What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-16 compared with 2023-02-17 · 269 added, 296 removed, 2063 unchanged (21% of the section changed)

CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer and Chief Administrative Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022.

Based on the foregoing, our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, Chief Financial Officer and Chief Administrative Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023.

Based on the foregoing, our Chief Executive Officer, Chief Financial Officer and Chief Administrative Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level.

Internal Control over Financial Reporting

3 unchanged sentences

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.

During the three months ended December 31, 2023, no trustee or officer of Elme Communities adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Material U.S.

7 unchanged sentences

The summary is also based upon the assumption that we will operate the Company and its subsidiaries and affiliated entities in accordance with their applicable organizational documents.

This summary is for general information only, and does not purport to discuss all aspects of U.S.

This summary is for general information only, and does not purport to discuss all aspects

federal income taxation that may be important to a particular investor in light of its investment or tax circumstances, or to investors subject to special tax rules, including:

46 unchanged sentences

For each taxable year in which we qualify for taxation as a REIT, we generally will not be subject to U.S.

federal corporate income tax on our “REIT taxable income” (generally, taxable income subject to specified adjustments, including a deduction for dividends paid and excluding our net capital gain) that is distributed currently to our shareholders.

This treatment substantially eliminates the “double taxation” at the corporate and shareholder levels that generally results from an investment in a non-REIT C corporation.

5 unchanged sentences

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

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”).

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.

23 unchanged sentences

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.

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.

23 unchanged sentences

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;

12 unchanged sentences

The Code provides relief from violations of the REIT gross income requirements, as described below under “—Requirements for Qualification as a REIT—Gross Income Tests,” in cases where a violation is due to reasonable cause and not to willful neglect, and other requirements are met, including the payment of a penalty tax that is based upon the magnitude of the violation.

In addition, certain provisions of the Code extend similar relief in the case of certain violations of the REIT asset requirements (see “—Requirements for Qualification as a REIT—Asset Tests” below) and other REIT requirements, again provided that the violation is due to reasonable cause and not willful neglect, and other conditions are met, including the payment of a penalty tax.

In addition, certain provisions of the Code extend similar relief in the case of certain violations of the REIT asset

requirements (see “—Requirements for Qualification as a REIT—Asset Tests” below) and other REIT requirements, again provided that the violation is due to reasonable cause and not willful neglect, and other conditions are met, including the payment of a penalty tax.

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

15 unchanged sentences

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;

10 unchanged sentences

In addition, it is possible that a partnership or limited liability company could take an action which could cause us to fail a gross income or asset test, and that we would not become aware of such action in time to dispose of our interest in the partnership or limited liability company or take other corrective action on a timely basis.

In that case, we could fail to qualify as a REIT unless we were entitled to relief, as described below.

In that case, we could fail to qualify as a REIT unless we

were entitled to relief, as described below.

Ownership of Disregarded Subsidiaries .

29 unchanged sentences

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 subsidiary.

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

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

federal income tax purposes.

18 unchanged sentences

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

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;

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;

• 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.

3 unchanged sentences

• Fourth, for rents to qualify as rents from real property for the purpose of satisfying the gross income tests, we generally must not operate or manage the property or furnish or render services to the tenants of such property, other than through an “independent contractor” who is adequately compensated and from whom we derive no revenue or through a taxable REIT subsidiary.

To the extent that impermissible services are provided by an independent contractor, the cost of the services generally must be borne by the independent contractor.

To the extent that impermissible services are provided by an independent contractor, the

cost of the services generally must be borne by the independent contractor.

We anticipate that any services we provide directly to tenants will be “usually or customarily rendered” in connection with the rental of space for occupancy only and not otherwise considered to be provided for the tenants’ convenience.

26 unchanged sentences

We intend to structure any hedging transactions in a manner that does not jeopardize our qualification as a REIT, but there can be no assurance we will be successful in this regard.

Income from Forward Sale Agreements .

We may enter into forward sale agreements from time to time and, subject to certain conditions, we have the right to elect physical, cash or net share settlement under these agreements at any time and from time to time, in part or in full.

In the event that we elect to settle a forward sale agreement for cash and the settlement price is below the forward sale price, we would be entitled to receive a cash payment from the applicable forward purchaser(s).

Under Section 1032 of the Code, generally, no gains and losses are recognized by a corporation in dealing in its own shares, including pursuant to a “securities futures contract,” as defined in the Code by reference to the Securities Exchange Act of 1934.

Although we believe that any amount received by us in exchange for our common shares would qualify for the exemption under Section 1032 of the Code, because it is not entirely clear whether a forward sale agreement qualifies as a “securities futures contract,” the U.S.

federal income tax treatment of any cash settlement payment we receive is uncertain.

In the event that we recognize a significant gain from the cash settlement of a forward sale agreement, we might not be able to satisfy the gross income requirements applicable to REITs under the Code.

If we were to fail to satisfy one or both of the gross income tests for any taxable year, we may nevertheless qualify as a REIT for such year if we were entitled to relief under certain provisions of the Code, as described below.

If these relief provisions were inapplicable, we would not qualify to be taxed as a REIT.

Income from Prohibited Transactions .

6 unchanged sentences

or (e) the fair market value of property sold during the year is 20% or less of the aggregate fair market value of all of our assets as of the beginning of the taxable year and the fair market value of property sold during the 3-year period ending with the year of sale is 10% or less of the aggregate fair market value of all of our assets as of the beginning of each of the 3 taxable years ending with the year of sale.

If we rely on clauses (b), (c), (d), or (e) in the preceding sentence, substantially all of the marketing and development expenditures with respect to the property sold must be made through an independent contractor from whom we derive no income or, one of our taxable REIT subsidiaries.

The sale of more than one property to one buyer as part of one transaction constitutes one sale for purposes of this “safe harbor.” We intend to hold our properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing and owning our properties and to make occasional sales of the properties as are consistent with our investment objectives.

5 unchanged sentences

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 .

If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify as a REIT for that year if we are entitled to relief under the Code.

These relief provisions will be generally available if (1) our failure to meet these tests was due to reasonable cause and not due to willful neglect and (2) following our identification of the failure to meet the 75% and/or 95% gross income tests for any taxable year, we file a schedule with the IRS setting forth a description of each item of our gross income that satisfies the gross income tests for purposes of the 75% or 95% gross income test for such taxable year in accordance with Treasury Regulations.

These relief provisions will be generally available if (1) our failure to meet these tests was due to reasonable cause and not due to willful neglect and (2)

following our identification of the failure to meet the 75% and/or 95% gross income tests for any taxable year, we file a schedule with the IRS setting forth a description of each item of our gross income that satisfies the gross income tests for purposes of the 75% or 95% gross income test for such taxable year in accordance with Treasury Regulations.

It is not possible, however, to state whether in all circumstances we would be entitled to the benefit of these relief provisions.

2 unchanged sentences

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

Redetermined Amounts.

Any redetermined rents, redetermined deductions, excess interest, or redetermined taxable REIT subsidiary service income we generate will be subject to a 100% penalty tax.

15 unchanged sentences

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.

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

23 unchanged sentences

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.

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.

25 unchanged sentences

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

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.

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.

1 unchanged sentence

In certain circumstances we may elect to retain, rather than distribute, our net long-term capital gains and pay tax on such gains.

In this case, we could elect for our shareholders to include their proportionate share of such undistributed long-term capital gains in income, and to receive a corresponding credit for their share of the tax that we paid.

In this case, we could elect for our shareholders to include their proportionate share of such undistributed long-term capital gains in income, and to receive a corresponding

credit for their share of the tax that we paid.

Our shareholders would then increase their adjusted basis of their stock by the difference between (1) the amounts of capital gain dividends that we designated and that they included in their taxable income, minus (2) the tax that we paid on their behalf with respect to that income.

13 unchanged sentences

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.

Furthermore, under Section 451 of the Code, subject to certain exceptions, we must accrue income for U.S.

federal income tax purposes no later than when such income is taken into account as revenue in our financial statements, which could create additional differences between REIT taxable income and the receipt of cash attributable to such income.

In addition, Section 162(m) of the Code places a per-employee limit of $1 million on the amount of compensation that a publicly held corporation may deduct in any one year with respect to its chief executive officer and certain other highly compensated executive officers.

Changes to Section 162(m) made by the TCJA eliminated an exception that formerly permitted certain performance-based compensation to be deducted even if in excess of $1 million, which may have the effect of increasing our REIT taxable income.

If these timing differences occur, we may need to arrange for short-term, or possibly long-term, borrowings or need to pay dividends in the form of taxable stock dividends in order to meet the distribution requirements.

48 unchanged sentences

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.

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

Dividends 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.

6 unchanged sentences

shareholder will receive an IRS Form 1099-DIV indicating the amount that will be taxable to the shareholder as capital gain.

Corporate shareholders, however, may be required to treat up to 20% of some capital gain dividends as ordinary income.

Corporate shareholders, however, may be required to treat up to

20% of some capital gain dividends as ordinary income.

Recipients of capital gain dividends from us that are taxed at corporate income tax rates will be taxed at the normal corporate income tax rates on these dividends.

29 unchanged sentences

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.

42 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.

3 unchanged sentences

These regulations, though directed towards “tax shelters,” are broadly written, and apply to transactions that would not typically be considered tax shelters.

The Code imposes significant penalties for failure to comply with these requirements.

The Code imposes

significant penalties for failure to comply with these requirements.

shareholders should consult their tax advisors concerning any possible disclosure obligation with respect to the receipt or disposition of our shares, or transactions that we might undertake directly or indirectly.

14 unchanged sentences

If the holder owns no other shares, under certain circumstances, such basis may be transferred to a related person, or it may be lost entirely.

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.

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 had 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 did 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.

These proposed Treasury Regulations would be effective for transactions that occur after the date the regulations are published as final Treasury Regulations.

There can, however, be no assurance as to whether, when, and in what particular form such proposed Treasury Regulations will ultimately be finalized.

These proposed Treasury Regulations have been withdrawn and, although the IRS has reaffirmed its support for a share-by-share basis recovery approach, there is no indication as to whether regulations or other guidance on this issue will be promulgated in the future.

Net Investment Income Tax .

3 unchanged sentences

Expansion of Medicare Tax .

The temporary 20% deduction allowed by Section 199A of the Code, as added by the TCJA, with respect to ordinary REIT dividends received by non-corporate taxpayers is allowed only for purposes of Chapter 1 of the Code and thus is apparently not allowed as a deduction allocable to such dividends for purposes of determining the amount of net investment income, described above, subject to the 3.8% Medicare tax, which is imposed under Chapter 2A of the Code.

The temporary 20% deduction allowed by Section 199A of the Code with respect to ordinary REIT

dividends received by non-corporate taxpayers is allowed only for purposes of Chapter 1 of the Code and thus is apparently not allowed as a deduction allocable to such dividends for purposes of determining the amount of net investment income, described above, subject to the 3.8% Medicare tax, which is imposed under Chapter 2A of the Code.

Prospective investors should consult their own tax advisors regarding this legislation.

26 unchanged sentences

Shareholders—Taxation of Taxable U.S.

Shareholders”) or an entity that is treated as a partnership for U.S.

federal income tax purposes.

Shareholders”).

These rules are complex, and no attempt is made herein to provide more than a brief summary of such rules.

50 unchanged sentences

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.

5 unchanged sentences

shareholder’s basis in its shares, will be taxed under FIRPTA at the rate of tax, including any applicable capital gains rates, that would apply to a U.S.

shareholder of the same type (e.g., an individual or a corporation, as the case may be), and the collection of the tax will be enforced by a refundable withholding tax at a rate of 15% of the amount by which the distribution exceeds the non-U.S.

shareholder’s share of our earnings and profits.

42 unchanged sentences

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.

7 unchanged sentences

Generally, subject to the discussion below regarding dispositions by “qualified shareholders” and “qualified foreign pension funds,” with respect to any particular shareholder, our shares will constitute a USRPI only if each of the following three statements is true:

• 50% or more of our assets on any of certain testing dates during a prescribed testing period consist of interests in real property located within the United States, excluding for this purpose, interests in real property solely in a capacity as creditor;

• 50% or more of our assets on any of certain testing dates during a prescribed testing period consist of interests in real

property located within the United States, excluding for this purpose, interests in real property solely in a capacity as creditor;

• We are not a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT, less than 50% of value of which is held directly or indirectly by non-U.S.

103 unchanged sentences

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.

37 unchanged sentences

federal income tax purposes.

This summary only applies to investors that will hold their debt securities as “capital assets” (within the meaning of Section 1221 of the Code) and purchase their debt securities in the initial offering at their issue price.

If such debt securities are purchased at a price other than the offering price, the amortizable bond premium or market discount rules may apply which are not described herein.

2 unchanged sentences

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.

Holders of Debt Securities

55 unchanged sentences

Tax-Exempt Shareholders”).

Interest income accrued on the debt securities and gain recognized in connection with dispositions of the debt securities generally will not constitute UBTI unless the tax-exempt organization holds the debt securities as debt-financed property (e.g., the tax-exempt organization has incurred “acquisition indebtedness” with respect to such note).

Before making an investment in the debt securities, a tax-exempt investor should consult its tax advisors with regard to UBTI and the suitability of the investment in the debt securities.

12 unchanged sentences

federal income or withholding taxes under the “portfolio interest” exception of the Code, provided that the Non-U.S.

• does not own, actually or constructively, 10% or more of our stock,

• does not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock that are entitled to vote,

• is not a controlled foreign corporation with respect to which we are a “related person” (within the meaning of Section 864(d)(4) of the Code),

29 unchanged sentences

Holder generally will be subject to regular U.S.

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

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

Holder were a U.S.

11 unchanged sentences

To claim exemption from withholding, the Non-U.S.

Holder must certify its qualification, which generally can be done by filing a properly executed IRS Form W-8ECI (or other applicable form).

Holder must certify its qualification, which generally can be done by providing the applicable withholding agent with a properly executed IRS Form W-8ECI (or other

applicable form).

Information Reporting and Backup Withholding .

39 unchanged sentences

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

The taxable REIT subsidiary is subject to U.S.

A taxable REIT subsidiary is generally 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 we and/or

our taxable REIT subsidiary is 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.

Tax Shelter Reporting

If a holder recognizes a loss as a result of a transaction with respect to our shares of at least (i) for a holder that is an individual, S corporation, trust or a partnership with at least one non-corporate partner, $2 million or more in a single taxable year or $4 million or more in a combination of taxable years, or (ii) for a holder that is either a corporation or a partnership with only corporate partners, $10 million or more in a single taxable year or $20 million or more in a combination of taxable years, such holder may be required to file a disclosure statement with the IRS on Form 8886.

corporate partners, $10 million or more in a single taxable year or $20 million or more in a combination of taxable years, such holder may be required to file a disclosure statement with the IRS on Form 8886.

Direct shareholders of portfolio securities are in many cases exempt from this reporting requirement, but shareholders of a REIT currently are not excepted.

47 unchanged sentences

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

10-K 001-06622 3.1 2/17/2023

3.2 Amended and Restated Bylaws of Elme Communities, as amended

8 unchanged sentences

4.4 Description of Registrant's Securities

10-K 001-06622 4.4 2/17/2023

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

10-K 001-06622 10.1 2/17/2023

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

1 unchanged sentence

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

10-K 001-06622 10.3 2/17/2023

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

29 unchanged sentences

1 To Change in Control Agreement with Paul T.

10-K 001-06622 10.18 2/17/2023

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

8 unchanged sentences

1 To Change in Control Agreement with Susan L.

10.24* Offer letter to Taryn D.

10-K 001-06622 10.18 2/17/2023

10.25* Change in control agreement dated July 21,2017 with Taryn D.

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

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

10.24* Agreement and General Release between Stephen E.

Riffee and Elme Communities

10-K 001-06622 10.27 2/17/2023

10.25* Form of Change in Control Agreement

10-K 001-06622 10.28 2/17/2023

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

10-K 001-06622 10.29 2/17/2023

10.27* 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

10-Q 001-06622 10.1 8/3/2021

10-K 001-06622 10.3 2/17/2023

10.28 Second Amended and Restated Credit Agreement, dated August 26, 2021, by and among Washington Real Estate Investment Trust, as borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as administrative agent

1 unchanged sentence

10.29 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

10-K 001-06622 10.33 2/17/2023

10.30* Offer Letter to Tiffany Butcher

10-Q 001-06622 10.1 8/1/2023

21 Subsidiaries of Registrant

3 unchanged sentences

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

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

32 Certification of the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18U.S.C.

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

32 Certification of the Chief Executive Officer, Chief Financial Officer and Chief Administrative Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

97 Elme Communities Compensation Recovery Policy

101 INS-XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

17 unchanged sentences

McDermott Chairman and Chief Executive Officer February 16, 2024

/s/ Edward S.

Civera* Lead Independent Trustee February 17, 2023

/s/ Benjamin S.

Butcher* Lead Independent Trustee February 16, 2024

/s/ Jennifer S.

Banner* Trustee February 16, 2024

/s/ Benjamin S.

Butcher* Trustee February 17, 2023

/s/ William G.

Byrnes* Trustee February 17, 2023

Carras* Trustee February 16, 2024

Goitia* Trustee February 16, 2024

3 unchanged sentences

Winns* Trustee February 16, 2024

/s/ Stephen E.

Riffee Executive Vice President and February 17, 2023

Riffee Chief Financial Officer

/s/ Steven M.

Freishtat Executive Vice President and February 16, 2024

Freishtat Chief Financial Officer

(Principal Financial Officer)

Drew Hammond Vice President, Chief Accounting Officer and February 17, 2023

Drew Hammond Treasurer

(Principal Accounting Officer)

Drew Hammond Senior Vice President, Chief Administrative Officer and Treasurer February 16, 2024

Drew Hammond (Principal Accounting Officer)

Drew Hammond through power of attorney

31 unchanged sentences

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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.

Accounting for Acquisitions of Real Estate Properties

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Acquisition of Real Estate

Description of the Matter

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.

During the year ended December 31, 2023, the Company acquired one real estate property for an aggregate purchase price of $108.0 million as disclosed in Note 3 to the consolidated financial statements.

This transaction was accounted for as asset acquisition.

Auditing the Company's accounting for this acquisition 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.

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 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.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for estimating the relative fair value of acquired assets 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 relative fair values of acquired tangible and intangible assets 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 relative fair values of acquired assets to observable market data, including other properties within the same submarkets.

Impairment of Watergate 600

Description of the Matter

During the year ended December 31, 2023, the Company recognized an impairment charge of $41.9 million on its single office property, Watergate 600, as described in Note 3 to the consolidated financial statements.

As discussed in Note 2 to the consolidated financial statements, the Company assesses real estate assets for impairment whenever events or changes in circumstances indicate that the carrying value of a real estate asset may not be recoverable.

Impairment is recognized when indicators of impairment are present and the future undiscounted cash flows for a real estate asset are less than its carrying amount, at which time the real estate asset is written down to its estimated fair value, should the carrying value exceed the fair value.

Auditing the Company’s accounting for impairment of Watergate 600 was complex and involved a high degree of subjectivity in evaluating management’s assessment of recoverability and the resulting measurement of impairment when the asset is not deemed recoverable.

Management’s use of assumptions and estimates is inherent in the determination of estimated future cash flows expected to result from the property’s use and eventual disposition and the estimated fair value of the property.

In particular, management’s assumptions and estimates included estimated future revenue and expenses and capitalization rates, which were sensitive to expectations about market or economic conditions.

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 real estate asset impairment assessment process.

For example, we tested controls over management’s process and assumptions for assessing recoverability and evaluating the assumptions used to determine fair value when the asset’s carrying value is deemed not recoverable.

To test the Company's accounting for impairment of Watergate 600, we performed audit procedures that included, among others, evaluating the methodologies applied and testing the significant assumptions discussed above in the recoverability assessment and valuation analysis.

We involved our valuation specialists to assist in performing these procedures.

For example, we evaluated the significant assumptions used to estimate future cash flows for reasonableness by comparing them to the Company’s historical accounting records or to available market data.

We held discussions with management about judgments used to understand the probability of future leasing events that could affect cash flow assumptions for the property.

/s/ Ernst & Young LLP

79 unchanged sentences

88,950 91,722 72,656

Real estate impairment 41,860 — —

250,974 211,103 173,744

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

Real estate operating loss ( 23,063 ) ( 1,723 ) ( 4,593 )

9 unchanged sentences

Income from operations of properties sold or held for sale

— 23,083 24,638

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

Income from discontinued operations

— 69,524 24,638

Net (loss) income $ ( 52,977 ) $ ( 30,868 ) $ 16,384

23 unchanged sentences

Other comprehensive income (loss):

Unrealized gain (loss) on interest rate derivatives 2,819 3,673 ( 33,025 )

Unrealized (loss) gain on interest rate derivatives ( 764 ) 2,819 3,673

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

14 unchanged sentences

Balance, December 31, 2020 84,409 844 1,649,366 ( 298,860 ) ( 30,563 ) 1,320,787 322 1,321,109

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

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

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

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

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

7 unchanged sentences

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

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

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

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

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

12 unchanged sentences

— — — ( 63,406 ) — ( 63,406 ) — ( 63,406 )

Equity offerings, net of issuance costs 1,032 10 26,839 — — 26,849 — 26,849

Shares issued under Dividend Reinvestment Program 28 — 497 — — 497 — 497

12 unchanged sentences

Credit losses on lease related receivables 4,833 2,483 2,482

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

Real estate impairment 41,860 — —

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

Share-based compensation expense 5,538 7,988 8,553

18 unchanged sentences

Principal payments – mortgage notes payable — ( 76,598 ) —

Proceeds from notes payable — — 350,000

Repayments of notes payable — — ( 311,894 )

7 unchanged sentences

Payment of tax withholdings for restricted share awards ( 2,072 ) ( 3,286 ) ( 2,241 )

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

Net cash provided by (used in) financing activities 60,238 ( 56,416 ) ( 565,396 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 1,314 ) ( 224,368 ) 225,930

19 unchanged sentences

NATURE OF BUSINESS

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.

Elme Communities, a Maryland real estate investment trust, formerly known as Washington Real Estate Investment Trust, is a self-administered equity real estate investment trust, successor to a trust organized in 1960.

Our business primarily consists of the ownership and operation of apartment communities in the greater Washington, DC metro and Sunbelt regions.

Federal Income Taxes

2 unchanged sentences

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.

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.

We sold no properties in 2023 or 2022.

We sold twelve office and eight retail properties for an aggregate gain of $ 46.4 million during the year ended December 31, 2021.

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”).

10 unchanged sentences

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform ("Topic 848"), which was amended in December 2022 by ASU 2022-06, Reference Rate Reform (Topic 848).

Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in Topic 848 is optional and may be elected through December 31, 2024 as reference rate reform activities occur.

During the first quarter of 2023, we executed an amendment to the $ 700.0 million unsecured revolving credit facility (“Revolving Credit Facility”) to convert the benchmark interest rate from LIBOR to an adjusted SOFR ("Secured Overnight Financing Rate").

We elected to apply the optional expedients in Topic 848 to (i) assert that the hedged interest payments remain probable regardless of any expected modification in terms related to reference rate reform, and (ii) continue the method of assessing effectiveness as documented in the original hedge documentation so that the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

The impact of this guidance did not have a material impact on our consolidated financial statements.

Principles of Consolidation and Basis of Presentation

1 unchanged sentence

All intercompany balances and transactions have been eliminated in consolidation.

Certain immaterial amounts in prior periods have been reclassified to conform with the current period presentation.

The primary changes to the consolidated statements of operations are reclassifications between property operating and maintenance expense and real estate taxes and insurance expense .

We have prepared the accompanying audited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.

Use of Estimates in the Financial Statements

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

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.

Actual results could differ from those estimates.

23 unchanged sentences

We capitalize all capital improvements associated with replacements, improvements or major repairs to real property that extend its useful life and depreciate them using the straight-line method over their estimated useful lives ranging from 3 to 40 years.

We also capitalize costs incurred in connection with our development projects, including interest incurred on borrowing obligations and other internal costs during periods in which qualifying expenditures have been made and activities necessary to get the development projects ready for their intended use are in progress.

We also capitalize

costs incurred in connection with our development projects, including interest incurred on borrowing obligations and other internal costs during periods in which qualifying expenditures have been made and activities necessary to get the development projects ready for their intended use are in progress.

Capitalization of these costs begins when the activities and related expenditures commence and ceases when the project is substantially complete and ready for its intended use, at which time the project is placed into service and depreciation commences.

26 unchanged sentences

These capitalized costs include external direct costs utilized in developing or obtaining the applications and expenses for employees who are directly associated with the development of the applications.

Capitalization of such costs begins when the preliminary project stage is complete and continues until the project is substantially complete and is ready for its intended purpose.

Capitalization of such costs begins when the preliminary project stage is complete and continues until the project is

substantially complete and is ready for its intended purpose.

Completed projects are amortized on a straight-line basis over their estimated useful lives.

22 unchanged sentences

Transformation Costs

Transformation costs include costs related to the strategic transformation, including the allocation of internal costs, consulting, advisory and termination benefits.

Transformation costs include costs related to the strategic shift away from the commercial sector to residential sector, including the allocation of internal costs, consulting, advisory and termination benefits.

Earnings Per Common Share

6 unchanged sentences

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.

20 unchanged sentences

The effective portion of changes in fair value of the interest rate swaps associated with our cash flow hedges is recorded in Accumulated other comprehensive income (loss).

Our cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument, such as notional amounts, settlement dates, reset dates, calculation period and LIBOR do not perfectly match.

In addition, we evaluate the default risk of the counterparty by monitoring its creditworthiness.

8 unchanged sentences

As of December 31, 2023, 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.

From time to time, we have properties under development/redevelopment and held for current or future development.

The cost of our real estate portfolio under development or held for future development as of December 31, 2023 and 2022 was $ 31.0 million and $ 31.3 million, respectively.

6 unchanged sentences

(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

September 29, 2023 Elme Druid Hills Residential 500 93.8 % $ 108,000

500 $ 108,000

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

November 19, 2021 Assembly Eagles Landing Residential 490 94.3 % 106,000

February 1, 2022 Elme Sandy Springs Residential 389 91.3 % $ 105,586

May 5, 2022 Elme Marietta Residential 420 90.7 % 107,900

May 5, 2022 Elme Cumberland Residential 270 91.1 % 69,750

1,079 $ 283,236

August 10, 2021 Elme Conyers Residential 240 93.3 % $ 48,000

November 19, 2021 Elme Eagles Landing Residential 490 89.0 % 106,000

730 $ 154,000

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

14 unchanged sentences

Total carrying amounts recorded $ 108,190 $ 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.

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

The difference in the total acquisition cost of $ 108.2 million for the 2023 acquisition and the cash paid for the 2023 acquisition per the consolidated statements of cash flows of $ 107.6 million is due to net credits received at settlement totaling $ 0.6 million.

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 Elme Marietta and Elme Cumberland 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.

5 unchanged sentences

Leasing commissions/absorption costs 67,504 60,887 6,617 63,064 56,416 6,648

Net lease intangible assets 621 618 3 621 612 9

Net lease intangible liabilities 13,055 10,499 2,556 13,055 9,683 3,372

5 unchanged sentences

$ 3,724 $ 11,660 $ 3,613

Amortization of these combined components over the next five years and thereafter is projected to be as follows (in thousands):

Amortization of these combined components over the next four years is projected to be as follows (in thousands):

Depreciation and amortization expense Real estate rental revenue, net increase Total

3 unchanged sentences

2027 1,019 ( 476 ) 543

2027 1,627 ( 479 ) 1,148

Properties Sold and Held for Sale

2 unchanged sentences

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 no properties in 2022.

We sold no properties in 2023 and 2022.

We sold twelve office and eight retail properties for an aggregate gain of $ 46.4 million during the year ended December 31, 2021.

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.

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

We applied reasonable estimates and judgments in evaluating each of the properties as of December 31, 2022.

Should external or internal circumstances change requiring the need to shorten holding periods or adjust future estimated cash flows from our properties, we could be required to record impairment charges in the future.

Real Estate Impairment

During 2023, we recognized an impairment charge of $ 41.9 million on Watergate 600 in order to reduce its carrying value to its estimated fair value, which declined due to changes in market conditions in the Washington, DC metro region office market.

The estimated fair value is inherently subjective because there are few observable market transactions for similar office properties.

This fair valuation fell into Level 3 in the fair value hierarchy due to its reliance on significant unobservable inputs (see note 9).

In accordance with ASC 820, we estimated the fair value using a discounted cash flow model which required certain significant assumptions, including a discounted cash flow term of 5 years, an average economic occupancy of 80.5 %, and a terminal capitalization rate of 7.5 %.

No other properties, including assets held for development, had any recognized impairment charges during 2023.

Discontinued Operations

11 unchanged sentences

Capital expenditures $ 3,316

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

All assets and liabilities related to the twelve office properties (the “Office Portfolio”) and eight retail properties (the “Retail Portfolio”) were sold as of December 31, 2021.

LEASE ACCOUNTING

3 unchanged sentences

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.

Our right-of-use asset and lease liability are recorded within Prepaid expenses and other assets 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.”

7 unchanged sentences

MORTGAGE NOTE PAYABLE

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

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

This mortgage note bore interest at 3.36 % per annum.

2 unchanged sentences

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.

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

This mortgage note bore interest at 2.93 % per annum.

4 unchanged sentences

UNSECURED LINES OF CREDIT PAYABLE

During the third quarter of 2021, we entered into an amended and restated credit agreement (“Credit Agreement”) which provides for a $ 700.0 million unsecured revolving credit facility (“Revolving Credit Facility”) and the continuation of an existing $ 250.0 million unsecured term loan (“2018 Term Loan”).

During the third quarter of 2021, we entered into an amended and restated credit agreement (“Credit Agreement”) which provides for a $ 700 million unsecured revolving credit facility (the “Revolving Credit Facility”) and the continuation of an existing $ 250.0 million unsecured term loan (“2018 Term Loan”).

The Revolving Credit Facility has a four-year term ending in August 2025, with two six-month extension options.

5 unchanged sentences

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).

During the first quarter of 2023, we prepaid the remaining $ 100.0 million portion of the 2018 Term Loan and 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.

The Revolving Credit Facility bears interest at a rate of daily SOFR plus 0.10 % plus a margin ranging from 0.70 % to 1.40 %.

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

As of December 31, 2023, the interest rate on the Revolving Credit Facility is based on an adjusted daily SOFR (inclusive of the 0.10 % credit spread adjustment) plus 0.85 % applicable margin, the daily SOFR is 5.38% and the facility fee is 0.20 %.

The amount of the Revolving Credit Facility unused and available at December 31, 2023 was as follows (in thousands):

7 unchanged sentences

Balance, December 31, 2023 $ 157,000

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.

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.

Interest only payments are due and payable generally on a monthly basis.

28 unchanged sentences

2023 2022 Maturity Date (2)

2018 Term Loan (3)

1 Month LIBOR + 110 basis points

2018 Term Loan 1 Month LIBOR + 110 basis points

2.31 % $ — $ 100,000 1/10/2023

2023 Term Loan 1 Month SOFR + 95 basis points

4.73 % 125,000 — 1/10/2025

30-Year Unsecured Notes 7.25 % 7.36 % 50,000 50,000 2/25/2028

8 unchanged sentences

(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.

During 2023, 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 (subject to adjustment depending on Elme Communities’ credit rating).

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

8 unchanged sentences

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.

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 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.

4 unchanged sentences

The required principal payments on the unsecured notes and term loans as of December 31, 2023 are as follows (in thousands):

2023 $ 100,000

Thereafter 350,000

3 unchanged sentences

DERIVATIVE INSTRUMENTS

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.

We had one interest rate swap arrangement with a notional amount of $ 100.0 million that had effectively fixed the remaining $ 100.0 million portion of the 2018 Term Loan prior to the prepayment.

During the first quarter of 2023, 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 fixed the interest rate on a $ 100.0 million portion of the 2023 Term Loan through the interest rate swap arrangement’s expiration date of July 21, 2023.

During the first quarter of 2023, we entered into two interest rate swap arrangements with an aggregate notional amount of $ 125.0 million that effectively fixed the interest at 4.73 % for the 2023 Term Loan beginning on July 21, 2023 through the 2023 Term Loan’s maturity date of January 10, 2025.

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

8 unchanged sentences

Interest rate swap $ 100,000 March 31, 2017 July 21, 2023 $ — $ 1,998

Interest rate swap 75,000 July 21, 2023 January 10, 2025 740 —

Interest rate swap 50,000 July 21, 2023 January 10, 2025 494 —

$ 1,234 $ 1,998

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.

4 unchanged sentences

Unrealized (gain) loss on interest rate hedges $ ( 764 ) $ 2,819 $ 3,673

Amounts reported in Accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt.

The gains or losses reclassified from Accumulated other comprehensive income into interest expense for the three years ended December 31, 2022, were as follows (in thousands):

Amounts reported in Accumulated other comprehensive loss related to effective cash flow hedges will be reclassified to interest expense as interest payments are made on our variable-rate debt.

During the next twelve months, we estimate that an additional $ 1.2 million related to our two outstanding interest rate swap arrangements will be reclassified as a decrease to interest expense.

The losses reclassified from Accumulated other comprehensive income into interest expense for the three years ended December 31, 2023, were as follows (in thousands):

Year Ending December 31,

1 unchanged sentence

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

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

During the next twelve months, we estimate that an additional $ 2.0 million related to the previously settled interest rate swap arrangements will be reclassified as an increase to interest expense.

As of December 31, 2023, the fair value of derivative assets, including accrued interest, was $ 1.2 million and we did no t have any derivatives in a liability position.

19 unchanged sentences

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):

The fair values of these assets at December 31, 2023 and 2022 were as follows (in thousands):

December 31, 2023 December 31, 2022

6 unchanged sentences

Interest rate swaps 1,234 — 1,234 — 1,998 — 1,998 —

Interest rate swaps $ — $ — $ — $ — $ ( 821 ) $ — $ ( 821 ) $ —

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets not measured at fair value on an ongoing basis but subject to fair value adjustments only in certain circumstances, such as when there is evidence of impairment, are measured at fair value on a nonrecurring basis.

In the third quarter of 2023, we measured the fair value of Watergate 600 using Level 3 inputs as there was evidence of impairment (see note 3).

Financial Assets and Liabilities Not Measured at Fair Value

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

Many of these estimates involve significant judgment.

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

30 unchanged sentences

The degree of achievement of any individual financial performance measures will be determined by the Compensation Committee in its discretion with respect to the Chief Executive Officer, and by the Chief Executive Officer or other immediate supervisor in his or her discretion with respect to all other participants (subject to final approval by the Compensation Committee), and the Compensation Committee will evaluate the degree of achievement of the individual performance measures on a scale of below 1 (below threshold), 1 (threshold), 2 (target) or 3 (high) or any fractional number between 1 and 3.

Each participant’s total award under the Officer STIP with respect to a performance period will be stated as a percentage of the participant’s annual base salary determined as of the first day of that performance period, which percentage will depend upon the participant’s position and the degree of achievement of threshold, target, and high performance goals for the performance period which, except as otherwise determined by the Compensation Committee, will be as set forth in the table below:

The percentages for the performance period beginning January 1, 2023 are as set forth in the table below:

Threshold Target High

President and Chief Executive Officer 63 % 125 % 188 %

Executive Vice President 48 % 93 % 160 %

Senior Vice President 35 % 65 % 115 %

Chief Financial Officer 41 % 75 % 133 %

Chief Operating Officer (1)

23 % 45 % 76 %

Chief Information Officer 35 % 65 % 115 %

Chief Administrative Officer (1)

28 % 54 % 96 %

______________________________

(1) For both the Chief Operating Officer and the Chief Administrative Officer, the percentages include the effects of prorations for the amount of time in 2023 that they were in their respective positions.

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.

Bonuses payable under the short-term incentive plans for non-executive officers and staff are payable 100 % in cash.

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.

3 unchanged sentences

Each participant’s total award under the Officer LTIP with respect to a performance period will be stated as a percentage of the participant’s annual base salary determined as of the beginning of that performance period.

The percentage will depend upon the participant’s position and the degree of achievement of threshold, target, and high performance goals for the performance period which, except as otherwise determined by the Compensation Committee, will be as set forth in the table below:

The percentages for the performance period beginning January 1, 2023 are as set forth in the table below:

Threshold Target High

President and Chief Executive Officer 198 % 275 % 440 %

Executive Vice President 143 % 200 % 295 %

Senior Vice President 100 % 143 % 207 %

Chief Financial Officer 95 % 135 % 196 %

Chief Operating Officer (1)

110 % 157 % 231 %

Chief Information Officer 100 % 143 % 207 %

Chief Administrative Officer (1)

65 % 92 % 134 %

______________________________

Any time-based awards under the Officer LTIP will be subject to a three-year vesting schedule, with any award vesting in one-third increments on December 15 of each year of the applicable performance period if the participant remains employed by the Company on each of such dates.

3 unchanged sentences

If a Change in Control (as defined in the Officer LTIP) occurs during a performance period while the participant is employed, the Officer LTIP provides that all time-based awards which are unvested will become vested, and the participant will receive a pro-rated portion of the shareholder return measure-based awards and the strategic measure-based awards will be calculated at target.

Prior Short-Term Incentive Plan ("Prior STIP")

Under the Prior STIP, executive officers earned awards, payable 50 % in cash and 50 % in restricted shares, based on a percentage of salary and an achievement rating subject to the discretion of the Compensation Committee of the board of trustees in consideration of various performance conditions and other subjective factors during a one-year performance period.

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, 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.

We recognize compensation expense on this 50 % when the grant date occurs at the end of the one-year period through the three-year vesting period.

Bonuses payable under the short-term incentive plans for non-executive officers and staff are payable 100 % in cash.

Prior Long-Term Incentive Plan ("Prior LTIP")

Under the Prior LTIP, executive officers earned awards payable, 75 % in unrestricted shares and 25 % in restricted shares, based on a percentage of salary and the achievement of certain market conditions.

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.

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.

The amendment became effective for three-year performance periods commencing on or after January 1, 2018.

The officers' total award opportunities under the Prior LTIP stated as a percentage of base salary ranged from 80 % to 150 % at target level.

The unrestricted shares vest immediately at the end of the three-year performance period, and the restricted shares vest over a one-year period commencing on the January 1 following the end of the three-year performance period.

We recognize compensation expense for the Prior LTIP ratably (over three years for the 75 % unrestricted shares and over four years for the 25 % restricted shares) based on the grant date fair value, as determined using a Monte Carlo simulation, and regardless of whether the market conditions are achieved and the awards ultimately vest.

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, 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).

For three-year performance periods commencing on or after January 1, 2023, the market performance condition is based on total shareholder return relative to the FTSE Nareit Residential Index ( 60 % weighting) and a defined population of peer companies ( 40 % weighting).

For three-year performance period commencing on 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 period commencing on 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 Nareit 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 Elme Communities and each of the peer companies.

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

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

Expected volatility (1)

9 unchanged sentences

(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 2023 ranged from approximately 27 % to 137 % for the 60 % of the LTIP based on TSR relative to the FTSE Nareit Residential Index and from approximately 32 % to 159 % for the 40 % 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 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.

2 unchanged sentences

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.

The restricted share unit awards vest ratably over three years from December 15 preceding the grant date based upon continued employment.

The restricted share unit awards vest ratably over three years beginning on the December 15 following the grant date based upon continued employment.

We recognize compensation expense for these awards according to a graded vesting schedule over the three-year requisite service period.

36 unchanged sentences

Absolute/Index TSR (2)

1,048 N/A 971

The unamortized value of these awards with market conditions as of December 31, 2023 was as follows (in thousands):

6 unchanged sentences

(1) The 2023, 2022 and 2021 Awards were granted under the Officer LTIP, whereby all of the shares vest immediately at the end of the three-year performance period.

(2) The performance conditions for the 2023 awards were evaluated based on 60 % on TSR relative to the FTSE Nareit Residential Index and 40 % based on TSR relative to a defined populations of peer companies.

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 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

29 unchanged sentences

Discontinued operations — — 0.82

Basic net income (loss) per common share (1)

Basic net (loss) income per common share (1)

$ ( 0.61 ) $ ( 0.36 ) $ 0.19

2 unchanged sentences

Discontinued operations — — 0.82

Diluted net income (loss) per common share (1)

Diluted net (loss) income per common share (1)

$ ( 0.61 ) $ ( 0.36 ) $ 0.19

9 unchanged sentences

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

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).

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 six 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.

28 unchanged sentences

Other income 569

Real estate impairment ( 41,860 )

Net loss $ ( 52,977 )

11 unchanged sentences

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 46,441

Net income $ 16,384

Net loss $ ( 30,868 )

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

7 unchanged sentences

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 )

Loss on extinguishment of debt ( 34 )

Loss on interest rate derivatives ( 5,866 )

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

1 unchanged sentence

______________________________

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

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

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

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

2 unchanged sentences

Unaudited financial data by quarter in each of the years ended December 31, 2023 and 2022 were as follows (in thousands, except for per share data):

Quarter (1), (2)

First Second Third Fourth

10 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 )

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 sale of real estate of $ 46.4 million.

SHAREHOLDERS' EQUITY

On October 26, 2023, the Board authorized and approved a share repurchase program of up to $ 50.0 million of the Company’s common shares of beneficial interest over a period of two years, subject to any applicable limitations or restrictions set forth in our existing credit facility and other debt agreements.

The share repurchase program is scheduled to expire on October 25, 2025, unless extended by the Board.

On February 17, 2021, we entered into separate amendments to each of our existing equity distribution agreements (“Original Equity Distribution Agreements”) with each of Wells Fargo Securities, LLC, BNY Mellon Capital Markets, LLC, Capital One Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co.

7 unchanged sentences

We may use net proceeds from the issuance of common shares under this program for general business purposes, including, without limitation, working capital, the acquisition, renovation, expansion, improvement, development or redevelopment of income producing properties or the repayment of debt.

Our issuances and net proceeds on the Equity Distribution Agreements in 2020 and 2021 and the Original Equity Distribution Agreements in 2020 and 2019, respectively, for the three years ended December 31, 2022 were as follows (in thousands, except per share data):

Our issuances and net proceeds on the Equity Distribution Agreements in 2022 and 2021 and the Original Equity Distribution Agreements in 2021 for the three years ended December 31, 2023 were as follows (in thousands, except per share data):

Year Ended December 31,

32 unchanged sentences

2021 $ 1,402 $ — $ ( 10 ) $ 1,392

Initial Cost (a) Net Improvements (Retirement) since Acquisition Gross Amounts at Which Carried at December 31, 2022 Accumulated Depreciation at December 31, 2022 (b)

Properties Location Land Buildings and Improvements Land Buildings and Improvements (b) Total (c) Year of Construction Date of Acquisition

Feet Homes Depreciation Life (d)

Initial Cost (a) Net Improvements (Retirement) since Acquisition Gross Amounts at Which Carried at December 31, 2023 Accumulated Depreciation at December 31, 2023

Properties Location Land Buildings and Improvements Land Buildings and Improvements Total (c) Year of Construction Date of Acquisition

Depreciation Life (d)

Residential Properties

3801 Connecticut Avenue Washington, D.C.

$ 420,000 $ 2,678,000 $ 23,157,000 $ 420,000 $ 25,835,000 $ 26,255,000 $ 16,859,000 1951 Jan 1963 178,000 307 30 years

3801 Connecticut Avenue Washington, DC $ 420,000 $ 2,678,000 $ 23,494,000 $ 420,000 $ 26,172,000 $ 26,592,000 $ 18,112,000 1951 Jan 1963 30 years

Roosevelt Towers Virginia 336,000 1,996,000 14,761,000 336,000 16,757,000 17,093,000 13,970,000 1964 May 1965 40 years

4 unchanged sentences

The Clayborne Virginia 269,000 — 32,103,000 699,000 31,673,000 32,372,000 20,797,000 2008 Jun 2003 26 years

Kenmore Apartments Washington, D.C.

28,222,000 33,955,000 21,469,000 28,222,000 55,424,000 83,646,000 24,484,000 1948 Sep 2008 268,000 374 30 years

Kenmore Apartments Washington, DC 28,222,000 33,955,000 22,258,000 28,222,000 56,213,000 84,435,000 26,795,000 1948 Sep 2008 30 years

The Maxwell Virginia 12,787,000 — 38,993,000 12,850,000 38,930,000 51,780,000 17,137,000 2014 Jun 2011 30 years

Yale West Washington, D.C.

14,684,000 62,069,000 2,320,000 14,684,000 64,389,000 79,073,000 20,229,000 2011 Feb 2014 173,000 216 30 years

Yale West Washington, DC 14,684,000 62,069,000 2,530,000 14,684,000 64,599,000 79,283,000 22,468,000 2011 Feb 2014 30 years

The Paramount (f) Virginia 8,568,000 38,716,000 4,554,000 8,568,000 43,270,000 51,838,000 17,598,000 1984 Oct 2013 30 years

2 unchanged sentences

Riverside Apartments Virginia 38,924,000 184,854,000 54,251,000 38,864,000 239,165,000 278,029,000 72,196,000 1971 May 2016 30 years

Riverside Apartments land parcel (e) Virginia 15,968,000 — 14,419,000 — 30,387,000 30,387,000 — n/a May 2016 — n/a n/a

Assembly Alexandria Virginia 23,942,000 93,672,000 14,159,000 23,942,000 107,831,000 131,773,000 14,997,000 1990 Jun 2019 437,000 532 30 years

Assembly Manassas Virginia 13,586,000 68,802,000 6,421,000 13,586,000 75,223,000 88,809,000 11,063,000 1986 Jun 2019 390,000 408 30 years

Assembly Dulles Virginia 12,476,000 66,852,000 7,476,000 12,476,000 74,328,000 86,804,000 10,798,000 2000 Jun 2019 361,000 328 30 years

Assembly Leesburg Virginia 4,113,000 21,286,000 1,463,000 4,113,000 22,749,000 26,862,000 3,791,000 1986 Jun 2019 124,000 134 30 years

Assembly Herndon Virginia 11,225,000 51,534,000 6,378,000 11,225,000 57,912,000 69,137,000 8,937,000 1991 Jun 2019 221,000 283 30 years

Assembly Germantown Maryland 7,609,000 34,431,000 3,422,000 7,609,000 37,853,000 45,462,000 5,980,000 1990 Jun 2019 211,000 218 30 years

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

Riverside Apartments land parcel (e) Virginia 15,968,000 — 14,419,000 — 30,387,000 30,387,000 — n/a May 2016 n/a

Elme Alexandria Virginia 23,942,000 93,672,000 19,263,000 23,942,000 112,935,000 136,877,000 19,611,000 1990 Jun 2019 30 years

Elme Manassas Virginia 13,586,000 68,802,000 8,468,000 13,586,000 77,270,000 90,856,000 14,293,000 1986 Jun 2019 30 years

Elme Dulles Virginia 12,476,000 66,852,000 10,415,000 12,476,000 77,267,000 89,743,000 14,082,000 2000 Jun 2019 30 years

Elme Leesburg Virginia 4,113,000 21,286,000 1,832,000 4,113,000 23,118,000 27,231,000 4,937,000 1986 Jun 2019 30 years

Elme Herndon Virginia 11,225,000 51,534,000 8,295,000 11,225,000 59,829,000 71,054,000 11,369,000 1991 Jun 2019 30 years

Elme Germantown Maryland 7,609,000 34,431,000 4,838,000 7,609,000 39,269,000 46,878,000 7,569,000 1990 Jun 2019 30 years

Elme Watkins Mill Maryland 7,151,000 30,851,000 2,548,000 7,151,000 33,399,000 40,550,000 6,900,000 1975 Jun 2019 30 years

Cascade at Landmark Virginia 12,289,000 56,235,000 5,115,000 12,289,000 61,350,000 73,639,000 10,979,000 1988 Jul 2019 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

Elme Conyers Georgia 4,798,000 42,122,000 4,001,000 4,798,000 46,123,000 50,921,000 4,843,000 1999 Aug 2021 30 years

Elme Eagles Landing Georgia 16,117,000 86,460,000 5,345,000 16,117,000 91,805,000 107,922,000 8,688,000 2000 Nov 2021 30 years

Elme Sandy Springs Georgia 17,423,000 85,817,000 5,558,000 17,423,000 91,375,000 108,798,000 7,226,000 1972 Feb 2022 30 years

Elme Marietta Georgia 19,019,000 83,319,000 2,737,000 19,019,000 86,056,000 105,075,000 5,945,000 1975 May 2022 30 years

Elme Cumberland Georgia 14,106,000 51,689,000 3,705,000 14,106,000 55,394,000 69,500,000 4,098,000 1982 May 2022 30 years

Elme Druid Hills Georgia 25,249,000 79,281,000 141,000 25,249,000 79,422,000 104,671,000 1,215,000 1987 Sep 2023 30 years

$ 366,233,000 $ 1,326,267,000 $ 588,313,000 $ 352,611,000 $ 1,928,202,000 $ 2,280,813,000 $ 526,321,000

Office Buildings

Watergate 600 Washington, D.C.

$ 45,981,000 $ 78,325,000 $ 46,136,000 $ 45,751,000 $ 124,691,000 $ 170,442,000 $ 30,898,000 1972 Apr 2017 300,000 30 years

Office Building

Watergate 600 (b) Washington, DC $ 45,981,000 $ 78,325,000 $ ( 30,022,000 ) $ 31,486,000 $ 62,798,000 $ 94,284,000 $ 1,703,000 1972 Apr 2017 30 years

Total $ 412,214,000 $ 1,404,592,000 $ 558,291,000 $ 384,097,000 $ 1,991,000,000 $ 2,375,097,000 $ 528,024,000

1 unchanged sentence

a) The purchase cost of real estate investments has been divided between land and buildings and improvements on the basis of management’s determination of the fair values.

b) Excludes the right of use asset and associated accumulated depreciation for our corporate office operating lease of $ 2.6 million and $ 1.7 million, respectively.

c) At December 31, 2022, total land, buildings and improvements are carried at $ 1,401.0 million for federal income tax purposes.

b) During 2023, we recognized an impairment charge of $ 41.9 million on Watergate 600 in order to reduce its carrying value to its estimated fair value, which declined due to changes in market conditions in the Washington, DC metro region office market.

c) At December 31, 2023, total land, buildings and improvements are carried at $ 1.5 billion for federal income tax purposes.

d) The useful life shown is for the main structure.

30 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