Elme Communities (ELME) Earnings Call Transcript & Summary

Hello and welcome to the annual meeting of shareholders of Washington Real Estate Investment Trust. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Ed Civera, Lead Independent Trustee of WashREIT. Mr. Civera, the floor is yours.

Thank you, and good morning, and welcome to the Virtual 2020 Annual Meeting of Shareholders for Washington Real Estate Investment Trust. I am Ed Civera, the company's Lead Independent Trustee, and I will act as the Chairman of this meeting. I now call to order the 2020 annual meeting. This is our first virtual meeting, and we hope it will run smoothly and without glitches, but if we do run into any technical issues, we want to apologize in advance. The rules of the meeting have been posted on the meeting center site. If anyone is having IT issues related to participation in this meeting, please call 800-565-9748 or e-mail, info@washreit.com. We note that this contact information is also available in the rules of the meeting. As a reminder, this meeting is for shareholders and invitees only. Just a quick procedural point, Taryn Fielder will act as inspector of election. She has already taken the oath as inspector of election, which will be filed with the minutes of the meeting. I'd like to take a few minutes to recognize the members of our Board of Trustees, all of whom are participating in today's virtual meeting. Ben Butcher is the CEO, President and Chairman of the Board of STAG Industrial, Inc., a publicly traded REIT specializing in industrial properties. Bill Byrnes, is the retired Chairman of the Board of Directors of CapitalSource, Inc. and a former Managing Director and Head of the financial institutions investment banking group with Alex Brown & Sons. Ellen Goitia is a CPA and the former Senior Partner in charge of KPMG's Chesapeake Business Unit Audit practice. Ellen is also the Chair of our Audit Committee. Paul McDermott is the Chairman of the Board and CEO of Washington Real Estate. We will hear more from Paul later in the meeting and attendees will have an opportunity to ask him questions. Tom Nolan, is the former Chairman, CEO and President of Spirit Realty Capital. Tom is also the Chair of our Compensation Committee. Andy Winns is the President Latin America, Africa region at Lockheed Martin Corporation and a retired Vice Admiral in the United States Navy. Andy is also the Chair of our Corporate Governance and Nominating Committee. And as for myself, I am the retired Chairman of the Board of Catalyst Health Solutions, Inc. and the former Chief Operating Officer and Co-Chief Executive Officer of United Payors & United Providers. Each of the current trustees, including myself, have been nominated for another 1 year term on the Board of Trustees. Finally, I'd like to acknowledge the participation of Steve Riffee, who is the Chief Financial Officer of Washington Real Estate and Jim Sexton, a partner with Ernst & Young LLP, the auditor that the Audit Committee has appointed to serve as the company's independent registered public accounting firm for the year ending December 31, 2020. Each of Steve and Jim are available to answer any appropriate questions. Taryn Fielder is acting as Secretary for this meeting and will start with some initial matters. Taryn is our General Counsel, and she will confirm that a quorum is present in person or by proxy before proceeding to introductory matters and commencement of voting. I will now turn it over to Ms. Fielder.

Thank you, Ed. At least a majority of all of the votes entitled to be cast are represented at this virtual meeting, either in person or by proxy. And therefore, a quorum is present. Our presentation today will contain financial measures such as core FFO and NOI that are non-GAAP measures, and we have provided reconciliations to those measures in our materials on our website at www.washreit.com. Today's presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act that involve risks, uncertainties and other factors that are detailed from time to time in our 10-K and other filings with the SEC. We assume no obligation to update forward-looking statements. I will now describe the proposals to be voted upon. Proposal one is the election of Ben Butcher, Bill Byrnes, Ed Civera, Ellen Goitia, Paul McDermott, Tom Nolan and Andy Winns as continuing members of the Board of Trustees, and each of the foregoing nominees will serve until the 2021 annual meeting of shareholders. Proposal 2 is to approve by advisory and nonbinding vote our executive compensation. Proposal 3 is the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2020. A copy of the notice, proxy statement of these proposals and related annual report are submitted to this meeting and available for review. Before shareholders vote on these proposals, we would give people the opportunity to ask any questions that have been submitted prior to the meeting that relate to these proposals as described in the proxy statement. Note that there will be a Q&A opportunity later with regard to company matters. Ed, I can confirm that there have not been any questions submitted with respect to the proposals. So we now call for the vote on proposals 1, 2 and 3 each as described in the proxy statement. All persons acting as proxies or shareholders who have not already voted should submit their proxies or ballots at this time. Shareholders who have already voted by proxy need not cast ballots in the voting today unless they wish to change the vote on their proxies. The polls are now open. If you previously registered to attend this virtual meeting and have not already voted or wish to change any of your votes, please do so now in accordance with the instructions on your computer screen. We will hold the polls open during the CEO's remarks. Paul, you have the floor.

Thank you, Taryn, and good morning to all. We hope that everyone is safe and healthy during these challenging times. Today, I will provide a recap of 2019 and an update on where we stand and the actions that we are taking to successfully navigate the global pandemic. Given that we are using a virtual meeting format with audio only, I encourage you to review our most recent investor presentation, which can be found on our website, www.washreit.com under the Investors tab. Here, you can find a detailed overview of our investment strengths as well as information about recent collections and COVID-19 management strategies. As we manage through this unfortunate situation, our top priority continues to be the safety of our residents, tenants, employees and each of their families. We are following recommendations from health care authorities and orders from our local governments and being proactive. The past several years have been dedicated to developing the tools and resources to allow us to perform nearly all of our corporate functions from remote locations. In preparation for situations like the -- we find ourselves in now, our teams have risen to the challenge, working and collaborating from across the region to keep the business running smoothly and efficiently. We entered the current year with a strong balance sheet and further improved our liquidity position with a $150 million term loan, which closed in early May, bringing total available liquidity to $520 million. We have no major capital requirements for the balance of the year and access to additional liquidity, if needed. Thus far, our rent collections have been very strong and May collections are tracking above April for both our multifamily and commercial portfolios. We will continue to closely monitor collection trends and provide periodic updates to the investment community. Looking forward, we remain committed to our long-term investment strategy, which has proven prudent in derisking the company as we saw with our 2019 capital activities. We executed $1.3 billion of strategic transactions last year, a company record, to streamline and derisk our portfolio and improve our ability to deliver long-term value creation. We sold our riskiest big box retail assets and allocated that capital to 8 value-oriented multifamily assets that are positioned to capitalize on the supply/demand imbalance for affordable rental options. The 7 property Assembly portfolio allowed us to expand our affordability GAAP strategy to the suburban DC markets where home purchase prices are out of reach for millennials and working class renters. Our value-add unit renovation program delivers elevated product to the market where there is little else to meet the demand. Landmark at Alexandria was our 8th acquisition of the year, adding to our growing suburban portfolio. With these acquisitions, our 5-year renovation pipeline grew to over 3,000 units and multifamily is now our largest asset class. Alongside our strategic capital allocation, we signed 1.1 million square feet of commercial leases, including several long-term leases with high-quality tenants. Our commercial leasing volume marks a 4-year record in the impact of this leasing as well as our commercial assets significantly reduced our near-term commercial lease expirations and set us up for growth as new leases commence. In closing, we created a solid foundation for long-term growth in 2019. Although we, like everyone, will need to absorb the near-term impact of the economic shutdown, we have well-located residential units and a 3,000 unit 5-year renovation pipeline in the path of growth when the economy resumes. The Trove, our multifamily development, will provide substantial growth once it stabilizes with much of the investment already made. Finally, we have a strong balance sheet with a substantial amount of available liquidity. All in all, we are certain of the strength of our organization and confident in our ability to support our stakeholders, preserve our operational flexibility and continue to deliver long-term value creation.

Thank you, Paul. We will now conclude the voting matters and announce the results. The polls are now closed. As to proposal one, Mr. Butcher, Mr. Byrnes, Mr. Civera, Ms. Goitia, Mr. McDermott, Mr. Nolan and Mr. Winns have each received the affirmative vote of more than 96% of the votes cast by shareholders on the matter. Therefore, each nominee has been duly elected to serve as a trustee until the 2020 annual meeting of shareholders. Proposal 2, the advisory and nonbinding vote on our executive compensation has received the favorable vote of more than 97% of the votes cast by shareholders on the matter. Therefore, this proposal has been approved. Proposal 3, ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020, has received the favorable vote of more than 98% of the votes cast by shareholders on the matter. Therefore, this proposal has been approved. We will now entertain questions with regard to company matters that have been submitted.