What changed in this filing

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Item 9A. Controls and Procedures

2023-02-17 compared with 2022-02-18 · 362 added, 459 removed, 1997 unchanged (29% of the section changed)

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OTHER INFORMATION

Retirement of Chief Financial Officer

As previously reported, on November 8, 2022, Stephen E.

Riffee, the Company’s Executive Vice President and Chief Financial Officer, provided notice to Elme of his intention to retire at the end of February 2023.

Riffee’s retirement will be effective as of February 28, 2023.

In recognition of Mr.

Riffee’s service to the Company, the Company has agreed to subsidize Mr.

Riffee’s COBRA premium for seven months, subject to Mr.

Riffee’s execution of a general release of claims against Elme (the “Release Agreement”), which was executed on February 15, 2023.

The Release Agreement also contains confidentiality and other customary provisions.

Additionally, pursuant to the Release Agreement, Mr.

Riffee has agreed to reasonably cooperate with and provide information to Elme upon request, and he will receive reasonable and necessary expenses in connection therewith.

The foregoing description is qualified in its entirety by reference to the full text of the Release Agreement, which is filed as Exhibit 10.27 hereto and is incorporated by reference.

Appointment of Chief Financial Officer

On February 14, 2023, further to the Company’s previously announced transition arrangement, as disclosed on its Current Report on Form 8-K filed on November 9, 2022 , the Board appointed Steven M.

Freishtat as Executive Vice President and Chief Financial Officer of the Company effective as of March 1, 2023 (following Mr.

Riffee’s retirement).

In connection with such appointment, Mr.

Freishtat will participate in Elme Communities’ executive compensation program, including the Officer STIP (with threshold, target and high award opportunities of 41%, 75% and 133%, respectively, of his base salary) and Officer

LTIP (with threshold, target and high award opportunities of 95%, 125% and 196%, respectively, of his base salary), effective as of the performance period beginning January 1, 2023.

Additionally, Mr.

Freishtat’s base annual salary will be $325,000, effective March 1, 2023.

Frieshtat is also eligible to participate in the Company’s Supplemental Executive Retirement Plan and has executed a change in control agreement, substantively in the form as the Form of Change in Control Agreement (as defined below), providing for among other benefits, a lump sum payment equal to two times his base salary in effect at the time termination, a lump sum payment equal to two times his average bonus for the three years preceding the termination and up to 18 months of continued health care coverage.

A description of the material terms of the executive compensation program can be found in the sections entitled “Short-Term Incentive Plan (STIP),” “Long-Term Incentive Plan (LTIP),” and “Other Executive Compensation Components” in the Company’s definitive proxy statement, dated April 15, 2022, which was filed on April 15, 2022, which descriptions are incorporated herein by reference, and in “Amendment to Executive Officer Short-Term Incentive Plan and Long-Term Incentive Plan” below .

In connection Mr.

Freishtat’s appointment, the Company entered into an indemnification agreement with Mr.

Freishtat, effective as of March 1, 2023.

Subject to certain terms and conditions, the indemnification agreement generally requires the Company to indemnify Mr.

Freishtat against any and all judgments, penalties, fines, settlements and reasonable expenses actually incurred by or on behalf of Mr.

Freishtat in connection with any threatened, pending or completed legal proceeding arising by reason of his status as an officer of Elme.

The description is not complete and is subject to and qualified in its entirety by reference to the Form of Indemnification Agreement filed as Exhibit 10(nn) to Washington REIT’s Current Report on Form 8-K filed on July 27, 2009 and is incorporated herein by reference.

Amendment to Executive Officer Short-Term Incentive Plan and Long-Term Incentive Plan

On February 14, 2023, the Board approved amendments to both the Amended and Restated Executive Officer Short-Term Incentive Plan (the “Officer STIP”) and the Amended and Restated Executive Officer Long-Term Incentive Plan (the “Officer LTIP”).

Upon adoption by the Board, both amendments became effective for performance periods beginning on or after January 1, 2023.

The amendment to the Officer STIP, revises the Officer STIP to, among other things, reflect the Company’s name change, remove the hardwired award percentages, and add a provision for calculating an award if a participant’s employment is terminated under certain circumstances prior to the establishment of such participant’s award percentages for the then-current performance period.

The amendment to the Officer LTIP, among other things, makes corresponding changes as described above for the Officer STIP, establishes that, upon a qualifying termination, achievement of any strategic goal equity grant shall be determined based on actual levels of achievement on the date of such termination, and that upon a change in control, any strategic goal equity grant will vest at the greater of target level and actual level of attainment of the strategic goals as of the change of control.

A description of the material terms of the executive compensation program prior to these amendments can be found in the sections entitled “Short-Term Incentive Plan (STIP)” and “Long-Term Incentive Plan (LTIP)” in the Company’s definitive proxy statement, dated April 15, 2022, which was filed on April 15, 2022, which descriptions are incorporated herein by reference.

The foregoing descriptions are qualified in their entirety by reference to the full text of Amendment Number One to the Amended and Restated Executive Officer Short-Term Incentive Plan and Amendment Number One to the Amended and Restated Executive Officer Long-Term Incentive Plan, which are filed as Exhibits 10.30 and 10.29 hereto, respectively, and are incorporated by reference.

Updates to Form of Change in Control Agreement

The Company previously adopted a form of change in control agreement (the “CIC Form Agreement”) for certain key officers.

On February 14, 2023, the Board approved several updates to the form as reflected in a new form of CIC Form Agreement (the “Form of Change in Control Agreement”) to, among other changes, reflect the Company’s name change, provide for payment of certain termination benefits in a lump sum, require execution of a release in connection with receipt of payment of termination benefits, and eliminate the partial reduction of the termination benefit in circumstances when such employee continues to be employed by the Company for some period of time following a change in control.

The Form of Change in Control Agreement is expected to be used for new key officers, including the new Chief Financial Officer, as described above.

In connection with the approval of the Form of Change in Control Agreement, the Board entered into amendments to the existing change in control agreement (each, a “CIC Agreement”) of Paul T.

McDermott and Susan L.

Gerock (each, an “Executive”).

As amended, each CIC Agreement will require the Executive to execute a release in connection with receipt of payment of termination benefits and will eliminate the partial reduction of the termination benefit in circumstances when the Executive continues to be employed by the Company for some period of time following a change in control.

The foregoing descriptions are qualified in their entirety by reference to the full text of the Form of Change in Control

Agreement, Amendment No.

1 To Change in Control Agreement with Paul T.

McDermott and Amendment No.

1 To the Change in Control Agreement with Susan L.

Gerock, which are filed as Exhibits 10.28, 10.18 and 10.23 hereto, respectively, and are incorporated by reference.

A description of the material terms of the Mr.

McDermott and Ms.

Gerock’s change in control agreements prior to these amendments can be found in the section entitled “Potential Payments Upon Termination or Change in Control” in the Company’s definitive proxy statement, dated April 15, 2022, which was filed on April 15, 2022, which description is incorporated herein by reference.

Material U.S.

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federal income tax considerations relating to our qualification and taxation as a real estate investment trust, a “REIT,” and the acquisition, holding, and disposition of (i) our common shares, preferred shares and depositary shares (together with common shares and preferred shares, the “shares”) as well as our warrants and rights, and (ii) certain debt securities that we may offer (together with the shares, the “securities”).

For purposes of this discussion, references to “our Company,” “we” and “us” mean only Washington Real Estate Investment Trust and not its subsidiaries or affiliates.

For purposes of this discussion, references to “our Company,” “we” and “us” mean only Elme Communities and not its subsidiaries or affiliates.

This summary is based upon the Internal Revenue Code of 1986, as amended, (the “Code”), the Treasury Regulations, rulings and other administrative interpretations and practices of the Internal Revenue Service (“IRS”) (including administrative interpretations and practices expressed in private letter rulings, which are binding on the IRS only with respect to the particular taxpayers who requested and received those rulings), and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect.

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• tax-exempt organizations, except to the extent discussed below in “—Taxation of U.S.

Shareholders—Taxation of

Tax-Exempt Shareholders” and “Taxation of Holders of Debt Securities-Tax-Exempt Holders of Debt Securities,”

Shareholders—Taxation of Tax-Exempt Shareholders” and “Taxation of Holders of Debt Securities-Tax-Exempt Holders of Debt Securities,”

• broker-dealers,

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A REIT generally is not subject to U.S.

federal income tax on the “REIT taxable income” (generally, taxable income of the REIT subject to specified adjustments, including a deduction for dividends paid and excluding net capital gain) that it distributes to shareholders, provided that the REIT meets the annual REIT distribution requirement and the other requirements for qualification as a REIT

under the Code.

We believe that we are organized and have operated, and we intend to continue to operate, in a manner so as to qualify for taxation as a REIT under the Code.

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shareholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations.

Capital gain dividends and qualified dividend income will continue to be subject to a maximum 20% rate (excluding the 3.8% tax on “net investment income”).

Capital gain dividends and qualified dividend income will continue to be subject to a maximum 20% rate (excluding the 3.8% tax on “net investment

Any net operating losses, foreign tax credits and other tax attributes of a REIT generally do not pass through to our shareholders, subject to special rules for certain items such as the net capital gain that we recognize.

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• any undistributed taxable income from prior taxable years.

We will be subject to a 100% penalty tax on certain rental income we receive when a taxable REIT subsidiary provides services to our tenants, on certain expenses deducted by a taxable REIT subsidiary on payments made to us and on income for services rendered to us by a taxable REIT subsidiary, if the arrangements among us, our tenants, and our taxable REIT subsidiaries do not reflect arm’s-length terms.

If we acquire any assets from a non-REIT C corporation in a carry-over basis transaction, we would be liable for corporate income tax, at the highest applicable corporate rate, on the “built-in gain” inherent in those assets if we disposed of those assets within five years after they were acquired.

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shareholder in our common shares.

If we violate an asset test (other than certain de minimis violations) or other requirements applicable to REITs, as described below, but our failure is due to reasonable cause and not due to willful neglect and we nevertheless maintain our REIT qualification because we satisfy specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the amount determined by multiplying the net income generated by such non-qualifying assets by the highest rate of tax applicable to non-REIT C corporations during periods when owning such assets would have caused us to fail the relevant asset test.

us to fail the relevant asset test.

If we fail to satisfy a requirement under the Code and the failure would result in the loss of our REIT qualification, other than a failure to satisfy a gross income test or an asset test, as described above, but nonetheless maintain our qualification as a REIT because the requirements of certain relief provisions are satisfied, we will be subject to a penalty of $50,000 for each such failure.

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We believe that we have been organized, have operated and have issued sufficient shares of beneficial interest with sufficient diversity of ownership to allow us to satisfy the above conditions.

In addition, our declaration of trust contains restrictions regarding the transfer of shares of beneficial interest that are intended to assist us in continuing to satisfy the share ownership requirements described in conditions (5) and (6) above.

In addition, our declaration of trust contains restrictions regarding the transfer of shares of beneficial interest that are intended to assist us in continuing to satisfy the share ownership

requirements described in conditions (5) and (6) above.

If we fail to satisfy these share ownership requirements, we will fail to qualify as a REIT unless we qualify for certain relief provisions described below under “—Requirements for Qualification as a REIT-Relief from Violations;

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We could be subject to monetary penalties if we fail to comply with these record-keeping requirements.

A shareholder that fails or refuses to comply with the demand is required by Treasury Regulations to submit a statement with its tax return disclosing the actual ownership of our stock and other information.

If we comply with the record-keeping requirement and we do not know or, exercising reasonable diligence, would not have known of our failure to meet condition (6) above, then we will be treated as having met condition (6) above.

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If we did not have reasonable cause for a failure, we would fail to qualify as a REIT.

Whether we would have reasonable cause for any such failure cannot be known with certainty, because the determination of whether

reasonable cause exists depends on the facts and circumstances at the time and we cannot provide any assurance that we in fact would have reasonable cause for a particular failure or that the IRS would not successfully challenge our view that a failure was due to reasonable cause.

Whether we would have reasonable cause for any such failure cannot be known with certainty, because the determination of whether reasonable cause exists depends on the facts and circumstances at the time and we cannot provide any assurance that we in fact would have reasonable cause for a particular failure or that the IRS would not successfully challenge our view that a failure was due to reasonable cause.

Moreover, we may be unable to actually rectify a failure and restore asset test compliance within the required timeframe due to the inability to transfer or otherwise dispose of assets, including as a result of restrictions on transfer imposed by our lenders or undertakings with our co-investors and/or the inability to acquire additional qualifying assets due to transaction risks, access to additional capital or other considerations.

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federal income tax purposes, it would be taxable as a corporation and therefore could be subject to an entity-level tax on its income.

In such a situation, the character of our assets and items of gross income would change and could preclude us from satisfying the REIT asset tests or the gross income tests as discussed in “—Requirements for Qualification as a REIT—Asset Tests” and “—Requirements for Qualification as a REIT—Gross Income Tests,” and in turn could prevent us from qualifying as a REIT, unless we are eligible for relief from the violation pursuant to relief provisions.

In such a situation, the character of our assets and items of gross income would change and could preclude us from satisfying the REIT asset tests or the gross

income tests as discussed in “—Requirements for Qualification as a REIT—Asset Tests” and “—Requirements for Qualification as a REIT—Gross Income Tests,” and in turn could prevent us from qualifying as a REIT, unless we are eligible for relief from the violation pursuant to relief provisions.

See “—Requirements for Qualification as a REIT—Relief from Violations;

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If a REIT owns a corporate subsidiary that is a “qualified REIT subsidiary,” or QRS, that subsidiary is generally disregarded for U.S.

federal income tax purposes, and all assets, liabilities and items of income,

deduction and credit of the subsidiary are treated as assets, liabilities and items of income, deduction and credit of the REIT itself, including for purposes of the gross income and asset tests applicable to REITs, as described below.

federal income tax purposes, and all assets, liabilities and items of income, deduction and credit of the subsidiary are treated as assets, liabilities and items of income, deduction and credit of the REIT itself, including for purposes of the gross income and asset tests applicable to REITs, as described below.

A QRS is any corporation, other than a taxable REIT subsidiary, that is directly or indirectly wholly owned by a REIT.

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Ownership of Interests in Taxable REIT Subsidiaries .

Each our our taxable REIT subsidiaries is a corporation other than a REIT in which we directly or indirectly hold stock, and that has made a joint election with us to be treated as a taxable REIT subsidiary under Section 856(l) of the Code.

Our taxable REIT subsidiary (and any taxable REIT subsidiary we may form in the future) is a corporation other than a REIT in which we directly or indirectly hold stock, and that has made a joint election with us to be treated as a taxable REIT subsidiary under Section 856(l) of the Code.

A taxable REIT subsidiary also includes any corporation other than a REIT in which a taxable REIT subsidiary of ours owns, directly or indirectly, securities (other than certain “straight debt” securities), which represent more than 35% of the total voting power or value of the outstanding securities of such corporation.

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In addition, a taxable REIT subsidiary may be prevented from deducting interest on debt, including debt funded directly or indirectly by us, if certain tests are not satisfied.

If dividends are paid to us by one or more of our taxable REIT subsidiaries, then a portion of the dividends we distribute to shareholders who are taxed at individual rates will generally be eligible for taxation at lower capital gains rates, rather than at ordinary income rates.

If dividends are paid to us by our taxable REIT subsidiary, then a portion of the dividends we distribute to shareholders who are taxed at individual rates will generally be eligible for taxation at lower capital gains rates, rather than at ordinary income rates.

See “—Taxation of U.S.

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Generally, a taxable REIT subsidiary can perform impermissible tenant services without causing us to receive impermissible tenant services income under the REIT income tests.

However, several provisions applicable to the arrangements between us and our taxable REIT subsidiaries ensure that such taxable REIT subsidiaries will be subject to an appropriate level of U.S.

However, several provisions applicable to the arrangements between us and our taxable REIT subsidiary ensure that such taxable REIT subsidiary will be subject to an appropriate level of U.S.

federal income taxation.

For example, taxable REIT subsidiaries are limited in their ability to deduct interest payments in excess of a certain amount, including interest payments made directly or indirectly to us, as described below in “—Annual Distribution Requirements.” In addition, we will be obligated to pay a 100% penalty tax on some payments we receive or on certain expenses deducted by our taxable REIT subsidiaries, and on income earned by our taxable REIT subsidiaries for services provided to, or on behalf of, us, if the economic arrangements between us, our tenants and such taxable REIT subsidiaries are not comparable to similar arrangements among unrelated parties.

Our taxable REIT subsidiaries, and any future taxable REIT subsidiaries acquired by us, may make interest and other payments to us and to third parties in connection with activities related to our properties.

There can be no assurance that our taxable REIT subsidiaries will not be limited in their ability to deduct interest payments made to us.

In addition, there can be no assurance that the IRS might not seek to impose the 100% excise tax on a portion of payments received by us from, or expenses deducted by, or service income imputed to, our taxable REIT subsidiaries.

We own two subsidiaries that have elected to be treated as taxable REIT subsidiaries for U.S.

For example, taxable REIT subsidiaries are limited in their ability to deduct interest payments in excess of a certain amount, including interest payments made directly or indirectly to us, as described below in “—Annual Distribution Requirements.” In addition, we will be obligated to pay a 100% penalty tax on some payments we receive or on certain expenses deducted by our taxable REIT subsidiary, and on income earned by our taxable REIT subsidiary for services provided to, or on behalf of, us, if the economic arrangements between us, our tenants and such taxable REIT subsidiary are not comparable to similar arrangements among unrelated parties.

Our taxable REIT subsidiary, and any future taxable REIT subsidiaries acquired by us, may make interest and other payments to us and to third parties in connection with activities related to our properties.

There can be no assurance that our taxable REIT subsidiary will not be limited in its ability to deduct interest payments made to us.

We own one subsidiary that has elected to be treated as taxable REIT subsidiaries for U.S.

federal income tax purposes.

Our taxable REIT subsidiaries are taxable as regular corporations and have elected, together with us, to be treated as our taxable REIT subsidiaries.

Our taxable REIT subsidiary is taxable as a regular corporation and has elected, together with us, to be treated as our taxable REIT subsidiary.

We may elect, together with other corporations in which we may own directly or indirectly stock, for those corporations to be treated as our taxable REIT subsidiaries.

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To qualify as a REIT, we must satisfy two gross income tests that are applied on an annual basis.

First, in each taxable year, at least 75% of our gross income (excluding gross income from prohibited transactions, certain hedging transactions, as described below, and certain foreign currency transactions) must be derived from investments relating to real property or mortgages on real property, including:

• “rents from real property”;

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• income attributable to temporary investments of new capital in stocks and debt instruments during the one-year period following our receipt of new capital that we raise through equity offerings or issuance of debt obligations with at least a five-year term.

Second, at least 95% of our gross income in each taxable year (excluding gross income from prohibited transactions, certain hedging transactions, as described below, and certain foreign currency transactions) must be derived from some combination of income that qualifies under the 75% gross income test described above, as well as (a) other dividends, (b) interest (including interest income from debt instruments issued by publicly offered REITs), and (c) gain from the sale or disposition of stock or securities (including gain from the sale or other disposition of debt instruments issued by publicly offered REITs), in either case, not held for sale to customers.

Second, at least 95% of our gross income in each taxable year (excluding gross income from prohibited transactions, certain hedging transactions, as described below, and certain foreign currency transactions) must be derived from some combination of income that qualifies under the 75% gross income test described above, as well as other income sources generally including (a) other dividends, (b) interest (including interest income from debt instruments issued by publicly offered REITs), and (c) gain from the sale or disposition of stock or securities (including gain from the sale or other disposition of debt instruments issued by publicly offered REITs), in either case, not held for sale to customers.

Gross income from certain hedging transactions is excluded from gross income for purposes of the 95% gross income requirement.

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• First, the amount of rent must not be based in whole or in part on the income or profits of any person.

However, an amount we receive or accrue generally will not be excluded from the term “rents from real property” solely by reason of being based on a fixed percentage or percentages of receipts or sales;

amount we receive or accrue generally will not be excluded from the term “rents from real property” solely by reason of being based on a fixed percentage or percentages of receipts or sales;

• Second, we, or an actual or constructive owner of 10% or more of our shares, must not actually or constructively own 10% or more of the interests in the tenant, or, if the tenant is a corporation, 10% or more of the voting power or value of all classes of stock of the tenant.

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If the impermissible tenant services income exceeds 1% of our total income from a property, then all of the income from that property will fail to qualify as rents from real property.

If the total amount of impermissible tenant

services income does not exceed 1% of our total income from the property, the services will not “taint” the other income from the property (that is, it will not cause the rent paid by tenants of that property to fail to qualify as rents from real property), but the impermissible tenant services income will not qualify as rents from real property.

If the total amount of impermissible tenant services income does not exceed 1% of our total income from the property, the services will not “taint” the other income from the property (that is, it will not cause the rent paid by tenants of that property to fail to qualify as rents from real property), but the impermissible tenant services income will not qualify as rents from real property.

We will be deemed to have received income from the provision of impermissible services in an amount equal to at least 150% of our direct cost of providing the service.

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Under existing law, whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances surrounding the particular transaction.

However, we will not be treated as a dealer in real property for purposes of the 100% tax with respect to a real estate asset that we sell if (i) we have held the property for at

least two years for the production of rental income prior to the sale, (ii) capitalized expenditures on the property in the two years preceding the sale are less than 30% of the net selling price of the property, and (iii) we either (a) have seven or fewer sales of property (excluding certain property obtained through foreclosure) for the year of sale;

However, we will not be treated as a dealer in real property for purposes of the 100% tax with respect to a real estate asset that we sell if (i) we have held the property for at least two years for the production of rental income prior to the sale, (ii) capitalized expenditures on the property in the two years preceding the sale are less than 30% of the net selling price of the property, and (iii) we either (a) have seven or fewer sales of property (excluding certain property obtained through foreclosure) for the year of sale;

or (b) the aggregate adjusted basis of property sold during the year is 10% or less of the aggregate adjusted basis of all of our assets as of the beginning of the taxable year;

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Any gain from the sale of property for which a foreclosure property election has been made and remains in place generally will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property.

To the extent that we receive any income from foreclosure property that does not qualify for purposes of the 75% gross income test, we intend to make an election to treat the related property as foreclosure property if the election is available (which may not be the case with respect to any acquired “distressed loans”).

To the extent that we

receive any income from foreclosure property that does not qualify for purposes of the 75% gross income test, we intend to make an election to treat the related property as foreclosure property if the election is available (which may not be the case with respect to any acquired “distressed loans”).

Failure to Satisfy the Gross Income Tests .

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government securities.

For purposes of this test, real estate assets include interests in real property, such as land and buildings, leasehold interests in real property, stock of other corporations that qualify as REITs and debt instruments issued by publicly offered REITs, some types of mortgage-backed securities, mortgage loans, personal property leased in connection with real property to the extent that rents attributable to such personal property are treated as “rents from real property”, and stock or debt instruments held for less than one year purchased with an offering of our shares or long term debt.

property are treated as “rents from real property”, and stock or debt instruments held for less than one year purchased with an offering of our shares or long term debt.

Assets that do not qualify for purposes of the 75% asset test are subject to the additional asset tests described below.

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(2) obligations to pay rent from real property;

(3) rental agreements described in Section 467

(3) rental agreements described in Section 467 of the Code;

(4) any security issued by other REITs;

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In addition, debt will not be disqualified from being treated as “straight debt” solely because the time or amount of payment is subject to a contingency upon a default or the exercise of a prepayment right by the issuer of the debt, provided that such contingency is consistent with customary commercial practice.

We own two subsidiaries that have elected to be treated as taxable REIT subsidiaries for U.S.

We own one subsidiary that has elected to be treated as a taxable REIT subsidiary for U.S.

federal income tax purposes.

Our taxable REIT subsidiaries are taxable as non-REIT C corporations and have elected, together with us, to be treated as our taxable REIT subsidiaries.

So long as our taxable REIT subsidiaries qualify as such, we will not be subject to the 5% asset test, 10% voting securities limitation or 10% value limitation with respect to our ownership interest in the taxable REIT subsidiaries.

Our taxable REIT subsidiary is taxable as a non-REIT C corporation and has elected, together with us, to be treated as our taxable REIT subsidiary.

So long as our taxable REIT subsidiary qualifies as such, we will not be subject to the 5% asset test, 10% voting securities limitation or 10% value limitation with respect to our ownership interest in the taxable REIT subsidiary.

We may acquire securities in other taxable REIT subsidiaries in the future.

We believe that the aggregate value of our interests in our taxable REIT subsidiaries does not exceed, and believe that in the future it will not exceed, 20% of the aggregate value of our gross assets.

To the extent that we own an interest in an issuer that does not qualify as a REIT, a qualified REIT subsidiary, or a taxable REIT subsidiary, we believe that our pro rata share of the value of the securities, including debt, of any such issuer does not exceed 5% of the total value of our assets.

We believe that the aggregate value of our interests in our taxable REIT subsidiary does not exceed, and believe that in the future it will not exceed, 20% of the aggregate value of our gross assets.

To the extent that we own an interest in an issuer that does not qualify as a REIT, a qualified REIT subsidiary, or a

taxable REIT subsidiary, we believe that our pro rata share of the value of the securities, including debt, of any such issuer does not exceed 5% of the total value of our assets.

Moreover, with respect to each issuer in which we own an interest that does not qualify as a qualified REIT subsidiary or a taxable REIT subsidiary, we believe that our ownership of the securities of any such issuer complies with the 10% voting securities limitation and 10% value limitation.

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Specifically, if we fail these asset tests at the end of any quarter and such failure is not cured within 30 days thereafter, we may dispose of sufficient assets (generally within six months after the last day of the quarter in which our identification of the failure to satisfy these asset tests occurred) to cure such a violation that does not exceed the lesser of 1% of our assets at the end of the relevant quarter or $10,000,000.

If we fail any of the other asset tests or our failure of the 5% and 10% asset tests is in excess of the de minimis amount described above, as long as such failure was due to reasonable

cause and not willful neglect, we are permitted to avoid disqualification as a REIT, after the 30-day cure period, by taking steps including the disposing of sufficient assets to meet the asset test (generally within six months after the last day of the quarter in which our identification of the failure to satisfy the REIT asset test occurred), paying a tax equal to the greater of $50,000 or the highest corporate income tax rate of the net income generated by the non-qualifying assets during the period in which we failed to satisfy the asset test, and filing in accordance with applicable Treasury Regulations a schedule with the IRS that describes the assets that caused us to fail to satisfy the asset test(s).

If we fail any of the other asset tests or our failure of the 5% and 10% asset tests is in excess of the de minimis amount described above, as long as such failure was due to reasonable cause and not willful neglect, we are permitted to avoid disqualification as a REIT, after the 30-day cure period, by taking steps including the disposing of sufficient assets to meet the asset test (generally within six months after the last day of the quarter in which our identification of the failure to satisfy the REIT asset test occurred), paying a tax equal to the greater of $50,000 or the highest corporate income tax rate of the net income generated by the non-qualifying assets during the period in which we failed to satisfy the asset test, and filing in accordance with applicable Treasury Regulations a schedule with the IRS that describes the assets that caused us to fail to satisfy the asset test(s).

We intend to take advantage of any and all relief provisions that are available to us to cure any violation of the asset tests applicable to REITs.

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Second, distributions may be made in the following year if they are declared before we timely file our tax return for the year and if made with or before the first regular dividend payment after such declaration.

These distributions are taxable to our shareholders in the year in which paid, even though the distributions relate to our prior taxable year for purposes of the 90% distribution requirement.

These distributions are taxable to our shareholders in the year in which paid, even though the distributions relate to our prior taxable year for purposes of the 90% distribution

To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our “REIT taxable income,” as adjusted, we will be required to pay tax on that amount at regular corporate tax rates.

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Any deduction in excess of the limitation is carried forward and may be used in a subsequent year, subject to the 30% limitation.

Adjusted taxable income is determined without regard to certain deductions, including those for net interest expense, net operating loss carryforwards and, for taxable years beginning before January 1, 2022, depreciation, amortization and depletion.

If we or our subsidiaries, as applicable, are eligible to make a timely election (which is irrevocable), the 30% limitation does not apply to a trade or business involving real property development, redevelopment, construction, reconstruction, rental, operation, acquisition, conversion, disposition, management, leasing or brokerage, within the meaning of Section 469(c)(7)(C) of the Code.

If this election is made, depreciable real property (including certain improvements) held by the relevant trade or business must be depreciated under the alternative depreciation system under the Code, which is generally less favorable than the generally applicable system of depreciation under the Code.

If we do not make the election or if the election is determined not to be available with respect to all or certain of our business activities, this interest deduction limitation could result in us having more REIT taxable income and thus increase the amount of distributions we must make to comply with the REIT requirements and avoid incurring corporate level tax.

Similarly, the limitation could cause our taxable REIT subsidiaries to have greater taxable income and thus potentially greater corporate tax liability.

Adjusted taxable income is determined without regard to certain deductions, including those for net interest expense and net operating loss.

However, for the 2021 taxable year, we made a timely election (which is irrevocable), such that the 30% limitation does not apply.

This election is available for a trade or business involving real property development, redevelopment, construction, reconstruction, rental, operation, acquisition, conversion, disposition, management, leasing or brokerage, within the meaning of Section 469(c)(7)(C) of the Code.

As a result of this election, depreciable real property (including certain improvements) held by the relevant trade or business must be depreciated under the alternative depreciation system under the Code, which is generally less favorable than the generally applicable system of depreciation under the Code.

If it was subsequently determined that this election was not in fact available with respect to all or certain of our business activities, this interest deduction limitation could result in us having more REIT taxable income and thus increase the amount of distributions we must make to comply with the REIT requirements and avoid incurring corporate level tax.

Similarly, the limitation could cause our taxable REIT subsidiary (or any taxable REIT subsidiary we have in the future) to have greater taxable income and thus potentially greater corporate tax liability.

Furthermore, under amendments to Section 451 of the Code made by 2017 legislation informally called the Tax Cuts and Jobs Act (the “TCJA”), subject to certain exceptions, we must accrue income for U.S.

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In addition, if we merge with another REIT and we are the “successor” to the other REIT, the other REIT’s disqualification from taxation as a REIT would prevent us from being taxed as a REIT for the four taxable years following the year during which the other REIT’s qualification was lost.

There can be no

assurance that we would be entitled to any statutory relief.

There can be no assurance that we would be entitled to any statutory relief.

We intend to take advantage of any and all relief provisions that are available to us to cure any violation of the requirements applicable to REITs.

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court is able to exercise primary supervision over the administration of such trust and one or more U.S.

persons have the authority to control all substantial decisions of the trust, or (2) it has a valid election in place to be treated as a U.S.

persons have the authority to control all substantial decisions of the trust.

If an entity or arrangement treated as a partnership for U.S.

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For purposes of determining whether distributions to holders of shares are out of current or accumulated earnings and profits, our earnings and profits will be allocated first to any outstanding preferred shares and then to our outstanding common shares.

Dividends received from REITs are generally not eligible to be taxed at the preferential qualified dividend income rates currently available to individual U.S.

received from REITs are generally not eligible to be taxed at the preferential qualified dividend income rates currently available to individual U.S.

shareholders who receive dividends from taxable subchapter “C” corporations.

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The maximum amount of our distributions eligible to be designated as qualified dividend income for a taxable year is equal to the sum of:

• the qualified dividend income received by us during such taxable year from non-REIT corporations (including our taxable REIT subsidiaries);

• the qualified dividend income received by us during such taxable year from non-REIT corporations (including our

taxable REIT subsidiaries);

• the excess of any “undistributed” REIT taxable income recognized during the immediately preceding year over the U.S.

15 unchanged sentences

Distributions we make, to the extent they do not constitute a return of capital, generally will be treated as investment income for purposes of computing the investment interest limitation.

shareholder may elect, depending on its particular situation, to treat capital gain dividends, capital gains from the

disposition of shares and income designated as qualified dividend income as investment income for purposes of the investment interest limitation, in which case the applicable capital gains will be taxed at ordinary income rates.

shareholder may elect, depending on its particular situation, to treat capital gain dividends, capital gains from the disposition of shares and income designated as qualified dividend income as investment income for purposes of the investment interest limitation, in which case the applicable capital gains will be taxed at ordinary income rates.

We will notify shareholders regarding the portions of our distributions for each year that constitute ordinary income, return of capital and qualified dividend income.

24 unchanged sentences

Capital losses recognized by a U.S.

shareholder upon the disposition of our shares that were held for more than one year at the time of disposition will be considered long-term capital losses, and are generally available only to offset capital gain income of the shareholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year).

shareholder upon the disposition of our shares that were held for more than one year at the

time of disposition will be considered long-term capital losses and are generally available only to offset capital gain income of the shareholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year).

In addition, any loss upon a sale or exchange of our shares by a U.S.

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In general, a holder of our preferred shares will recognize capital gain or loss measured by the difference between the amount received by the holder of such shares upon the redemption and such holder’s adjusted tax basis in the preferred shares redeemed (provided the preferred shares are held as a capital asset) if such redemption (i) is ‘‘not essentially equivalent to a dividend’’ with respect to the holder of the preferred shares under Section 302(b)(1) of the Code, (ii) is a “substantially disproportionate” redemption with respect to the shareholder under Section 302(b)(2) of the Code, or (iii) results in a ‘‘complete termination’’ of the holder’s interest in all classes of our shares under Section 302(b)(3) of the Code.

In applying these tests, there must be taken into account not only any series or class of the preferred shares being redeemed, but also such holder’s ownership of other classes of our shares and any options (including stock purchase rights) to

acquire any of the foregoing.

The holder of our preferred shares also must take into account any such securities (including options) which are considered to be owned by such holder by reason of the constructive ownership rules set forth in Sections 318 and 302(c) of the Code.

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With respect to a redemption of our preferred shares that is treated as a distribution with respect to our shares, which is not otherwise taxable as a dividend, the IRS has proposed Treasury Regulations that would require any basis reduction associated with such a redemption to be applied on a share-by-share basis which could result in taxable gain with respect to some shares, even though the holder’s aggregate basis for the shares would be sufficient to absorb the entire amount of the redemption distribution (in excess of any amount of such distribution treated as a dividend).

Additionally, these proposed Treasury Regulations would not permit the transfer of basis in the redeemed shares of the preferred shares to the remaining shares held (directly or indirectly) by the redeemed holder.

Additionally, these proposed Treasury Regulations would not permit the transfer of basis in the redeemed shares of the preferred shares to the remaining shares held

(directly or indirectly) by the redeemed holder.

Instead, the unrecovered basis in our preferred shares would be treated as a deferred loss to be recognized when certain conditions are satisfied.

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shareholders with respect to such gain) or (2) the non-U.S.

shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States (in which case the non-U.S.

shareholder is a nonresident alien individual who was

present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States (in which case the non-U.S.

shareholder will be subject to a 30% tax on the individual’s net capital gain for the year), distributions that we make which are not dividends out of our earnings and profits will not be subject to U.S.

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federal income tax liability resulting therefrom their proportionate share of the tax paid by us on the undistributed capital gains treated as long-term capital gains to the non-U.S.

shareholder, and generally receive from the IRS a refund to the extent their proportionate share of the tax paid by us were to exceed the non-U.S.

shareholder, and generally receive from the

IRS a refund to the extent their proportionate share of the tax paid by us were to exceed the non-U.S.

shareholder’s actual U.S.

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Certain non-U.S.

pension funds that are “qualified foreign pension funds” as defined by Section 897(l) of the Code and certain

pension funds that are “qualified foreign pension funds” as defined by Section 897(l) of the Code and certain non-U.S.

publicly traded entities that are “qualified shareholders” as defined by Section 897(k) of the Code may be entitled to exceptions to the FIRPTA tax with respect to the sale of our shares.

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or foreign broker will be subject to information reporting and, possibly, backup withholding as described above for U.S.

shareholders, or the withholding tax for non-U.S.

shareholders, or the withholding

tax for non-U.S.

shareholders, as applicable, unless the non-U.S.

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federal income tax purposes.

The tax consequences of owning any notes issued with more than de minimis original issue discount, floating rate debt securities, convertible or exchangeable notes, indexed notes or other debt securities not covered by this discussion that we offer will be discussed in the applicable prospectus supplement.

will be discussed in the applicable prospectus supplement.

Holders of Debt Securities

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court is able to exercise primary supervision over the administration of such trust and one or more U.S.

persons have the authority to control all substantial decisions of the trust, or (2) it has a valid election in place to be treated as a U.S.

persons have the authority to control all substantial decisions of the trust.

If an entity or arrangement treated as a partnership for U.S.

7 unchanged sentences

Holder’s regular method of tax accounting for U.S.

federal income tax

federal income tax purposes.

Sale, Exchange, Retirement, Redemption or Other Taxable Disposition of the Debt Securities .

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Holder generally will be subject to regular U.S.

federal income tax on such income or gain in the same manner as if the Non-U.S.

federal income tax on such income or gain in the same manner as if the

Holder were a U.S.

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Consequently, prospective investors should consult with their tax advisors regarding the effect of state and local tax laws on an investment in our shares and depositary shares.

A portion of our income is earned through our taxable REIT subsidiaries.

The taxable REIT subsidiaries are subject to U.S.

A portion of our income is earned through our taxable REIT subsidiary.

The taxable REIT subsidiary is subject to U.S.

federal, state and local income tax at the full applicable corporate rates.

In addition, a taxable REIT subsidiary will be limited in its ability to deduct interest payments in excess of a certain amount made directly or indirectly to us.

To the extent that our taxable REIT subsidiaries and we are required to pay U.S.

To the extent that we and/or

our taxable REIT subsidiary is required to pay U.S.

federal, state or local taxes, we will have less cash available for distribution to shareholders.

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Not applicable.

Certain information required by Part III is omitted from this Form 10-K in that we will file a definitive proxy statement pursuant to Regulation 14A with respect to our 2022 Annual Meeting (the “Proxy Statement”) no later than 120 days after the end of the fiscal year covered by this Form 10-K, and certain information included therein is incorporated herein by reference.

Certain information required by Part III has been omitted pursuant to General Instruction G(3) to Form 10-K.

We will file a definitive proxy statement pursuant to Regulation 14A with respect to our 2023 Annual Meeting (the “Proxy Statement”) no later than 120 days after the end of the fiscal year covered by this Form 10-K, and certain information included therein is incorporated herein by reference.

Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by reference.

In addition, we have adopted a code of ethics that applies to all of our trustees, officers and employees, which can be reviewed and printed from our website www.washreit.com.

In addition, we have adopted a code of ethics that applies to all of our trustees, officers and employees, which can be reviewed and printed from our website www.elmecommunities.com.

The reference to our website address does not constitute incorporation by reference of the information contained in the website and such information should not be considered part of this document.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

NAME POSITION

McDermott Chairman and Chief Executive Officer, WashREIT

Civera Lead Independent Trustee, WashREIT;

Retired Chairman, Catalyst Health Solutions, Inc.

Butcher Chief Executive Officer, President and Chairman of the Board of Directors of STAG Industrial, Inc.

Byrnes Retired Managing Director, Alex Brown & Sons

Goitia Retired Partner, KPMG

Former Chairman of the Board and Chief Executive Officer, Spirit Realty Capital Inc.

Winns (RET.) President, Middle East-Africa Region, Lockheed Martin Corporation

Executive Officers

McDermott Chairman and Chief Executive Officer, WashREIT

Riffee Executive Vice President and Chief Financial Officer

Fielder Senior Vice President, General Counsel and Corporate Secretary

Gerock Senior Vice President and Chief Information Officer

The other information required by this Item is hereby incorporated herein by reference to our Proxy Statement.

The information required by this Item is hereby incorporated herein by reference to our Proxy Statement.

EXECUTIVE COMPENSATION

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3.1 Articles of Amendment and Restatement of Declaration of Trust of the Company, as amended

3.2 Amended and Restated Bylaws of Elme Communities, as amended

8-K 001-06622 3.2 10/17/2022

3.2 Amended and Restated Bylaws of Washington Real Estate Investment Trust, as adopted on February 8, 2017

10-Q 001-06622 3.2 7/31/2017

4.1 Indenture dated as of August 1, 1996 between Washington REIT and The First National Bank of Chicago

6 unchanged sentences

4.4 Description of Registrant's Securities

10-K 001-06622 3.2 2/16/2021

10.1* Share Purchase Plan

10-Q 001-06622 10(j) 11/14/2002

10.2* Supplemental Executive Retirement Plan

10-Q 001-06622 10(k) 11/14/2002

10.3* Supplemental Executive Retirement Plan

10-K 001-06622 10(p) 3/16/2006

10.4* 2007 Omnibus Long Term Incentive Plan

DEF 14A 001-06622 B 4/9/2007

10.5* Deferred Compensation Plan for Officers dated January 1, 2007

10-K 001-06622 10(gg) 2/29/2008

10.6* Supplemental Executive Retirement Plan II dated May 23, 2007

10-K 001-06622 10(hh) 2/29/2008

10.1* Supplemental Executive Retirement Plan II dated January 1, 2008

10.2* Form of Indemnification Agreement by and between Washington REIT and the indemnitee

8-K 001-06622 10(nn) 7/27/2009

10.8* Executive Stock Ownership Policy, adopted October 27, 2010

8-K 001-06622 10.31 11/2/2010

10.9* Amendment to Deferred Compensation Plan for Officers, adopted October 27, 2010

10.3* Deferred Compensation Plan for Officers, effective January 1, 2007, as amended and restated on January 1, 2011

10.4* Amendment to Amended and Restated Deferred Compensation Plan for Officers, adopted December 31, 2012

10-K 001-06622 10.37 2/27/2013

10.10* Amendment to Deferred Compensation Plan for Officers, adopted December 31, 2012

10.5* Amendment to Amended and Restated Deferred Compensation Plan for Officers, adopted February 13, 2013

10-Q 001-06622 10.45 5/9/2013

10.6* Amendment to Amended and Restated Deferred Compensation Plan for Officers, adopted February 18, 2014

10-K 001-06622 10.45 3/3/2014

10.11* Amendment to Deferred Compensation Plan for Officers, adopted February 13, 2013

10.7* Amended and Restated Trustee Deferred Compensation Plan, effective October 21, 2015

10-Q 001-06622 10.61 11/4/2015

10.12* Amendment to Deferred Compensation Plan for Directors, adopted February 13, 2013

10.9* 2016 Omnibus Incentive Plan

DEF 14A 001-06622 Annex A 3/23/2016

10.10* Long Term Incentive Plan (effective January 1, 2014)

10-Q 001-06622 10.50 8/5/2014

10.13* Amendment to Short Term Incentive Plan, adopted as of January 22, 2013

10.11* Amendment to Long Term Incentive Plan

10-Q 001-06622 10.60 11/4/2015

10.14* Amended and Restated Deferred Compensation Plan for Directors, effective October 22, 2013

10.12* Amendment Number Two to Washington Real Estate Investment Trust 2014 Long-Term Incentive Plan (effective January 1, 2018)

10-Q 001-06622 10.54 4/30/2018

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Number Exhibit Filing Date Filed

10.15* Employment Agreement dated August 19, 2013 with Paul T.

10-Q 001-06622 10.54 11/1/2013

10.16* Change in control agreement dated October 1, 2013 with Paul T.

10-K 001-06622 10.44 3/3/2014

10.17* Amendment to Deferred Compensation Plan for Officers, adopted February 18, 2014

10.13* Washington Real Estate Investment Trust Amended and Restated Executive Short-Term Incentive Plan, effective January 1, 2020

10-K 001-06622 10.45 2/19/2020

10.18* Amendment to Deferred Compensation Plan for Directors as Amended and Restated, adopted February 18, 2014

10.14* Washington Real Estate Investment Trust Amended and Restated Executive Long-Term Incentive Plan, effective January 1, 2020

10-K 001-06622 10.46 2/19/2020

10.19* Short Term Incentive Compensation Plan (effective January 1, 2014)

10-Q 001-06622 10.47 5/7/2014

10.20* Long Term Incentive Plan (effective January 1, 2014)

10.15* Note Purchase Agreement, dated as of September 30, 2020, by and among Washington Real Estate Investment Trust and other parties named therein as Purchasers

10-Q 001-06622 10.1 10/30/2020

10.21* Amendment to Short Term Incentive Plan (effective January 1, 2014)

10.16* Employment Agreement dated August 19, 2013 with Paul T.

10-Q 001-06622 10.54 11/1/2013

10.17* Change in control agreement dated October 1, 2013 with Paul T.

10-K 001-06622 10.44 3/3/2014

10.18* Amendment No.

1 To Change in Control Agreement with Paul T.

10.19* Executive Officer Severance Pay Plan, adopted August 4, 2014

10-Q 001-06622 10.54 10/30/2014

10.23* Description of Washington REIT Trustee Compensation Plan, effective January 1, 2015

10-K 001-06622 10.54 3/2/2015

10.20* Offer Letter to Stephen E.

2 unchanged sentences

10-K 001-06622 10.56 3/2/2015

10.26* Revised Description of Washington REIT Trustee Compensation Plan, effective January 1, 2015

10-Q 001-06622 10.57 5/5/2015

10.27* Statement of Amendment of STIP and LTIP for S.

10-Q 001-06622 10.58 5/5/2015

10.28* Amendment to Long Term Incentive Plan

10-Q 001-06622 10.60 11/4/2015

10.29* Amended and restated Trustee Deferred Compensation Plan

10.22* Change in control agreement dated February 2, 2022 with Susan L.

10-Q 001-06622 10.1 4/28/2022

10.30* 2016 Omnibus Incentive Plan

DEF 14A 001-06622 Annex A 3/23/2016

10.31* Revocation of Statement of Amendment of STIP and LTIP

10-K 001-06622 10.49 2/20/2018

10.23* Amendment No.

1 To Change in Control Agreement with Susan L.

10.24* Offer letter to Taryn D.

2 unchanged sentences

10-Q 001-06622 10.1 7/31/2017

10.34* Amendment Number Two to Washington Real Estate Investment Trust 2014 Long-Term Incentive Plan (effective January 1, 2018)

10-Q 001-06622 10.54 4/30/2018

10.35* Second Amendment to Washington Real Estate Investment Trust Short-Term Incentive Plan

10-Q 001-06622 10.1 4/29/2019

10.36* Separation Agreement and General Release between Thomas Q.

Bakke and Washington Real Estate Investment Trust

10-Q 001-06622 10.2 4/29/2019

10.37* Amendment No.

1 to Separation Agreement and General Release between Thomas Q.

Bakke and Washington Real Estate Investment Trust

10-Q 001-06622 10.3 4/29/2019

10.38 Purchase and sale agreement, dated April 2, 2019, for the Assembly Portfolio by and among Washington Real Estate Investment Trust and Barton’s Crossing LP, Magazine Carlyle Station LP, Magazine Fox Run LP, Magazine Glen LP, Magazine Lionsgate LP, Magazine Village At McNair Farms LP, and Magazine Watkins Station LP

10-Q 001-06622 10.1 7/29/2019

10.39 First amendment to purchase and sale agreement, dated April 19, 2019, for the Assembly Portfolio

10-Q 001-06622 10.2 7/29/2019

10.40 Purchase and Sale Agreement, dated June 26, 2019, by and between Washington Real Estate Investment Trust and Global Retail Investors, LLC

8-K 001-06622 10.1 7/26/2019

10.41* Washington Real Estate Investment Trust Amended and Restated Executive Short-Term Incentive Plan, effective January 1, 2020

10-K 001-06622 10.45 2/19/20

10.42* Washington Real Estate Investment Trust Amended and Restated Executive Long-Term Incentive Plan, effective January 1, 2020

10-K 001-06622 10.46 2/19/20

10.43 Note Purchase Agreement, dated as of September 30, 2020, by and among Washington Real Estate Investment Trust and other parties named therein as Purchasers

10.26* Severance Agreement and General Release between Taryn D.

Fielder and Washington Real Estate Investment Trust

10-Q 001-06622 10.2 4/28/2022

10.27* Agreement and General Release between Stephen E.

Riffee and Elme Communities

10.28* Form of Change in Control Agreement

10.29* Amendment Number One to Washington Real Estate Investment Trust Amended and Restated Executive Officer Long-Term Incentive Plan

10.30* Amendment Number One to Washington Real Estate Investment Trust Amended and Restated Executive Officer Short-Term Incentive Plan

10.31 Purchase and Sale Agreement, dated as of June 14, 2021, between Washington REIT and BPG Acquisitions, LLC

2 unchanged sentences

10-Q 001-06622 10.2 10/29/2021

10.33 First Amendment to Second Amended and Restated Credit Agreement, dated January 10, 2023, by and among Elme Communities, as borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as administrative agent

21 Subsidiaries of Registrant

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31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act

Incorporated by Reference

Number Exhibit Description Form File

Number Exhibit Filing Date Filed

31.3 Certification of the Chief Accounting Officer pursuant to Rule 13a-14(a) of the Exchange Act

9 unchanged sentences

* Management contracts or compensation plans or arrangements in which trustees or executive officers are eligible to participate.

In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of WashREIT or its subsidiaries are not filed herewith.

In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of Elme Communities or its subsidiaries are not filed herewith.

Pursuant to this regulation, we hereby agree to furnish a copy of any such instrument to the SEC upon request.

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WASHINGTON REAL ESTATE INVESTMENT TRUST

ELME COMMUNITIES

February 17, 2023

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Civera* Lead Independent Trustee February 17, 2023

/s/ Jennifer S.

Banner* Trustee February 17, 2023

/s/ Benjamin S.

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INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Washington Real Estate Investment Trust (“WashREIT”) is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal controls over financial reporting.

WashREIT’s internal control system over financial reporting is a process designed under the supervision of WashREIT’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with U.S.

Management of Elme Communities is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal controls over financial reporting.

Elme Communities’ internal control system over financial reporting is a process designed under the supervision of Elme Communities’ principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with U.S.

generally accepted accounting principles.

2 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions.

In connection with the preparation of WashREIT’s annual consolidated financial statements, management has undertaken an assessment of the effectiveness of WashREIT’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (the 2013 COSO Framework).

Management’s assessment included an evaluation of the design of WashREIT’s internal control over financial reporting and testing of the operational effectiveness of those controls.

Based on this assessment, management has concluded that as of December 31, 2021, WashREIT’s internal control over financial reporting was effective at a reasonable assurance level regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

In connection with the preparation of Elme Communities’ annual consolidated financial statements, management has undertaken an assessment of the effectiveness of Elme Communities’ internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (the 2013 COSO Framework).

Management’s assessment included an evaluation of the design of Elme Communities’ internal control over financial reporting and testing of the operational effectiveness of those controls.

Based on this assessment, management has concluded that as of December 31, 2022, Elme Communities’ internal control over financial reporting was effective at a reasonable assurance level regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

generally accepted accounting principles.

Ernst & Young LLP, the independent registered public accounting firm that audited WashREIT’s consolidated financial statements included in this report, has issued an unqualified opinion on the effectiveness of WashREIT’s internal control over financial reporting, a copy of which appears on page 85 of this annual report.

Ernst & Young LLP, the independent registered public accounting firm that audited Elme Communities’ consolidated financial statements included in this report, has issued an unqualified opinion on the effectiveness of Elme Communities’ internal control over financial reporting, a copy of which appears on page 85 of this annual report.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Trustees of Washington Real Estate Investment Trust

To the Shareholders and the Board of Trustees of Elme Communities

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Washington Real Estate Investment Trust and Subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Elme Communities and Subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedules listed in the Index at Item 15(A) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment Assessment of Income Producing Properties

Accounting for Acquisitions of Real Estate Properties

Description of the Matter

The Company had net income producing property of $1.6 billion as of December 31, 2021.

As discussed in Note 2 to the consolidated financial statements, real estate is evaluated for recoverability based on estimated cash flows if there are indicators of potential impairment.

Auditing the Company's impairment analysis involved a high degree of subjectivity due to the uncertainty around the Company’s estimated cash flows used in the impairment assessment.

Estimated future cash flows are based on assumptions, including the projected annual and residual cash flows and the estimated holding period for individual properties, that are forward looking and could be affected by future economic and market conditions.

During the year ended December 31, 2022, the Company acquired three properties for an aggregate purchase price of $283.2 million as disclosed in Note 3 to the consolidated financial statements.

These transactions were accounted for as asset acquisitions.

Auditing the Company's accounting for these acquisitions involves a higher degree of auditor judgment due to management’s use of estimates in determining the relative fair values of the tangible and identified intangible assets acquired and liabilities assumed.

The significant assumptions used to estimate the values of the tangible and intangible assets included the replacement cost of the acquired real estate assets, estimated future cash flows and other valuation assumptions, which are based on internal analyses and other market data.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for assessing impairment of income producing properties.

For example, we tested controls over management’s review of qualitative and quantitative indicators of impairment and properties’ expected future cash flows used in the recoverability evaluation, and we tested management’s review of the significant assumptions used in their impairment assessment.

Our testing of the Company’s impairment assessment included, among other procedures, evaluating the significant assumptions and testing the completeness and accuracy of the underlying data used by the Company to develop its estimated future cash flows for individual income producing properties.

We held discussions with management about the current status of potential transactions and about management’s judgments to understand the probability of future events that could affect the holding period and other cash flow assumptions for the properties.

We searched for and evaluated information that corroborates or contradicts the Company’s assumptions.

We also compared the significant assumptions to current industry, market and economic trends and to the historical results of the properties.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for estimating the fair value of acquired assets and liabilities and allocating purchase price to the various components, including controls over management’s determination and review of the significant assumptions used in the analyses described above.

To test the fair values of acquired tangible and intangible assets and liabilities used in the purchase price allocation, we involved our valuation specialists and performed audit procedures that included, among others, evaluating the Company’s valuation methodologies, testing the significant assumptions described above and testing the completeness and accuracy of the underlying data.

For example, we compared the significant assumptions used and the Company’s estimated fair values of acquired assets to observable market data, including other properties within the same submarkets.

/s/ Ernst & Young LLP

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Trustees of Washington Real Estate Investment Trust

To the Shareholders and the Board of Trustees of Elme Communities

Opinion on Internal Control Over Financial Reporting

We have audited Washington Real Estate Investment Trust and Subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Washington Real Estate Investment Trust and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We have audited Elme Communities and Subsidiaries’ internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Elme Communities and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2022 consolidated financial statements of the Company and our report dated February 17, 2023 expressed an unqualified opinion thereon.

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February 17, 2023

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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Total real estate held for investment, net 1,820,678 1,592,841

Investment in real estate held for sale, net — 795,687

Cash and cash equivalents 8,389 233,600

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Prepaid expenses and other assets 25,730 33,866

Other assets related to properties sold or held for sale — 87,834

Total assets $ 1,872,606 $ 1,875,994

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Tenant security deposits 5,563 4,669

Other liabilities related to properties sold or held for sale — 25,229

Total liabilities 608,820 558,932

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Shares of beneficial interest, $ 0.01 par value;

150,000 and 100,000 shares authorized;

86,261 and 84,409 shares issued and outstanding, as of December 31, 2021 and December 31, 2020, respectively

150,000 shares authorized:

87,534 and 86,261 shares issued and outstanding, as of December 31, 2022 and 2021, respectively

Additional paid in capital 1,729,854 1,697,477

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See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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91,722 72,656 70,336

Real estate impairment — — 8,374

211,103 173,744 163,414

(Loss) gain on sale of real estate, net — ( 15,009 ) 59,961

Real estate operating (loss) income ( 4,593 ) ( 2,419 ) 49,481

Loss on sale of real estate, net — — ( 15,009 )

Real estate operating loss ( 1,723 ) ( 4,593 ) ( 2,419 )

Other income (expense)

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Gain on sale of real estate, net — 46,441 —

Loss on extinguishment of debt

Income from discontinued operations

— 69,524 24,638

Net income (loss) $ 16,384 $ ( 15,680 ) $ 383,550

Basic net income (loss) per share

Net (loss) income $ ( 30,868 ) $ 16,384 $ ( 15,680 )

Basic net (loss) income per share

Continuing operations

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Discontinued operations — 0.82 0.30

Basic net income (loss) per share (1)

Basic net (loss) income per share (1)

$ ( 0.36 ) $ 0.19 $ ( 0.20 )

Diluted net income (loss) per share

Diluted net (loss) income per share

Continuing operations

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Discontinued operations — 0.82 0.30

Diluted net income (loss) per share (1)

Diluted net (loss) income per share (1)

$ ( 0.36 ) $ 0.19 $ ( 0.20 )

4 unchanged sentences

See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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2022 2021 2020

Net income (loss) $ 16,384 $ ( 15,680 ) $ 383,550

Net (loss) income $ ( 30,868 ) $ 16,384 $ ( 15,680 )

Other comprehensive income (loss):

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Reclassification of unrealized loss on interest rate derivatives to earnings 2,039 7,799 639

Comprehensive income (loss) $ 27,856 $ ( 48,066 ) $ 375,534

See accompanying notes to the financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

Comprehensive (loss) income $ ( 26,010 ) $ 27,856 $ ( 48,066 )

See accompanying notes to the consolidated financial statements.

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

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Balance, December 31, 2019 82,099 821 1,592,487 ( 183,405 ) 1,823 1,411,726 336 1,412,062

Cumulative effect of change in accounting principle (see note 4) — — — ( 906 ) — ( 906 ) — ( 906 )

Net income — — — 383,550 — 383,550 — 383,550

Unrealized gain on interest rate derivatives — — — — ( 8,016 ) ( 8,016 ) — ( 8,016 )

Net loss — — — ( 15,680 ) — ( 15,680 ) — ( 15,680 )

Unrealized loss on interest rate hedges — — — — ( 33,025 ) ( 33,025 ) — ( 33,025 )

Loss on interest rate derivatives — — — — 560 560 — 560

Amortization of swap settlements — — — — 79 79 — 79

Distributions to noncontrolling interests — — — — — — ( 14 ) ( 14 )

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Net income — — — 16,384 — 16,384 — 16,384

Unrealized loss on interest rate derivatives — — — — ( 33,025 ) ( 33,025 ) — ( 33,025 )

Unrealized gain on interest rate hedges — — — — 3,673 3,673 — 3,673

Loss on interest rate derivatives — — — — 5,760 5,760 — 5,760

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Balance, December 31, 2021 86,261 863 1,697,477 ( 362,494 ) ( 19,091 ) 1,316,755 307 1,317,062

Net income — — — 16,384 — 16,384 — 16,384

Unrealized gain on interest rate derivatives — — — — 3,673 3,673 — 3,673

Loss on interest rate derivatives — — — — 5,760 5,760 — 5,760

Net loss — — — ( 30,868 ) — ( 30,868 ) — ( 30,868 )

Unrealized gain on interest rate hedges — — — — 2,819 2,819 — 2,819

Amortization of swap settlements — — — — 2,039 2,039 — 2,039

7 unchanged sentences

See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Cash flows from operating activities

Net income (loss) $ 16,384 $ ( 15,680 ) $ 383,550

Net (loss) income $ ( 30,868 ) $ 16,384 $ ( 15,680 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 91,722 95,560 120,030

Credit losses (gains) on lease related receivables 2,482 5,422 ( 10 )

Real estate impairment — — 8,374

Credit losses on lease related receivables 2,483 2,482 5,422

(Gain) loss on sale of real estate — ( 46,441 ) 15,009

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Non-real estate capital improvements ( 1,743 ) ( 49 ) ( 222 )

Insurance proceeds 2,224 — —

Real estate deposits — ( 1,000 ) —

Net cash provided by investing activities 702,170 65,760 61,036

Net cash (used in) provided by investing activities ( 241,163 ) 702,170 65,760

Cash flows from financing activities

Line of credit repayments, net ( 42,000 ) ( 14,000 ) ( 132,000 )

Line of credit borrowings (repayments), net 55,000 ( 42,000 ) ( 14,000 )

Dividends paid ( 59,363 ) ( 90,728 ) ( 99,080 )

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Net cash used in financing activities ( 56,416 ) ( 565,396 ) ( 185,199 )

Net increase (decrease) in cash, cash equivalents and restricted cash 225,930 ( 6,461 ) 7,111

Net (decrease) increase in cash, cash equivalents and restricted cash ( 224,368 ) 225,930 ( 6,461 )

Cash, cash equivalents and restricted cash at beginning of year 234,220 8,290 14,751

Cash, cash equivalents and restricted cash at end of year $ 9,852 $ 234,220 $ 8,290

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

ELME COMMUNITIES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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NATURE OF BUSINESS

Washington Real Estate Investment Trust (“WashREIT”), a Maryland real estate investment trust, is a self-administered equity real estate investment trust, successor to a trust organized in 1960.

Our business consists of the ownership and operation of income-producing real estate properties primarily in the greater Washington, DC metro region, the majority of which are residential properties.

Elme Communities, a Maryland real estate investment trust, is a self-administered equity real estate investment trust, successor to a trust organized in 1960.

In October 2022, the Company changed its name from Washington Real Estate Investment Trust to Elme Communities to reflect the Company’s continued transition into a focused multifamily company, and subsequent geographic expansion into Sunbelt markets.

On October 20, 2022, the Company’s ticker symbol on the New York Stock Exchange changed from “WRE” to “ELME.” Our business primarily consists of the ownership and operation of apartment communities in the greater Washington, DC metro and Sunbelt regions.

Federal Income Taxes

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When selling a property, we generally have the option of (a) reinvesting the sales proceeds of property sold in a way that allows us to defer recognition of some or all taxable gain realized on the sale, (b) distributing gains to the shareholders with no tax to us or (c) treating net long-term capital gains as having been distributed to our shareholders, paying the tax on the gain deemed distributed and allocating the tax paid as a credit to our shareholders.

During the three years ended December 31, 2021, we sold our interests in the following properties (in thousands):

Disposition Date Property Type (Loss) Gain on Sale

July 26, 2021 Office Portfolio (1)

Office $ ( 11,220 )

September 22, 2021 Retail Portfolio (2)

Retail 57,661

Total 2021 $ 46,441

April 21, 2020 John Marshall II Office $ ( 6,855 )

December 2, 2020 Monument II Office ( 8,595 )

December 17, 2020 1227 25th Street Office 1,125

Total 2020 $ ( 14,325 )

June 26, 2019 Quantico Corporate Center (3)

Office $ ( 1,046 )

July 23, 2019 Shopping Center Portfolio (4)

Retail 333,023

August 21, 2019 Frederick Crossing and Frederick County Square Retail 9,507

August 27, 2019 Centre at Hagerstown Retail ( 3,506 )

December 19, 2019 1776 G Street Office 61,007

Total 2019 $ 398,985

______________________________

(1) Consists of twelve office properties:

1901 Pennsylvania Avenue, 515 King Street, 1220 19th Street, 1600 Wilson Boulevard, Silverline Center, Courthouse Square, 2000 M Street, 1140 Connecticut Avenue, Army Navy Club, 1775 Eye Street, Fairgate at Ballston and Arlington Tower.

(2) Consists of eight retail properties:

Takoma Park, Westminster, Concord Centre, Chevy Chase Metro Plaza, 800 S.

Washington Street, Randolph Shopping Center, Montrose Shopping Center and Spring Valley Village .

(3) Consists of 925 and 1000 Corporate Drive.

(4) Consists of five retail properties:

Gateway Overlook, Wheaton Park, Olney Village Center, Bradlee Shopping Center and Shoppes of Foxchase.

We sold no properties in 2022.

We sold twelve office and eight retail properties for an aggregate gain of $ 46.4 million and three office properties for an aggregate loss of $ 14.3 million during the years ended December 31, 2021 and 2020, respectively.

Generally, and subject to our ongoing qualification as a REIT, no provisions for income taxes are necessary except for taxes on undistributed taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRSs”).

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Beginning in 2018, ordinary taxable income per share is equal to the Section 199A dividend that was created by the Tax Cuts and Jobs Act.

The following is a breakdown of the taxable percentage of our dividends for the three years ended December 31,

2021 (unaudited):

The following is a breakdown of the taxable percentage of our dividends for the three years ended December 31, 2022 (unaudited):

2022 2021 2020

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Principles of Consolidation and Basis of Presentation

The accompanying audited consolidated financial statements include the consolidated accounts of WashREIT and our subsidiaries and entities in which WashREIT has a controlling financial interest.

The accompanying audited consolidated financial statements include the consolidated accounts of Elme Communities and our subsidiaries and entities in which Elme Communities has a controlling financial interest.

All intercompany balances and transactions have been eliminated in consolidation.

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Use of Estimates in the Financial Statements

The preparation of financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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We also generate other property-related revenue associated with the leasing of apartment homes, including parking income, move-in charges, pet rent and other miscellaneous revenue.

Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned.

Similar to rental income, such revenues are recorded when due from residents and recognized monthly as they are earned.

We recognize cost reimbursement income at our residential properties from pass-through expenses on an accrual basis over the periods in which the expenses were incurred.

Pass-through expenses are primarily comprised of utility costs which are reimbursed by tenants in accordance with specific allowable costs per tenant lease agreements.

Pass-through expenses are primarily comprised of utility costs which are reimbursed by residents in accordance with specific allowable costs per resident lease agreements.

We recognize gains on sales of real estate when we have executed a contract for sale of the asset, transferred controlling financial interest in the asset to the buyer and determined that it is probable that we will collect substantially all of the consideration for the asset.

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Asset Acquisitions

The properties we acquire typically are not businesses as defined by ASU 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business .

The properties we acquire typically are not businesses as defined by ASC 805 ("Topic 805") - Clarifying the Definition of a Business.

Per this definition, a set of transferred assets and activities is not a business when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

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Acquisition costs are capitalized and identifiable assets (including physical assets and in-place leases), liabilities assumed and any noncontrolling interests are measured by allocating the cost of the acquisition on a relative fair value basis.

Acquisitions executed prior to our adoption of ASU 2017-01 as of January 1, 2017 were accounted for as business combinations.

We determine the fair values of acquired buildings on an “as-if-vacant” basis considering a variety of factors, including the replacement cost of the property, estimated rental and absorption rates, estimated future cash flows and valuation assumptions consistent with current market conditions.

We determine the fair value of land acquired based on comparisons to similar

properties that have been recently marketed for sale or sold.

We determine the fair value of land acquired based on comparisons to similar properties that have been recently marketed for sale or sold.

The fair value of in-place leases are based upon our evaluation of the specific characteristics of the leases.

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Our dilutive earnings per share calculation includes the dilutive impact of operating partnership units under the if-converted method and our share based awards with performance conditions prior to the grant date and all market condition awards under the contingently issuable method.

Stock Based Compensation

Share-Based Compensation

We currently maintain equity based compensation plans for trustees, officers and employees.

We recognize compensation expense for service-based share awards ratably over the period from the service inception date through the vesting period based on the fair market value of the shares on the date of grant.

We recognize compensation expense for service-based share awards ratably over the period from the service inception date

through the vesting period based on the fair market value of the shares on the date of grant.

We account for forfeitures as they occur.

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Our results of operations are dependent on the overall economic health of our markets and residents which are affected by external economic factors, such as inflation, consumer confidence and unemployment rates, as well as changing residents and consumer requirements.

As of December 31, 2021, one property, Riverside Apartments, accounted for more than approximately 10 % of total assets and two properties, Riverside Apartments and Watergate 600, each accounted for more than approximately 10 % of real estate rental revenue.

As of December 31, 2022, one property, Riverside Apartments, accounted for more than approximately 10 % of total assets and more than approximately 10 % of real estate rental revenue.

We have properties under development/redevelopment and held for current or future development.

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As of December 31, 2022, we have invested $ 30.4 million, including the cost of acquired land, in a residential development adjacent to Riverside Apartments.

In addition we continue to capitalize qualifying costs on several other projects with minor development activity necessary to ready each project for its intended use.

We placed the remainder of the Trove development costs into service during the first quarter of 2021.

During the second quarter of 2022, we paused development activities at the aforementioned property and ceased associated capitalization of interest on spending and real estate taxes, though we still consider the future completion of this development to be probable.

We also continue to capitalize qualifying costs on several other projects with minor development activity necessary to ready each project for its intended use.

Properties and land for development acquired during the three years ended December 31, 2022 were as follows:

Acquisition Date Property Type # of Homes (unaudited) Contract

Acquisition Date Property Type # of Homes (unaudited) Ending Occupancy Contract

Purchase Price

(in thousands)

February 1, 2022 Carlyle of Sandy Springs Residential 389 95.1 % 105,586

May 5, 2022 Marietta Crossing Residential 420 95.5 % 107,900

May 5, 2022 Alder Park Residential 270 93.7 % 69,750

1,079 $ 283,236

August 10, 2021 The Oxford Residential 240 94.6 % $ 48,000

1 unchanged sentence

730 $ 154,000

April 30, 2019 Assembly Portfolio - Virginia (1)

Residential 1,685 $ 379,100

June 27, 2019 Assembly Portfolio - Maryland (2)

Residential 428 82,070

July 23, 2019 Cascade at Landmark Residential 277 69,750

2,390 $ 530,920

______________________________

(1) Consists of Assembly Alexandria, Assembly Manassas, Assembly Dulles, Assembly Leesburg and Assembly Herndon.

(2) Consists of Assembly Germantown and Assembly Watkins Mill.

The Assembly Portfolio - Virginia and Assembly Portfolio - Maryland properties are collectively the “Assembly Portfolio.”

The results of operations from acquired operating properties are included in the consolidated statements of operations as of their acquisition dates.

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Land $ 50,547 $ 20,914 $ —

Buildings and improvements 128,540 — 423,663

Leasing commissions/absorption costs 4,786 — 15,474

Total $ 154,240 $ — $ 531,528

The weighted average remaining life for the absorption costs is 4 months.

The difference in the total cost of the 2021 acquisitions of $ 154.2 million and the cash paid for the acquisitions per the consolidated statements of cash flows of $ 153.7 million is primarily due to credits received at settlement totaling $ 0.5 million.

Building 220,825 128,540 —

Absorption costs 7,300 4,786 —

Aggregate discount on assumed mortgages 5,042 — —

Total acquisition cost 283,714 154,240 —

Outstanding balance on assumed mortgages ( 76,554 ) — —

Total carrying amounts recorded $ 207,160 $ 154,240 $ —

The weighted average remaining life for the absorption costs is two months .

The difference in the total cost of the 2022 acquisitions of $ 283.7 million for the 2022 acquisitions and the cash paid for the acquisitions per the consolidated statements of cash flows of $ 204.4 million is due to the assumption of two mortgage notes secured by Marietta Crossing and Alder Park for an aggregate outstanding balance of $ 76.6 million and credits received at settlement totaling $ 2.8 million.

In September 2022, we extinguished the liabilities associated with the two mortgage notes though defeasance arrangements.

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2027 1,627 ( 479 ) 1,148

Thereafter 1,782 ( 524 ) 1,258

Properties Sold and Held for Sale

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Depreciation on these properties is discontinued when classified as held for sale, but operating revenues, other operating expenses and interest continue to be recognized through the date of sale.

We sold our interests in the following properties during the three years ended December 31, 2021:

Disposition Date Property Type Rentable

(unaudited) Contract

(in thousands) (Loss) Gain on Sale

(in thousands)

July 26, 2021 Office Portfolio (1)

Office 2,370,000 $ 766,000 $ ( 11,220 )

September 22, 2021 Retail Portfolio (2)

Retail 693,000 168,314 57,661

Total 2021 3,063,000 $ 934,314 $ 46,441

April 21, 2020 John Marshall II Office 223,000 $ 57,000 $ ( 6,855 )

December 2, 2020 Monument II Office 207,000 53,000 ( 8,595 )

December 17, 2020 1227 25th Street Office 135,000 53,500 1,125

Total 2020 565,000 $ 163,500 $ ( 14,325 )

June 26, 2019 Quantico Corporate Center (3)

Office 272,000 $ 33,000 $ ( 1,046 )

July 23, 2019 Shopping Center Portfolio (4)

Retail 800,000 485,250 333,023

August 21, 2019 Frederick Crossing and Frederick County Square Retail 520,000 57,500 9,507

August 27, 2019 Centre at Hagerstown Retail 330,000 23,500 ( 3,506 )

December 19, 2019 1776 G Street Office 262,000 129,500 61,007

Total 2019 2,184,000 $ 728,750 $ 398,985

______________________________

(1) Consists of twelve office properties:

(2) Consists of eight retail properties:

Takoma Park, Westminster, Concord Centre, Chevy Chase Metro Plaza, 800 S.

Washington Street, Randolph Shopping Center, Montrose Shopping Center and Spring Valley Village .

(3) Consists of 925 and 1000 Corporate Drive.

(4) Consists of five retail properties:

Gateway Overlook, Wheaton Park, Olney Village Center, Bradlee Shopping Center and Shoppes of Foxchase.

We sold no properties in 2022.

The dispositions of the office and retail properties in 2021 represented a strategic shift that had a major effect on our financial results, and we accordingly reported them as discontinued operations.

We have fully transferred control of the assets associated with these disposed properties and do not have continuing involvement in the operations of these properties.

In June 2021, we entered into a purchase and sale agreement with a single buyer to sell the Office Portfolio for a purchase price of $ 766.0 million.

Upon execution of the purchase and sale agreement, the properties in the Office Portfolio met the criteria for classification as held for sale.

We closed on the sale of the Office Portfolio on July 26, 2021, recognizing a loss on sale of real estate of $ 11.2 million.

In June 2021, we executed a letter of intent to sell the Retail Portfolio.

During the 2021 Quarter, we executed a purchase and sale agreement for the sale of our remaining eight retail properties for a purchase price of $ 168.3 million and closed on the sale on September 22, 2021, recognizing a gain on real estate of $ 57.7 million.

The dispositions of the Office Portfolio and the Retail Portfolio represent a strategic shift that will have a major effect on our financial results and we have accordingly reported the Office Portfolio and Retail Portfolio as discontinued operations.

As of December 31, 2022, we assessed our properties for impairment and did no t recognize any impairment charges during 2022.

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Discontinued Operations

The results of the Office and Retail Portfolios, which were sold in 2021, are classified as discontinued operations and are summarized as follows (amounts in thousands, except for share data):

The results of the twelve office and eight retail properties sold in 2021 are classified as discontinued operations and are summarized as follows (amounts in thousands, except for share data):

Year Ended December 31,

2021 2020 2019

Real estate rental revenue $ 70,519 $ 118,114

3 unchanged sentences

Depreciation and amortization ( 22,904 ) ( 49,694 )

Interest expense — — ( 313 )

Loss on extinguishment of debt — — ( 764 )

Gain on sale of real estate, net 46,441 —

4 unchanged sentences

All assets and liabilities related to the Office Portfolio and Retail Portfolio were sold as of December 31, 2021.

As of December 31, 2020, assets and liabilities related to the Office Portfolio and Retail Portfolio were as follows (in thousands):

December 31, 2020

Land $ 249,869

Income producing property 958,704

Accumulated depreciation and amortization ( 414,008 )

Income producing property, net 794,565

Development in progress and land held for development 1,122

Investment in real estate, net 795,687

Cash and cash equivalents 3

Restricted cash 10

Rents and other receivables 46,369

Prepaid expenses and other assets 41,452

Total assets $ 883,521

Accounts payable and other liabilities $ 14,706

Advance rents 4,754

Tenant security deposits 5,769

Liabilities related to properties sold or held for sale $ 25,229

LEASE ACCOUNTING

Leasing as a Lessee

For leases where we are the lessee, primarily in our corporate office operating lease, we recognize a right-of-use asset and a lease liability in accordance with Accounting Standards Codification (“ASC”) Topic 842.

For leases where we are the lessee, primarily in our corporate office operating lease, we recognize a right-of-use asset and a lease liability in accordance with ASC Topic 842.

The right-of-use asset and associated liability is equal to the present value of the minimum lease payments, applying our incremental borrowing rate.

Our borrowing rate is computed based on observable borrowing rates taking into consideration our credit quality and adjusting to a secured borrowing rate for similar assets and term.

As of December 31, 2021, we had $ 4.6 million in right-of-use assets and liabilities recorded within Income producing property and Accounts payable and other liabilities on our consolidated balance sheets, respectively.

Lease expense for the operating lease is recognized on a straight-line basis over the expected lease term and is included in “General and administrative expense.”

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Rental income under most of these commercial leases increase in future years based on agreed-upon percentages or in some instances, changes in the Consumer Price Index.

MORTGAGE NOTE PAYABLE

In May 2022, we assumed a $ 42.8 million mortgage note in connection with the acquisition of Marietta Crossing.

This mortgage note bore interest at 3.36 % per annum.

The effective interest rate on this mortgage note was 4.50 % based on quotes obtained for similar loans.

We recorded the mortgage note at its estimated fair value of $ 40.0 million.

Principal and interest were payable monthly until May 1, 2030, at which time all unpaid principal and interest were payable in full.

In May 2022, we assumed a $ 33.7 million mortgage note in connection with the acquisition of Alder Park.

This mortgage note bore interest at 2.93 % per annum.

The effective interest rate on this mortgage note was 4.00 % based on quotes obtained for similar loans.

We recorded the mortgage note at its estimated fair value of $ 31.5 million.

Principal and interest were payable monthly until May 1, 2030, at which time all unpaid principal and interest were payable in full.

In September 2022, we extinguished the liabilities associated with both of the mortgage notes through defeasance arrangements, recognizing aggregate losses on extinguishment of debt of $ 4.9 million.

UNSECURED LINES OF CREDIT PAYABLE

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As a result of the transaction, we recognized a loss on extinguishment of debt of $ 0.2 million related to the write off of unamortized loan origination costs.

We incurred $ 4.8 million of additional loan origination costs which will be amortized as interest expense over the term of the Revolving Credit Facility.

The 2018 Term Loan increased and replaced the $ 150.0 million unsecured term loan, initially entered into on July 22, 2016 (“2016 Term Loan”), that was scheduled to mature in July 2023.

The 2018 Term Loan is scheduled to mature in July 2023 and bears interest at a rate of either one month LIBOR plus a margin ranging from 0.85 % to 1.75 % or the base rate plus a margin ranging from 0.0 % to 0.75 % (in each case depending upon WashREIT’s credit rating).

We used the $ 100.0 million of additional proceeds from the 2018 Term Loan primarily to repay outstanding borrowings on the Revolving Credit Facility.

We incurred $ 4.8 million of additional loan origination costs which are amortized as interest expense over the term of the Revolving Credit Facility.

On September 27, 2021, we prepaid a $ 150.0 million portion of the 2018 Term Loan using proceeds from the sale of the Office Portfolio and Retail Portfolio (see note 3).

As a result of the prepayment, we recognized a loss on extinguishment of debt of $ 0.3 million related to the write-off of unamortized loan origination costs.

Simultaneous with the prepayment, we terminated five interest rate swap arrangements (see note 6).

We currently expect to hold the remaining $ 100.0 million portion of the 2018 Term Loan until maturity.

Simultaneous with the prepayment, we terminated five interest rate swap arrangements.

Subsequent to the end of 2022, we prepaid the remaining $ 100.0 million portion of the 2018 Term Loan using proceeds from a $ 125.0 million unsecured term loan (see note 7).

The amount of the Revolving Credit Facility unused and available at December 31, 2022 was as follows (in thousands):

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Balance, December 31, 2022 $ 55,000

The Revolving Credit Facility bears interest at a rate of either one month LIBOR plus a margin ranging from 0.70 % to 1.40 % or the base rate plus a margin ranging from 0.0 % to 0.40 % (in each case depending upon WashREIT’s credit rating).

The base rate is the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50 % and the LIBOR market index rate plus 1.0 %.

In addition, the Revolving Credit Facility requires the payment of a facility fee ranging from 0.10 % to 0.30 % (depending on WashREIT’s credit rating) on the $ 700.0 million committed revolving loan capacity, without regard to usage.

As of December 31, 2021, the interest rate on the Revolving Credit Facility is one month LIBOR plus 0.85 %, the one month LIBOR is 0.10 % and the facility fee is 0.20 %.

As of December 31, 2022, the Revolving Credit Facility bore interest at a rate of either one month LIBOR plus a margin ranging from 0.70 % to 1.40 % or the base rate plus a margin ranging from 0.0 % to 0.40 % (in each case depending upon Elme Communities’ credit rating).

The base rate was the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50 % and the LIBOR market index rate plus 1.0 %.

Subsequent to the end of 2022, we executed an amendment to the Revolving Credit Facility to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins.

In addition, the Revolving Credit Facility requires the payment of a facility fee ranging from 0.10 % to 0.30 % (depending on Elme Communities’ credit rating) on the $ 700.0 million committed revolving loan capacity, without regard to usage.

As of December 31, 2022, the interest rate on the Revolving Credit Facility was one month LIBOR plus 0.85 %, the one month LIBOR was 4.39 % and the facility fee was 0.20 %.

All outstanding advances for the Revolving Credit Facility are due and payable upon maturity in August 2025, unless extended pursuant to one or both of the two six-month extension options.

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Effective November 26, 2002, under this existing coverage, any losses caused by certified acts of terrorism would be partially reimbursed by the United States under a formula established by federal law.

this formula, the United States pays 85 % of covered terrorism losses exceeding the statutorily established deductible paid by the insurance provider, and insurers pay 10 % until aggregate insured losses from all insurers reach $ 100 billion in a calendar year.

Under this formula, the United States pays 85 % of covered terrorism losses exceeding the statutorily established deductible paid by the insurance provider, and insurers pay 10 % until aggregate insured losses from all insurers reach $ 100 billion in a calendar year.

If the aggregate amount of insured losses under this program exceeds $ 100 billion during the applicable period for all insured and insurers combined, then each insurance provider will not be liable for payment of any amount which exceeds the aggregate amount of $ 100 billion.

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2022 2021 Maturity Date (2)

10-Year Unsecured Notes 3.95 % 4.02 % — 300,000 8/26/2021

2018 Term Loan 1 Month LIBOR + 110 basis points

2018 Term Loan (3)

1 Month LIBOR + 110 basis points

2.31 % $ 100,000 $ 100,000 1/10/2023

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(2) No principal amounts are due prior to maturity.

(3) Subsequent to the end of 2022, we prepaid the remaining $ 100.0 million portion of the 2018 Term Loan using proceeds from the 2023 Term Loan (as defined below).

Subsequent to the end of 2022, we executed a $ 125.0 million unsecured term loan ("2023 Term Loan") with an interest rate of SOFR (subject to a credit spread adjustment of 10 basis points) plus a margin of 95 basis points.

The 2023 Term Loan has a two-year term ending in January 2025, with two one year extension options.

We used the proceeds to prepay the 2018 Term Loan in full and a portion of our borrowings under our unsecured credit facility.

In August 2021, we redeemed $ 300.0 million of our existing unsecured notes that were scheduled to mature in 2022.

As a result of the prepayment, we recognized a loss on extinguishment of debt of $ 12.3 million comprised of a prepayment penalty of $ 11.9 million and the write-off of unamortized loan origination costs of $ 0.4 million.

In April 2020, we used borrowings from our Revolving Credit Facility to prepay all $ 250.0 million of our 4.95 % 10-year unsecured notes without penalty.

On May 5, 2020, we entered into a one-year , $ 150.0 million unsecured term loan facility (“2020 Term Loan”), maturing on May 5, 2021 with a one-year extension option.

The 2020 Term Loan bears interest at LIBOR + 1.50 %, which margin is subject to change based on our credit ratings, with a 0.50 % floor for the LIBOR rate.

We used the proceeds to repay borrowings under our Revolving Credit Facility.

We repaid in full the 2020 Term Loan on November 30, 2020.

On September 29, 2020, we entered into a note purchase agreement to issue $ 350.0 million aggregate principal amount of 3.44 % senior unsecured 10-year notes payable (the “Green Bonds”).

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We incurred $ 2.6 million of debt issuance costs associated with the Green Bonds which are reported on our consolidated balance sheets as an offset to their related debt.

The Green Bonds are senior unsecured obligations of WashREIT and rank equal in right to payment with all other senior unsecured indebtedness of WashREIT.

The Green Bonds are senior unsecured obligations of Elme Communities and rank equal in right to payment with all other senior unsecured indebtedness of Elme Communities.

The proceeds of the sale of the Green Bonds were used to finance or refinance recently completed and future green building and energy efficiency, sustainable water and wastewater management and renewable energy projects.

In the fourth quarter of 2020, we repaid all $ 150.0 million of borrowings on the 2015 Term Loan and all $ 150.0 million of borrowings on the 2020 Term Loan.

As a result of these transactions, we recognized a loss on extinguishment of debt of $ 0.3 million.

The note purchase agreement contains customary financial covenants, including a maximum total leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a minimum unencumbered interest coverage ratio, and a maximum unencumbered leverage ratio.

The note purchase agreement also contains restrictive covenants that, among other things, restrict the ability of WashREIT and its subsidiaries to enter into transactions with affiliates, consolidate or merge or transfer or lease all or substantially all of its assets, create liens, make dividends and distributions if an event of default exists, or substantially change the general nature of our business.

The note purchase agreement also contains restrictive covenants that, among other things, restrict the ability of Elme Communities and its subsidiaries to enter into transactions with affiliates, consolidate or merge or transfer or lease all or substantially all of its assets, create liens, make dividends and distributions if an event of default exists, or substantially change the general nature of our business.

Such financial and restrictive covenants are substantially similar to the corresponding covenants contained in our Credit Agreement.

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In the case of an event of default, we will generally be prohibited from paying any dividends, subject to certain exceptions including payment of dividends necessary to maintain REIT status, and the Purchasers may, among other remedies, accelerate the payment of all obligations.

In the event of a change in control of WashREIT, we must offer to prepay the Green Bonds at par.

In the event of a change in control of Elme Communities, we must offer to prepay the Green Bonds at par.

The required principal payments on the unsecured notes and term loans as of December 31, 2022 are as follows (in thousands):

2023 $ 100,000

Thereafter 400,000

Interest on these notes is payable semi-annually, except for the term loans, for which interest is payable monthly.

Interest on these notes is payable semi-annually, except for the term loan, for which interest is payable monthly.

These notes contain certain financial and non-financial covenants, all of which we have met as of December 31, 2022.

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DERIVATIVE INSTRUMENTS

On July 22, 2016, we entered into two forward interest rate swap arrangements with total notional amounts of $ 100.0 million and $ 50.0 million to swap the floating interest rate under the $ 150.0 million 2016 Term Loan (see note 5) to an all-in fixed interest rate of 2.86 %, starting on March 31, 2017 and extending until the scheduled maturity of the 2016 Term Loan on July 21, 2023.

On March 29, 2018, we entered into the $ 250.0 million 2018 Term Loan (see note 5) maturing on July 21, 2023, which increased and replaced the 2016 Term Loan.

The interest rate swap arrangements that had effectively fixed the 2016 Term Loan effectively fixed the interest rate on a $ 150.0 million portion of the 2018 Term Loan at 2.31 %.

On March 29, 2018, we entered into four interest rate swap arrangements with a total notional amount of $ 100.0 million to effectively fix the interest rate on the remaining $ 100.0 million of the 2018 Term Loan at 3.71 %, that commenced on June 29, 2018 and extending until the maturity of the 2018 Term Loan on July 21, 2023.

The $ 250.0 million 2018 Term Loan had an all-in fixed interest rate of 2.87 % (see note 5 and note 6).

In the second quarter of 2021 we determined that the hedged transactions for five interest rate swap arrangements with an aggregate notional value of $ 150.0 million were probable not to occur and that these interest swap arrangements were no longer effective cash flow hedges as of June 30, 2021 due to our intention to prepay a $ 150.0 million portion of the 2018 Term Loan.

As a result, we recognized a loss of $ 5.8 million for the second quarter of 2021, which was recorded to Loss on interest rate derivatives on our consolidated statements of operations.

On September 27, 2021, we prepaid the $ 150.0 million portion of the 2018 Term Loan (see note 5).

In connection with the prepayment, we terminated the five interest rate swap arrangements with an aggregate notional value of $ 150.0 million.

Our remaining interest rate swap arrangement with a notional amount of $ 100.0 million is recorded at fair value in accordance with GAAP, based on discounted cash flow methodologies and observable inputs.

We have one interest rate swap arrangement with a notional amount of $ 100.0 million that effectively fixed the remaining $ 100.0 million portion of the 2018 Term Loan at 2.31 %.

Subsequent to the end of 2022, we prepaid the 2018 Term Loan using proceeds from the $ 125.0 million 2023 Term Loan (see note 7).

Subsequent to this transaction, our interest rate swap arrangement effectively fixes a $ 100.0 million portion of the 2023 Term Loan.

The interest rate swap arrangement is recorded at fair value in accordance with GAAP, based on discounted cash flow methodologies and observable inputs.

We record the effective portion of changes in fair value of the cash flow hedge in Other comprehensive income (loss).

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Hedge ineffectiveness of our cash flow hedges is recorded in earnings.

The fair values of the interest rate swaps as of December 31, 2021 and 2020, are as follows (in thousands):

The fair values of the interest rate swap as of December 31, 2022 and 2021, were as follows (in thousands):

Amount Effective Date Fair Value

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Derivative Instrument Maturity Date 2022 2021

Interest rate swaps $ 100,000 March 31, 2017 July 21, 2023 $ ( 821 ) $ ( 2,671 )

Interest rate swaps 50,000 March 31, 2017 July 21, 2023 — ( 1,338 )

Interest rate swaps 100,000 June 29, 2018 July 21, 2023 — ( 6,246 )

$ ( 821 ) $ ( 10,255 )

Interest rate swap $ 100,000 March 31, 2017 July 21, 2023 $ 1,998 $ ( 821 )

We record interest rate swaps on our consolidated balance sheets with prepaid expenses and other assets when in a net asset position, and with accounts payable and other liabilities when in a net liability position.

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Loss reclassified from Accumulated other comprehensive income (loss) into interest expense $ 2,039 $ 2,039 $ 79

During the next twelve months, we estimate that $ 0.8 million will be reclassified as an increase to interest expense.

We have agreements with each of our derivative counterparties that contain a provision whereby we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness.

As of December 31, 2021, we did no t have any derivatives in an asset position and the fair value of the derivative liabilities, including accrued interest, was $ 0.8 million.

During the next twelve months, we estimate that $ 2.0 million will be reclassified as a decrease to interest expense.

on the indebtedness.

As of December 31, 2022, the fair value of derivative assets, including accrued interest, was $ 2.0 million and we did no t have any derivatives in a liability position.

As of December 31, 2022, we have not posted any collateral related to these agreements.

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The only assets or liabilities we had at December 31, 2022 and 2021 that are recorded at fair value on a recurring basis are the assets held in the Supplemental Executive Retirement Plan ("SERP"), which primarily consists of investments in mutual funds, and the interest rate swaps (see note 8).

We base the valuations related to the SERP on assumptions derived from significant other observable inputs and accordingly

these valuations fall into Level 2 in the fair value hierarchy.

We base the valuations related to the SERP on assumptions derived from significant other observable inputs and accordingly these valuations fall into Level 2 in the fair value hierarchy.

The valuation of the interest rate swaps is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each interest rate swap.

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In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as the posting of collateral, thresholds, mutual puts and guarantees.

The valuation of interest rate swaps fall into Level 2 in the fair value hierarchy.

The valuation of interest rate swaps falls into Level 2 in the fair value hierarchy.

The fair values of these assets and liabilities at December 31, 2022 and 2021 were as follows (in thousands):

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The following disclosures of estimated fair value were determined by management using available market information and established valuation methodologies, including discounted cash flow models.

Many of these estimates involve significant judgment.

Many of these estimates involve significant

The estimated fair value disclosed may not necessarily be indicative of the amounts we could realize on disposition of the financial instruments.

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We estimate the fair value of the notes payable by discounting the contractual cash flows at a rate equal to the relevant treasury rates (with respect to the timing of each cash flow) plus credit spreads derived using the relevant securities’ market prices.

We classify these fair value measurements as Level 3 as we use

significant unobservable inputs and management judgment due to the absence of quoted market prices.

We classify these fair value measurements as Level 3 as we use significant unobservable inputs and management judgment due to the absence of quoted market prices.

As of December 31, 2022 and 2021, the carrying values and estimated fair values of our financial instruments were as follows (in thousands):

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Notes payable 497,359 454,564 496,946 515,341

STOCK BASED COMPENSATION

WashREIT maintains short-term and long-term incentive plans that allow for stock-based awards to officers and non-officer employees.

Stock based awards are provided to officers and non-officer employees, as well as trustees, under the Washington Real Estate Investment Trust 2016 Omnibus Incentive Plan which allows for awards in the form of restricted shares, restricted share units, options, and other awards up to an aggregate of 2,400,000 shares over the ten year period in which the plan will be in effect.

SHARE-BASED COMPENSATION

Elme Communities maintains short-term and long-term incentive plans that allow for share-based awards to officers and non-officer employees.

Share-based awards are provided to officers and non-officer employees, as well as trustees, under the Washington Real Estate Investment Trust 2016 Omnibus Incentive Plan which allows for awards in the form of restricted shares, restricted share units, options, and other awards up to an aggregate of 2,400,000 shares over the ten year period in which the plan will be in effect.

Restricted share units are converted into shares of our stock upon full vesting through the issuance of new shares.

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Senior Vice President 35 % 65 % 115 %

If a Change in Control (as defined in the Officer STIP) occurs during a performance period while the participant is employed, the participant will receive a prorated award under the Officer STIP calculated based on the actual levels of achievement of the

prorated performance goals as of the date of the Change in Control.

Under the Officer LTIP, as revised, all named executive officers will have the opportunity to receive awards based on (i) the achievement of performance measures, which will be established for each performance period, and (ii) continued employment with the Company.

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With respect to the 50 % of the Prior STIP award payable in restricted shares, the restricted shares will vest over a three-year period commencing on the January 1 following the end of the one-year performance period.

Prior to the adoption of the 2016 Omnibus Incentive Plan, stock based awards to officers, non-officer employees and trustees were issued under the Washington Real Estate Investment Trust 2007 Omnibus Long-Term Incentive Plan which allowed for awards in the form of restricted shares, restricted share units, options and other awards up to an aggregate of 2,000,000 shares while the plan was in effect.

Prior to the adoption of the 2016 Omnibus Incentive Plan, share-based awards to officers, non-officer employees and trustees were issued under the Washington Real Estate Investment Trust 2007 Omnibus Long-Term Incentive Plan which allowed for awards in the form of restricted shares, restricted share units, options and other awards up to an aggregate of 2,000,000 shares while the plan was in effect.

The grant date for the 50 % of the Prior STIP award payable in restricted shares was the date on which the Compensation Committee approved the Prior STIP awards.

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For performance periods beginning prior to January 1, 2018, performance was evaluated based 50 % on absolute total shareholder return (“TSR”) and 50 % on relative TSR over a three-year evaluation period with a new three-year period initiating under the existing plan each year.

During the first quarter of 2018, we amended the Prior LTIP for executive officers to eliminate the absolute TSR component and only utilize relative TSR

in the measurement of market condition performance.

During the first quarter of 2018, we amended the Prior LTIP for executive officers to eliminate the absolute TSR component and only utilize relative TSR in the measurement of market condition performance.

Under the amended Prior LTIP, relative TSR was evaluated 50 % relative to a defined population of peer companies and 50 % relative to the FTSE NAREIT Diversified Index.

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We use a binomial model which employs the Monte Carlo method as of the grant date to determine the fair value of the Officer LTIP awards.

For three-year performance periods commencing on or after January 1, 2021, the market condition performance measurement is based on total shareholder return relative to a defined population of peer companies ( 50 % weighting), relative to the FTSE Residential Index ( 42.5 % weighting) and the FTSE Office Index ( 7.5 % weighting).

The model evaluates the awards for changing total shareholder return over the term of the vesting, relative to the peer companies and relative to the FTSE indexes, and uses random simulations that are based on past stock characteristics as well as dividend growth and other factors for WashREIT and each of the peer companies.

For the three-year performance periods commencing between January 1, 2018 and December 31, 2020, the market condition performance measurement is based on total shareholder return relative to a defined population of peer companies ( 50 % weighting) and relative to the FTSE NAREIT Diversified Index ( 50 % weighting).

For three-year performance periods commencing prior to January 1, 2018, the market condition performance measurement was based on total shareholder return on an absolute basis ( 50 % weighting) and relative to a defined population of peer companies ( 50 % weighting).

For three-year performance periods commencing on or after January 1, 2022, the market condition performance measurement is based on total shareholder return relative to a defined population of peer companies ( 100 % weighting).

For three-year performance periods commencing between January 1, 2021 and December 31, 2021, the market condition performance measurement is based on total shareholder return relative to a defined population of peer companies ( 50 % weighting), relative to the FTSE Residential Index ( 42.5 % weighting) and the FTSE Office Index ( 7.5 % weighting).

The assumptions used to value the TSR portion of the officer LTIP and Prior LTIP awards were as follows:

2021 Awards 2020 Awards 2019 Awards

Expected volatility (1)

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Expected term (3)

3 and 4 years

Share price at grant date $ 24.54 $ 23.20 $ 31.50

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(3) Expected term based on the market condition performance period.

The calculated grant date fair value as a percentage of base salary for the officers for the three-year performance period that commenced in 2022 ranged from approximately 32 % to 248 % for the 100 % of the LTIP based on TSR relative to a defined population of peer companies.

The calculated grant date fair value as a percentage of base salary for the officers for the three-year performance period that commenced in 2021 ranged from approximately 37 % to 78 % for the 50 % of the LTIP based on TSR relative to a defined population of peer companies and from 38 % to 80 % for the 50 % of the LTIP based on TSR relative to the FTSE indexes.

The calculated grant date fair value as a percentage of base salary for the officers for the three-year performance period that commenced in 2020 ranged from approximately 20 % to 42 % for the 50 % of the LTIP based on TSR relative to a defined population of peer companies and from 22 % to 46 % for the 50 % of the LTIP based on TSR relative to the FTSE NAREIT Diversified Index.

The calculated grant date fair value as a percentage of base salary for the officers for the three-year performance period that commenced in 2019 ranged from approximately 35 % to 68 % for the 50 % of the LTIP based on TSR relative to a defined population of peer companies and from 39 % to 74 % for the 50 % of the LTIP based on TSR relative to the FTSE NAREIT Diversified Index.

During 2022, our chief executive officer was granted a one-time equity award of 100,000 restricted shares.

None of the restricted shares vest until the fifth anniversary of the grant date, at which time 100 % of the restricted shares will vest, subject to Mr.

McDermott's continued employment with WashREIT until such vesting date.

None of the restricted shares vest until the earlier of the fifth anniversary of the grant date or when our chief executive officer become retirement-eligible, at which time 100 % of the restricted shares will vest, subject to Mr.

McDermott's continued employment with Elme Communities until such vesting date.

During 2017, our chief executive officer was granted a one-time equity award of 100,000 restricted shares which vested in June 2022 on the fifth anniversary of the grant date.

Our non-executive officers and other employees earn restricted share unit awards under a long-term incentive plan for non-executive officers and staff based upon various percentages of their salaries and annual performance calculations.

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Restricted share awards made to retirement-eligible employees fully vest on the grant date.

Employees are considered retirement-eligible when they are both over the age of 55 and have been employed by WashREIT for at least 20 years, or over the age of 65 .

Employees are considered retirement-eligible when they are both over the age of 55 and have been employed by Elme Communities for at least 20 years, or over the age of 65 .

We fully recognize compensation expense for such awards as of the grant date.

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Total Compensation Expense

Total compensation expense recognized in the consolidated financial statements for each of the three years ended December 31, 2021 for all share based awards was $ 8.6 million, $ 7.9 million and $ 7.7 million, respectively, net of capitalized stock-based compensation expense of $ 0.3 million, $ 0.4 million and $ 0.2 million, respectively.

Total compensation expense recognized in the consolidated financial statements for each of the three years ended December 31, 2022 for all share based awards was $ 8.0 million, $ 8.6 million and $ 7.9 million, respectively, net of capitalized share-based compensation expense of $ 0.2 million, $ 0.3 million and $ 0.4 million, respectively.

Restricted Share Awards with Performance and Service Conditions

The activity for the three years ended December 31, 2022 related to our restricted share awards, excluding those subject to market conditions, was as follows:

Shares Wtd Avg Grant Fair Value

Shares Weighted Average Grant Fair Value

Unvested at December 31, 2019

269,383 $ 28.45

Granted 285,101 30.39

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Unvested at December 31, 2020

306,995 30.96

Granted 238,134 23.53

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Unvested at December 31, 2021

259,695 29.16

Granted 408,606 22.33

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Unvested at December 31, 2022

242,369 21.35

The total fair value of share grants vested for each of the three years ended December 31, 2022 was $ 11.1 million, $ 7.6 million and $ 6.6 million, respectively.

As of December 31, 2022, the total compensation cost related to non-vested share awards not yet recognized was $ 4.7 million, which we expect to recognize over a weighted average period of 30 months.

Restricted and Unrestricted Shares with Market Conditions

Stock based awards with market conditions under the LTIP and Prior LTIP were awarded in 2021, 2020 and 2019 with fair market values, as determined using a Monte Carlo simulation, as follows (in thousands):

Unrestricted Shares with Market Conditions

Share-based awards with market conditions under the LTIP were awarded in 2022, 2021 and 2020 with fair market values, as determined using a Monte Carlo simulation, as follows (in thousands):

2022 Awards (1)

2021 Awards (1)

Unrestricted Unrestricted Restricted Unrestricted

2020 Awards (1)

Relative Peer TSR $ 1,480 $ 951 $ 510

Absolute/Index TSR (2)

971 565 201 602

The unamortized value of these awards with market conditions as of December 31, 2022 was as follows (in thousands):

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2021 Awards (1)

Unrestricted Unrestricted Restricted Unrestricted

2020 Awards (1)

Relative Peer TSR $ 1,029 $ 299 $ —

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(1) The 2022, 2021 and 2020 Awards were granted under the Officer LTIP, whereby all of the shares vest immediately at the end of the three-year performance period.

The 2019 Awards were granted under the Prior LTIP, whereby the unrestricted shares ( 75 %) vest immediately at the end of the three-year performance period and the restricted shares ( 25 %) vest over a one-year period commencing on the January 1 following the end of the three-year performance period.

(2) The performance conditions for the 2022 awards were evaluated based on 100 % on TSR relative to a defined population of peer companies.

The performance conditions for the 2021 awards were evaluated based on 50 % on TSR relative to a defined population of peer companies and 50 % on TSR relative to the FTSE Multifamily and Office indexes.

The performance conditions for the 2020 and 2019 awards were evaluated based on 50 % on TSR relative to a defined population of peer companies and 50 % on TSR relative to the FTSE NAREIT Diversified Index.

The performance conditions for the 2020 awards were evaluated based on 50 % on TSR relative to a defined population of peer companies and 50 % on TSR relative to the FTSE NAREIT Diversified Index.

OTHER BENEFIT PLANS

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The plans allow for a deferral of a percentage of annual cash compensation and trustee fees.

The plans are unfunded and payments are to be made out of the general assets of WashREIT.

The plans are unfunded, and payments are to be made out of the general assets of Elme Communities.

The deferred compensation liability was $ 0.2 million and $ 0.5 million at December 31, 2022 and 2021, respectively.

In November 2005, the board of trustees approved the establishment of a SERP for the benefit of officers.

This is a defined contribution plan under which, upon a participant's termination of employment from WashREIT for any reason other than discharge for cause, the participant will be entitled to receive a benefit equal to the participant's accrued benefit times the participant's vested interest.

This is a defined contribution plan under which, upon a participant's termination of employment from Elme Communities for any reason other than discharge for cause, the participant will be entitled to receive a benefit equal to the participant's accrued benefit times the participant's vested interest.

We account for this plan in accordance with ASC 710-10 and ASC 320-10, whereby the investments are reported at fair value, and unrealized holding gains and losses are included in earnings.

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Income from discontinued operations, including gain on sale of real estate — 69,524 24,638

Allocation of earnings from discontinued operations to unvested restricted share awards — — ( 1,837 )

Adjusted income from discontinued operations 69,524 24,638 385,966

Adjusted net income (loss) $ 15,991 $ ( 16,225 ) $ 381,588

Adjusted net (loss) income $ ( 31,100 ) $ 15,991 $ ( 16,225 )

Weighted average shares outstanding – basic and diluted 87,388 84,544 82,348

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We operate in a single reportable segment which includes the ownership, development, redevelopment and acquisition of apartment communities.

Each of our operating properties, including our remaining office property, do not meet the criteria to be considered separate operating segments on a stand-alone basis.

We do not distinguish or group our consolidated operations based on size, type or geography.

All but one community is within the Washington, DC metro region and no community comprises more than 10% of consolidated revenues.

None of our operating properties meet the criteria to be considered separate operating segments on a stand-alone basis.

Within the residential segment, we do not distinguish or group our consolidated operations based on size (only one community, Riverside Apartments, comprises more than 10 % of consolidated revenues), type (all assets in the segment are residential) or geography (all but five communities are within the Washington, DC metro region).

Further, our apartment communities have similar long-term economic characteristics and provide similar products and services to our residents.

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office and residential.

During the third quarter

of 2021, we closed on the sales of the Office Portfolio and the Retail Portfolio (see note 3), and following such sales, we have one remaining office property, Watergate 600, which does not meet the criteria for a reportable segment, and has been classified within “Other” on our segment disclosure tables.

We evaluate performance based upon net operating income of the combined properties in the segment.

Our reportable operating segment is a consolidation of similar properties.

During the third quarter of 2021, we closed on the sales of the Office Portfolio and the Retail Portfolio (see note 3), and following such sales, we have one remaining office property, Watergate 600, which does not meet the criteria for a reportable segment and has been classified within “Other” on our segment disclosure tables.

We evaluate performance based upon net operating income ("NOI") of the combined properties in the segment.

Our reportable operating segment consolidates similar properties.

GAAP requires that segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing each segment’s performance.

Net operating income is a key measurement of our segment profit and loss and is defined as real estate rental revenue less real estate expenses.

NOI is a key measurement of our segment profit and loss and is defined as real estate rental revenue less real estate expenses.

Real estate rental revenue as a percentage of the total for each of the reportable operating segments for the three years ended December 31, 2022 was as follows:

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Interest expense ( 24,940 )

Loss on interest rate derivatives ( 5,866 )

Loss on extinguishment of debt ( 4,917 )

Other income 712

Discontinued operations:

Income from properties sold or held for sale 23,083

Gain on sale of real estate, net 46,441

Net income $ 16,384

Net loss $ ( 30,868 )

Capital expenditures $ 35,081 $ 3,175 $ 38,256

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General and administrative expenses ( 27,538 )

Transformation costs ( 6,635 )

Depreciation and amortization ( 72,656 )

Loss on sale of real estate ( 15,009 )

Interest expense ( 34,063 )

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Loss on extinguishment of debt ( 12,727 )

Other income 4,109

Discontinued operations:

Income from properties sold or held for sale 23,083

Net loss $ ( 15,680 )

Gain on sale of real estate 46,441

Net income $ 16,384

Capital expenditures $ 27,953 $ 4,506 $ 32,459

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Depreciation and amortization ( 70,336 )

Real estate impairment ( 8,374 )

Gain on sale of real estate 59,961

Loss on sale of real estate ( 15,009 )

Interest expense ( 37,305 )

Loss on extinguishment of debt ( 34 )

Loss on interest rate derivatives ( 560 )

Discontinued operations:

Income from properties sold or held for sale 24,638

Gain on sale of real estate 339,024

Loss on extinguishment of debt ( 764 )

Net income $ 383,550

Net loss $ ( 15,680 )

Capital expenditures $ 24,675 $ 33,642 $ 58,317

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______________________________

(1) Other represents Watergate 600, an office property that does not meet the qualitative or quantitative criteria for a reportable segment.

(2) Other represents Watergate 600, an office property that does not meet the qualitative or quantitative criteria for a reportable segment and office properties sold during 2020:

(1) In 2022 and 2021, Other represents Watergate 600, an office property that does not meet the qualitative or quantitative criteria for a reportable segment.

(2) In 2020, Other represents Watergate 600, an office property that does not meet the qualitative or quantitative criteria for a reportable segment and office properties sold during 2020:

John Marshall II, Monument II and 1227 25th Street.

(3) Total capital expenditures include office and retail properties classified as discontinued operations and total assets include office and retail properties classified as discontinued operations and corporate assets.

(3) Total assets and capital expenditures include office and retail properties classified as discontinued operations.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

6 unchanged sentences

Loss from continuing operations $ ( 7,724 ) $ ( 8,874 ) $ ( 10,739 ) $ ( 3,531 )

Income from operations of properties sold or held for sale $ 6,130 $ 9,745 $ 7,208 $ —

Net (loss) income $ ( 1,147 ) $ ( 6,992 ) $ 31,319 $ ( 6,796 )

Net loss $ ( 7,724 ) $ ( 8,874 ) $ ( 10,739 ) $ ( 3,531 )

Loss from continuing operations per share

1 unchanged sentence

Diluted $ ( 0.09 ) $ ( 0.10 ) $ ( 0.12 ) $ ( 0.04 )

Net (loss) income per share

Net loss per share

Basic $ ( 0.09 ) $ ( 0.10 ) $ ( 0.12 ) $ ( 0.04 )

3 unchanged sentences

Income from operations of properties sold or held for sale $ 6,130 $ 9,745 $ 7,208 $ —

Net income (loss) $ 1,719 $ ( 5,406 ) $ ( 956 ) $ ( 11,037 )

Net (loss) income $ ( 1,147 ) $ ( 6,992 ) $ 31,319 $ ( 6,796 )

Loss from continuing operations per share

1 unchanged sentence

Diluted $ ( 0.09 ) $ ( 0.20 ) $ ( 0.26 ) $ ( 0.08 )

Net income (loss) per share

Net (loss) income per share

Basic $ ( 0.02 ) $ ( 0.08 ) $ 0.37 $ ( 0.08 )

2 unchanged sentences

(1) With regard to per share calculations, the sum of the quarterly results may not equal full year results due to rounding.

(2) The third quarter of 2021 includes net gain on sales of real estate of $ 46.4 million.

The second and fourth quarters of 2020 include loss on sale of real estate of $ 7.5 million and $ 7.5 million respectively.

(2) The third quarter of 2021 includes net gain on sale of real estate of $ 46.4 million.

SHAREHOLDERS' EQUITY

14 unchanged sentences

Net proceeds $ 26,849 40,462 $ 48,355

Subsequent to December 31, 2021, we issued an additional 1.0 million shares at a weighted average price per share of $ 26.27 for net proceeds of $ 26.9 million.

We have a dividend reinvestment program, whereby shareholders may use their dividends and optional cash payments to purchase common shares.

15 unchanged sentences

Deferred leasing costs $ 8,992 $ 5,132 $ 3,860 $ 8,977 $ 4,734 $ 4,243

Deferred leasing incentives 509 389 120 533 304 229

Amortization, including write-offs, of deferred leasing costs and deferred leasing incentives for the three years ended December 31, 2022 were as follows (in thousands):

2 unchanged sentences

Deferred leasing costs amortization $ 406 $ 535 $ 1,269

Deferred leasing incentives amortization 85 536 932

SUBSEQUENT EVENT

On February 1, 2022, we closed on the acquisition of Carlyle of Sandy Springs, a 389 -unit residential property in Atlanta, Georgia, for a contract purchase price of $ 105.6 million.

VALUATION AND QUALIFYING ACCOUNTS

35 unchanged sentences

Assembly Watkins Mill Maryland 7,151,000 30,851,000 1,934,000 7,151,000 32,785,000 39,936,000 5,269,000 1975 Jun 2019 193,000 210 30 years

Cascade at Landmark Virginia 12,289,000 56,235,000 3,029,000 12,289,000 59,264,000 71,553,000 6,248,000 1988 Jun 2019 273,000 277 30 years

Cascade at Landmark Virginia 12,289,000 56,235,000 4,070,000 12,289,000 60,305,000 72,594,000 8,683,000 1988 Jul 2019 273,000 277 30 years

The Oxford Georgia 4,798,000 42,122,000 1,986,000 4,798,000 44,108,000 48,906,000 2,700,000 1999 Aug 2021 228,000 240 30 years

Assembly Eagles Landing Georgia 16,117,000 86,460,000 2,271,000 16,117,000 88,731,000 104,848,000 4,443,000 2000 Nov 2021 534,000 490 30 years

Carlyle of Sandy Springs Georgia 17,423,000 85,817,000 3,123,000 17,423,000 88,940,000 106,363,000 3,205,000 1972 Feb 2022 506,000 389 30 years

Marietta Crossing Georgia 19,019,000 83,319,000 641,000 19,019,000 83,960,000 102,979,000 2,267,000 1975 May 2022 415,000 420 30 years

Alder Park Georgia 14,106,000 51,689,000 564,000 14,106,000 52,253,000 66,359,000 1,548,000 1982 May 2022 321,000 270 30 years

$ 340,984,000 $ 1,246,986,000 $ 541,300,000 $ 327,420,000 $ 1,801,850,000 $ 2,129,270,000 $ 448,948,000 8,101,000 8,868

9 unchanged sentences

Buildings and improvements are depreciated over various useful lives ranging from 3 to 40 years.

e) As of December 31, 2021, WashREIT had one residential property under development, the Riverside Apartments land parcel.

e) As of December 31, 2022, Elme Communities had one residential property under development, the Riverside Apartments land parcel.

The value not yet placed into service at December 31, 2022 was $ 30.4 million.

f) As of December 31, 2021, WashREIT had investments in various development, redevelopment and renovation projects, including The Ashby at McLean and The Paramount.

f) As of December 31, 2022, Elme Communities had investments in various development, redevelopment and renovation projects, including The Ashby at McLean and The Paramount.

The total value of these projects, which has not yet been placed in service, is $ 0.9 million at December 31, 2022.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

ELME COMMUNITIES AND SUBSIDIARIES

SUMMARY OF REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION

23 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures