.68 to $15 per share for the Cortland sale and $2.90 to $3.50 per share for the rest of the asset sales.

When it was named WashREIT, the company owned a large portfolio of office and retail properties in the D.C. area, but it sold those assets for nearly $1B in 2021 as it shifted its focus to multifamily. It changed its name to Elme Communities in 2022. McDermott, who became WashREIT's CEO in 2013, has remained in the company's top role. 

For Cortland, the pending acquisition is the latest in a series of big investments in D.C. metro multifamily over the last few years. 

The company made a $1B investment in four Northern Virginia apartment buildings in 2022. In July 2024, it paid $104M for a 298-unit apartment building near Amazon HQ2, as Bisnow first reported. It then told the Washington Business Journal the next month that it planned to invest another $1B in the apartment market.

Those plans now seem to have come to fruition. Through the Elme deal, Cortland is absorbing properties spread across Arlington, Alexandria, Falls Church, Herndon, Manassas, McLean and D.C. proper. The three in Georgia are in Stockbridge, Smyrna and Atlanta. 

“This transaction is a major milestone in Cortland’s history, as we significantly grow our presence in the greater Washington, D.C. area and our home state of Georgia,” Cortland CEO Steven DeFrancis said in Elme’s release.

An analysis from JPMorgan Chase analysts Monday estimated that the overall transaction would come in at a 6.2% implied cap rate, with the Cortland deal at a 5.7% cap rate, the Watergate office building in the “low teens” and the remaining nine multifamily properties in the “low/mid 6s.”

“Overall, while pricing wasn’t as strong as we hoped, we think that the ELME board and management ran a good process to try to maximize value,” the analysis says. “This process included 80 counterparties and a variety of deal types. We think the realization that it was going to have a difficult time achieving an attractive cost of capital in the public markets and was better off taking the money today for shareholders deserves kudos.”

Elme's stock price was up more than 8% from opening Monday to $16.43 per share as of market close.

UPDATE: AUG. 4, 4:10 P.M. ET: This article has been updated to include insight on the deal from JPMorgan Chase analysts and Elme's stock price at market close.