Elme Communities' planned liquidation hit a snag on June 17 when a subsidiary of The Beitel Group terminated the purchase and sale agreement to acquire the 1,222-unit Riverside Apartments in Alexandria, Virginia, and related undeveloped land, for a contract sale price of $280 million, according to a June 24 filing with the Securities and Exchange Commission.
Elme and Beitel’s original PSA agreement in May had been amended to extend the inspection period from June 4 to June 18. As a result of the termination, Elme refunded Beitel’s earnest money toward the contract price, according to the filing.
Elme has recommenced its sales efforts for Riverside Apartments. It expects to market the property to a different buyer pool than its other assets, given its size. Before the termination at the property, the REIT’s target had been to complete all property sales by mid-year 2026.
The firm executed three other purchase and sale agreements, which are no longer subject to inspection periods, for three of its remaining properties — Elme Bethesda, The Kenmore and 3801 Connecticut Avenue — for aggregate gross proceeds of $168 million, per the filing.
The purchase and sale agreements for The Kenmore and 3801 Connecticut Avenue remain subject to the satisfaction of customary closing conditions, including regulatory requirements under the Tenant Opportunity to Purchase Act, per the filing.
Elme agreed to sell the 193-unit Elme Bethesda to CAPREIT, according to a May 27 SEC filing. The inspection period for the asset was to June 4, and the purchase price was reduced from $59 million to $58 million, according to a June 24 SEC filing. The closing is expected to occur no later than July 9, or 10 business days after certification of compliance with Montgomery County’s right-of-first-refusal requirements.
“There can be no assurance that the closing conditions under the purchase and sale agreements for Elme Bethesda, The Kenmore and 3801 Connecticut Avenue will be satisfied or that these property sales will be consummated on the terms and timeline provide for in the respective purchase agreements,” Elme said in the June 24 filing.
Elme Watkins sale
Despite some uncertainty regarding its other deals, Elme completed the sale of the 210-unit Elme Watkins Mill in Gaithersburg, Maryland, to RailField Partners on June 10.
The REIT used net proceeds from the sale to repay a portion of the $520 million senior secured term loan with Goldman Sachs Bank USA, leaving an outstanding balance of $251 million. The buyer purchased the property with RailField’s RG Value Add Fund, a programmatic joint venture with GCM Grosvenor.
RailField renamed the garden-style property One80 Watkins Mill, according to a press release shared with Multifamily Dive. The property has a swimming pool, fitness center, tennis court, playground and package lockers in addition to washers and dryers in every apartment. The asset, built in 1975, is currently nearly 100% occupied.
“We liked the deal because it is workforce housing in a high-cost area and the property, which was built in the 70's, has been very well maintained since it was owned by a REIT,” Jon Siegel, co-founder and chief investment officer at RailField, told Multifamily Dive in emailed comments. “It's had strong occupancy indicating that there is a lot of demand for this type of product and the market dynamics today provide for a better yield on these types of assets.”
Siegel said “buying from a liquidating REIT was a little different than typical just because they have some different motivations than everyone else.” However, he said it ended up being easy to work with Elme.
“We were concerned that they would have checked out in managing the property and that there would be nobody on the other end of the phone when we did the deal, but it turned out that Elme's management was strong and the team that we worked with was very responsive and professional,” Siegel said.
Uncertain distributions
After the Riverside termination, Elme withdrew its previously disclosed estimated ranges of liquidating distributions and is not providing an update at this time.
In a May 11 press release, the REIT said its projected distribution to shareholders would be between $16.74 and $17.02 per common share, compared to the estimated range of $17.02 to $17.47 per common share it announced in January.
Elme attributed the lower-than-projected liquidating distributions to reductions in the estimated range of proceeds from the sale of Riverside Apartments and its two remaining Washington, D.C., properties.
Elme began its selloff last year. The REIT, formerly known as WashREIT until 2022, had expanded its presence outside the Washington, D.C., metro area by acquiring properties in Atlanta. Still, its stock continued to trade at a discount to private-market values, forcing it to explore alternatives.
After initiating a “formal evaluation of strategic alternatives” last year, it took the first step to liquidate the company by selling 19 properties to an affiliate of Atlanta-based investor, developer and manager Cortland Partners for $1.6 billion in cash last November.
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