Elme Communities' liquidation process hit a roadblock on June 17. According to a filing with the U.S. Securities and Exchange Commission (SEC) on June 24, a subsidiary of The Beitel Group terminated the purchase and sale agreement (PSA) to acquire the 1,222-unit Riverside Apartments and related undeveloped land in Alexandria, Virginia, which had a contract price of $280 million.

The original PSA between Elme and Beitel, reached in May, had been amended to extend the inspection period from June 4 to June 18. The filing shows that due to the termination, Elme refunded the deposit paid by Beitel, which had been credited toward the contract price.

Elme has restarted the sales process for Riverside Apartments. Given the property's size, the company plans to market it to a different buyer pool than its other assets. Before this termination, the REIT had targeted completing the sale of all properties by mid-2026.

According to the filing, the company has signed three other purchase and sale agreements for its remaining three properties—Elme Bethesda, The Kenmore, and 3801 Connecticut Avenue—which are no longer subject to inspection periods, with a combined total sales price of $168 million.

Among these, the purchase and sale agreements for The Kenmore and 3801 Connecticut Avenue remain subject to customary closing conditions, including regulatory requirements under the Tenant Opportunity to Purchase Act.

According to a May 27 SEC filing, Elme agreed to sell the 193-unit Elme Bethesda to CAPREIT. The June 24 filing shows the inspection period for that asset was originally set to end June 4, and the purchase price was reduced from $59 million to $58 million. Closing is expected no later than July 9, or 10 business days after Montgomery County's right of first refusal certification requirement is met.

Elme said in the June 24 filing: "There can be no assurance that the closing conditions in the purchase and sale agreements for Elme Bethesda, The Kenmore, and 3801 Connecticut Avenue will be satisfied, or that the sales of these properties will be completed on the terms and timelines set forth in their respective purchase agreements."

Elme Watkins Mill deal completed

Despite uncertainty around other transactions, Elme completed the sale of the 210-unit Elme Watkins Mill property in Gaithersburg, Maryland, to RailField Partners on June 10.

The REIT used the net proceeds from the sale to repay a portion of its $520 million senior secured term loan with Goldman Sachs Bank USA, leaving an outstanding balance of $251 million. The buyer acquired the property through RailField's RG Value Add Fund, a joint venture with GCM Grosvenor.

According to a press release obtained by Multifamily Dive, RailField has renamed the garden-style property One80 Watkins Mill. The property features a pool, fitness center, tennis courts, playground, and package lockers, and each apartment includes a washer and dryer. Built in 1975, the asset is currently nearly 100% occupied.

"We liked this deal because it's workforce housing in a high-cost area, and the property was built in the '70s and has been very well maintained since the REIT owned it. Its strong occupancy shows there is strong demand for this type of product in the market, and current market dynamics offer better yields for this kind of asset," RailField co-founder and Chief Investment Officer Jon Siegel told Multifamily Dive in an email comment.

"Buying a property from a liquidating REIT is a bit different than usual because their motivations are different from other parties," Siegel said, but he also noted that the collaboration with Elme ultimately went very smoothly.

"We were concerned they might let property management slip and there might be no one to deal with during the transaction, but it turned out Elme's management is very strong, and the team we worked with was responsive and professional," Siegel said.

Increased distribution uncertainty

Following the termination of the Riverside transaction, Elme withdrew its previously disclosed range for liquidation distributions and is not providing an update at this time.

In a May 11 press release, the REIT had projected shareholder distributions of $16.74 to $17.02 per share, down from the $17.02 to $17.47 range announced in January. Elme attributed the lower distribution expectations to a narrower range of estimated proceeds from the sale of Riverside Apartments and the two remaining D.C. properties.

Elme began selling assets last year. The company, formerly known as WashREIT and renamed in 2022, had expanded beyond the D.C. metro area through the acquisition of Atlanta properties. However, its stock price continued to trade below private market values, prompting it to explore other options.

After launching a "formal review of strategic alternatives" last year, the company took its first step toward liquidation in November, selling 19 properties to affiliates of Atlanta-based investor, developer, and manager Cortland Partners for $1.6 billion in cash.

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