REIT's Liquidation Plan Upended After $280M Sale Falls Through
Elme Communities, a multifamily REIT in the process of dissolving, has withdrawn its payout estimate for shareholders after a deal to sell its largest remaining property collapsed.
Elme disclosed that a subsidiary of Beitel Group on June 17 terminated an agreement to buy Riverside Apartments, a 1,222-unit community in Alexandria, Virginia, for $280M, according to a filing with the Securities and Exchange Commission.
The terminated contract, which includes adjacent undeveloped land, throws uncertainty into when Elme will be able to sell the property, how much it would get in proceeds, and when it would be able to fully repay a $520M term loan from Goldman Sachs. As of Wednesday, the balance on that loan was $251M.
Elme’s stock was down 35% as of Thursday morning, representing a roughly $63.5M loss of market value.
Representatives for Elme and Beitel Group didn’t immediately respond to requests for comment.
Elme, formerly known as Washington REIT, in August announced its plans to liquidate after it reached a deal to sell two-thirds of its portfolio to Atlanta-based Cortland. Elme completed that sale in November and obtained the $520M in financing to complete its dissolution.
Elme has said it plans to repay the loan with net proceeds from the sales of its remaining properties. In its SEC filing on Wednesday, the REIT said it completed the sale of another property, Elme Watkins Mill, on June 10 and that it is in the process of selling its three other properties.
“The Term Loan cannot be fully repaid without sufficient proceeds from property sales, including proceeds from the sale of Riverside Apartments,” Elme said in the filing.
The REIT has already lowered its estimate twice this year on how much shareholders can expect to receive when it completes the liquidation process. Elme in May said it lowered its predictions due to sluggish D.C.-area market conditions.
It also disclosed that the price it is receiving for Elme Bethesda, a 193-unit apartment building at 5114 Dudley Lane, fell from $59M to $58M during the inspection period.
Elme withdrew its previous payout estimate due to the “uncertainty surrounding the timing of the sale of Riverside Apartments,” which it says might be below the proceeds the company had anticipated under the now-terminated contract.
It said it expects to provide an updated estimate after it enters into a new purchase agreement for Riverside. Elme said in the filing that it has “recommenced its marketing efforts” for the property.
