Elme sells last asset, Riverside, to FPA for $250M after retrade

Elme Communities has a contract to sell the last property it owns. On July 23, Elme Riverside Apartments LLC signed a purchase and sale agreement with FPA Multifamily, LLC for Riverside Apartments, a 1,222-unit community in Alexandria, Virginia, plus related undeveloped land, at a contract price of $250.0 million. That is $204,500 a unit. It is also $30 million under the $280 million contract Elme signed on May 8 with a buyer that walked on June 17, one day before an inspection period that had already been extended from June 4 to June 18.

Why it matters

Every developer holding an asset under contract should read the June and July filings side by side, because together they price the two halves of a retrade. The first buyer terminated inside its inspection window and, per the June 8-K, had its earnest money refunded in full. Cost to walk: zero. Cost to the seller of going back to market on a large asset in a soft submarket: $30 million, or roughly 11% of the original price, plus a quarter of delay. Elme names the reasons itself, citing prolonged softening in the D.C. area and “the relatively smaller pool of potential purchasers for larger assets.” Size cuts both ways. It concentrates value and it thins the bid.

The numbers

The new deal carries a $4.0 million earnest money deposit, funded $2.0 million within one business day of signing and $2.0 million within one business day after the inspection period expires on August 20, at which point the full deposit goes hard. Closing is set no later than September 14. FPA is not a stranger here: the 8-K discloses it had already entered three other purchase and sale agreements covering four other Elme properties, each negotiated independently.

The shareholder math is the cleanest read on the haircut. Elme’s estimated total liquidating distribution fell from a range of $16.74 to $17.02 per share in May to $16.41 to $16.61 now, against roughly 88.9 million fully diluted shares. Spread $30 million across that count and you get about 34 cents, which is most of the drop.

What’s next

Four properties remain, about $418 million in aggregate gross proceeds, with $251 million still outstanding on the $520 million Goldman Sachs term loan as of July 23. The two D.C. assets wait on TOPA. Elme is targeting NYSE delisting and dissolution in the fourth quarter, one quarter later than the plan the busted contract broke. More national capital markets coverage.