Paul T. McDermott
About Paul T. McDermott
Paul T. McDermott is Chairman, President, and Chief Executive Officer of Elme Communities (ELME), serving as trustee since 2013 and Chairman since 2018; age 63 as of April 17, 2025 . He brings decades of multifamily/office investment and operating experience from Rockefeller Group, PNC Realty Investors, Freddie Mac Multifamily, and Lend Lease . Under his leadership, ELME’s 2024 performance included same-store revenue growth of 3.3%, renewal lease rate growth of 5.1%, and sustainability milestones; Core FFO was $81.8 million, Adjusted EBITDA $120.3 million, with GAAP net loss of $13.1 million . Pay-versus-performance disclosures show five-year cumulative TSR of $65.06 on an initial $100 investment through 2024, with peer TSR $123.47; CEO compensation actually paid (CAP) was $3.27 million in 2024 .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Rockefeller Group Investment Management (Mitsubishi Estate subsidiary) | Senior Vice President & Managing Director | 2010–2013 | Led multifamily/office investment and operations |
| PNC Realty Investors | Principal & Chief Transaction Officer | 2006–2010 | Executed transactions and portfolio strategy |
| Freddie Mac (Multifamily Division) | Chief Credit Officer; Head of Multifamily Structured Finance & Affordable Housing | 2002–2006 | Built structured finance/affordable housing platforms |
| Lend Lease Real Estate Investments | Head of Washington, DC Region | 1997–2002 | Led regional development/investment activities |
Fixed Compensation
| Component | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary (CEO) | $750,000 | $750,000 | $750,000 |
| Summary Compensation – Total (CEO) | $5,279,117 | $3,707,826 | $3,980,371 |
| Non-Equity Incentive (STIP) – CEO | $942,000 | $815,250 | $990,000 |
Performance Compensation
2024 STIP Design and Results (CEO)
| Metric | Weighting | Target | Actual | Outcome |
|---|---|---|---|---|
| Core FFO per share | 30% | $0.93 | $0.93 | At target |
| Multifamily NOI Growth | 20% | 5.3% | 4.3% | Below target (between threshold and target) |
| Net Debt / Adjusted EBITDA | 15% | 5.5x | 5.7x | Below target (between threshold and target) |
| 2024 Initiatives (Customer Service Excellence; Innovation) | 10% | 7 points (target) | 8.75 points | Between target and high |
| Individual Objectives (CEO) | 25% | Committee-assessed | Committee-assessed | Reflected in payout |
| CEO STIP Payout | — | $937,500 target | $990,000 | 105.6% of target |
LTIP Structure and Select Outcomes
| LTIP Component | Weighting | Performance Hurdle | Vesting/Timing | Notable Result |
|---|---|---|---|---|
| Relative TSR (2024–2026 cohort) vs FTSE Nareit Residential subset and peer group | 60% | Threshold 33rd; Target 51st; High 76th percentile | 100% of earned performance shares vest at grant after 3-year period | Ongoing (2024–2026) |
| Time-Based Restricted Shares (2024 cohort) | 40% | Service-based | Vests 1/3 each on Dec 15, 2024/2025/2026 | Granted and vesting per schedule |
| 2022–2024 Relative TSR payout (prior cohort) | — | Company peer group | Paid in 2025 | CEO: $503,021 (54% of target $928,125) |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total Beneficial Ownership (CEO) | 669,760 common shares; less than 1% of outstanding |
| Outstanding Equity Awards at 12/31/2024 (CEO) | Unvested time-based shares: 153,164 ($2,338,814); Unearned performance shares (fair value): 101,572 ($1,551,000) |
| Vesting Schedule (CEO time-based) | 34,355 shares vest Dec 15, 2025; 18,809 vest Dec 15, 2026; 100,000 retention award vests Sep 29, 2027 (subject to service; retirement-eligible acceleration if separation not for cause after end of 2026) |
| Shares Vested in 2024 (value realized) | 78,243 shares; $1,241,465 |
| Anti-hedging/Anti-pledging | Hedging prohibited; pledging/margin loans prohibited |
| Executive Ownership Guidelines | CEO must hold common shares equal to 3.0x base salary; five-year compliance window |
Employment Terms
- CEO employment letter (Aug 20, 2013): Eligible for STIP/LTIP; 401(k) match; SERP participation; confidentiality and stock ownership guidelines; severance of 12 months base salary if terminated without cause or for Good Reason (outside change-in-control), plus pro-rata STIP/LTIP per plans .
- Severance Plan (executive officers): Salary-based severance weeks and employer-paid medical/dental/vision during severance; additive to equity/plan benefits unless change-in-control severance applies .
- Change-in-Control Agreements (double-trigger): Base salary continuation for 36 months (CEO), annual bonus during continuation based on prior 3-year average; COBRA costs up to 18 months; immediate vesting of equity and deferred comp; performance equity paid based on actual achievement at change-in-control; no single-trigger cash severance; no tax gross-ups .
- SERP (defined contribution): Contributions 12.6%–17% of base salary based on age/service; CEO aggregate SERP balance $2,234,578 at 12/31/2024; 2024 registrant contribution $127,500; aggregate 2024 earnings $316,565 .
- Clawback: Mandatory recovery of excess incentive compensation upon material restatement per SEC/NYSE rules (adopted Oct 19, 2023) .
- Deferred Compensation Plan: Officers may defer salary/STIP; STIP deferrals as RSUs with 25% company match vesting in 3 years; currently none of NEOs participate .
Board Governance
- Role and independence: McDermott is Chairman and CEO (not independent). Board mitigates dual-role risk via Lead Independent Trustee (Benjamin S. Butcher) with defined authority over agendas, info to Board, executive sessions, and shareholder communications .
- Committees and 2024 meetings: Audit (Chair: Ellen M. Goitia), Compensation (Chair: Thomas H. Nolan Jr.), Corporate Governance/Nominating (Chair: Vice Adm. Anthony L. Winns RET.); Board met 8 times in 2024; each incumbent trustee attended ≥75% of meetings; six executive sessions without CEO in 2024 .
- Independence: 7 of 8 trustees are independent; McDermott is the sole non-independent trustee; independence determinations consider relationships with Truist and JLL in context of director roles .
- Director compensation: Non-employee trustees receive $55,000 annual cash retainer, additional retainers for Lead Independent Trustee ($50,000) and committee roles, and annual $100,000 share grants; McDermott receives no additional board compensation .
Compensation Committee Analysis
- Consultant: Ferguson Partners Consulting L.P. (FPC) served as independent advisor; 2024 fees ~$45,500 .
- Peer group approach: 12-company REIT peer set spanning multifamily, office, diversified; compensation set around median base pay and up to 75th percentile total direct compensation for top-level performance .
- STIP/LTIP metrics emphasize balanced financial and TSR measures; caps and clawbacks in place; anti-hedging/anti-pledging policies .
- Say-on-Pay: 2022–2024 approvals at >96%, 94%, and 95%; program maintained without changes motivated by the vote .
Performance & Track Record
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| CEO CAP ($mm) | 3.361 | 5.415 | 5.147 | 1.844 | 3.267 |
| ELME cumulative TSR ($ per $100 start) | 78.12 | 97.07 | 69.07 | 59.34 | 65.06 |
| Peer group cumulative TSR ($ per $100 start) | 92.43 | 132.23 | 99.82 | 113.54 | 123.47 |
| GAAP Net (Loss) Income ($000s) | (15,680) | 16,384 | (30,868) | (52,977) | (13,103) |
| Core FFO ($000s) | 119,953 | 89,878 | 77,340 | 85,247 | 81,834 |
Additional 2024 operating highlights: same-store revenue growth 3.3%; resident retention 66%; renewal lease rate growth 5.1%; strategic initiatives implemented; ESG ratings improved; formal strategic alternatives review initiated Feb 13, 2025 .
Director Service Highlights for McDermott
- Board service: Trustee since 2013; Chairman since 2018 .
- Independence: Not independent (executive chairman); Board employs Lead Independent Trustee structure to address governance balance .
- Committees: As CEO/Chairman, not listed as a member on standing committees (Audit, Compensation, Corporate Governance/Nominating) .
- Attendance: Board met 8 times in 2024; incumbents ≥75% attendance; executive sessions without CEO held 6 times .
Director Compensation (for reference)
| Item | Amount |
|---|---|
| Annual cash retainer (non-employee trustee) | $55,000 |
| Lead Independent Trustee additional retainer | $50,000 |
| Annual equity grant (non-employee trustee) | $100,000; fully vested on grant |
| McDermott board compensation | None (as CEO) |
Investment Implications
- Compensation alignment: 2024 STIP tied to Core FFO/share, NOI growth, leverage, strategic initiatives, and individual goals; CEO earned 105.6% of target ($990k), reflecting mixed financial attainment but strong initiatives execution . LTIP emphasizes multi-year relative TSR with clear percentile hurdles, aligning long-term pay with shareholder returns .
- Retention risk and selling pressure: A 100,000-share retention award vests on Sep 29, 2027, with retirement-eligibility acceleration after end-2026 upon certain separations; additional time-based tranches vest Dec 15, 2025 and 2026, which could create scheduled liquidity events; anti-hedging/pledging policies reduce misalignment risk .
- Change-in-control economics: Double-trigger protection with 36 months salary continuation for CEO, bonus continuation and full equity vesting upon qualifying termination post-transaction; no tax gross-ups; signals retention through transitions but meaningful payout exposure if a deal occurs .
- Ownership alignment: CEO holds 669,760 shares; unvested and unearned awards indicate continued alignment over 2025–2027 through scheduled vesting; executive ownership policy requires 3x salary holdings .
- Governance mitigants: Dual-role CEO/Chairman offset by empowered Lead Independent Trustee and independent committee chairs; regular executive sessions without management . Strong say-on-pay support (>94% last three years) suggests shareholder acceptance of program structure .