Elme Communities Liquidation Roiled by Scuttled Sale

Staying in business is hard. So is getting out of business, at least for one real estate investment trust.

Elme Communities’ efforts to liquidate its assets and dissolve hit a snag last week when a sale of its largest remaining property fell apart, Bisnow reported. The termination of the property sale was disclosed to the Securities and Exchange Commission.

The Maryland-based firm had agreed to sell the 1,222-unit complex known as Riverside Apartments to a subsidiary of the Beitel Group for $280 million. It’s unclear why the deal fell apart, but Elme is already looking to restart marketing of the property in Alexandria, Virginia.

Elme and Beitel did not respond to requests for comment from the publication.

The sale casts doubt on Elme’s ability to repay a $520 million term loan provided by Goldman Sachs to finance the dissolution of the firm. The balance on the loan was $251 million as of Wednesday; Elme maintains that sale proceeds will help it pay off the debt.

Elme’s been trying to liquidate its holdings since August. It closed on a deal to sell two-thirds of its portfolio to Cortland in November and sold Elme Watkins Mill a couple of weeks ago. The firm is also working on the sale of three additional properties, according to its SEC filing.

In March, Elme sold the Watergate 600 office building in Washington, DC, for $52.5 million, a roughly 60 percent drop in value from its 2017 purchase price of $135 million. The buyer was local family office Jetset Hospitality, which structured the purchase as a 1031 exchange to defer capital gains taxes from a prior property sale; the sale marked Elme’s complete exit from office ownership.

Meanwhile, shareholders wait to see what their payout will be when the process comes to a close. Elme’s guidance on those payouts has fallen multiple times since it was first issued, due to both market conditions and fears that proceeds from the Riverside Apartments deal wouldn’t meet expectations (before the sale didn’t happen at all). It does not expect to provide another estimate before signing a fresh contract to sell Riverside Apartments.

On Wednesday, Elme’s stock cratered upon the sale cancellation news. It ticked up slightly in Friday morning trading, but is still down to $1.46 per share, a fall of more than 91 percent year-to-date.

— Holden Walter-Warner