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Item 1. Financial Statements

2024-08-02 compared with 2024-05-02 · 149 added, 70 removed, 317 unchanged (41% of the section changed)

5 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE DATA )

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Land $ 383,808 $ 384,097

24 unchanged sentences

150,000 shares authorized;

88,003 and 87,867 shares issued and outstanding, as of March 31, 2024 and December 31, 2023, respectively

88,011 and 87,867 shares issued and outstanding, as of June 30, 2024 and December 31, 2023, respectively

Additional paid in capital 1,737,941 1,735,530

9 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Real estate rental revenue $ 60,103 $ 56,599 $ 119,616 $ 112,408

21 unchanged sentences

(IN THOUSANDS)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net loss $ ( 3,471 ) $ ( 2,611 ) $ ( 7,118 ) $ ( 6,254 )

Other comprehensive income:

Unrealized gain (loss) on interest rate hedges 83 ( 333 )

Unrealized (loss) gain on interest rate hedges ( 796 ) 854 ( 713 ) 521

Reclassification of unrealized loss on interest rate derivatives to earnings 510 509 1,020 1,019

8 unchanged sentences

Net loss — — — ( 7,118 ) — ( 7,118 ) — ( 7,118 )

Unrealized gain on interest rate hedges — — — — 83 83 — 83

Unrealized loss on interest rate hedges — — — — ( 713 ) ( 713 ) — ( 713 )

Amortization of swap settlements — — — — 1,020 1,020 — 1,020

3 unchanged sentences

Share grants, net of forfeitures and tax withholdings 144 1 2,411 — — 2,412 — 2,412

Balance, March 31, 2024 88,003 $ 880 $ 1,736,524 $ ( 588,923 ) $ ( 12,365 ) $ 1,136,116 $ 288 $ 1,136,404

Balance, June 30, 2024 88,011 $ 880 $ 1,737,941 $ ( 608,310 ) $ ( 12,651 ) $ 1,117,860 $ 285 $ 1,118,145

Shares Issued and Out-standing Shares of Beneficial Interest at Par Value Additional Paid in Capital Distributions in Excess of

2 unchanged sentences

Net loss — — — ( 6,254 ) — ( 6,254 ) — ( 6,254 )

Unrealized loss on interest rate hedges — — — — ( 333 ) ( 333 ) — ( 333 )

Unrealized gain on interest rate hedges — — — — 521 521 — 521

Amortization of swap settlements — — — — 1,019 1,019 — 1,019

4 unchanged sentences

Share grants, net of forfeitures and tax withholdings 247 3 3,037 — — 3,040 — 3,040

Balance, June 30, 2023 87,809 $ 878 $ 1,733,388 $ ( 490,939 ) $ ( 12,693 ) $ 1,230,634 $ 294 $ 1,230,928

See accompanying notes to the consolidated financial statements.

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(IN THOUSANDS)

Shares Issued and Out-standing Shares of Beneficial Interest at Par Value Additional Paid in Capital Distributions in Excess of

Net Income Accumulated Other Comprehensive Loss Total Shareholders’ Equity Noncontrolling Interests in Subsidiaries Total Equity

Balance, March 31, 2024 88,003 $ 880 $ 1,736,524 $ ( 588,923 ) $ ( 12,365 ) $ 1,136,116 $ 288 $ 1,136,404

Net loss — — — ( 3,471 ) — ( 3,471 ) — ( 3,471 )

Unrealized loss on interest rate hedges — — — — ( 796 ) ( 796 ) — ( 796 )

Amortization of swap settlements — — — — 510 510 — 510

Distributions to noncontrolling interests — — — — — — ( 3 ) ( 3 )

Dividends ($ 0.18 per common share)

— — — ( 15,916 ) — ( 15,916 ) — ( 15,916 )

Share grants, net of share grant amortization and forfeitures 8 — 1,417 — — 1,417 — 1,417

Balance, June 30, 2024 88,011 $ 880 $ 1,737,941 $ ( 608,310 ) $ ( 12,651 ) $ 1,117,860 $ 285 $ 1,118,145

Shares Issued and Out-standing Shares of Beneficial Interest at Par Value Additional Paid in Capital Distributions in Excess of

Net Income Accumulated Other Comprehensive Loss Total Shareholders’ Equity Noncontrolling Interests in Subsidiaries Total Equity

Balance, March 31, 2023 87,709 $ 877 $ 1,731,701 $ ( 472,503 ) $ ( 14,056 ) $ 1,246,019 $ 296 $ 1,246,315

Net loss — — — ( 2,611 ) — ( 2,611 ) — ( 2,611 )

Unrealized gain on interest rate hedges — — — — 854 854 — 854

Amortization of swap settlements — — — — 509 509 — 509

Distributions to noncontrolling interests — — — — — — ( 2 ) ( 2 )

Dividends ($ 0.18 per common share)

— — — ( 15,825 ) — ( 15,825 ) — ( 15,825 )

Shares issued under Dividend Reinvestment Program 14 — 249 — — 249 — 249

Share grants, net of forfeitures and tax withholdings 86 1 1,438 — — 1,439 — 1,439

Balance, June 30, 2023 87,809 $ 878 $ 1,733,388 $ ( 490,939 ) $ ( 12,693 ) $ 1,230,634 $ 294 $ 1,230,928

See accompanying notes to the consolidated financial statements.

2 unchanged sentences

(IN THOUSANDS)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

16 unchanged sentences

Cash flows from financing activities

Line of credit borrowings (repayments), net 3,000 ( 20,000 )

Line of credit repayments, net ( 1,000 ) ( 31,000 )

Dividends paid ( 31,843 ) ( 30,777 )

20 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 2024

NATURE OF BUSINESS

1 unchanged sentence

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

Within these notes to the financial statements, we refer to the three months ended March 31, 2024 and March 31, 2023 as the “2024 Quarter” and the “2023 Quarter,” respectively.

Within these notes to the financial statements, we refer to the three months ended June 30, 2024 and June 30, 2023 as the “2024 Quarter” and the “2023 Quarter,” respectively, and the six months ended June 30, 2024 and June 30, 2023 as the “2024 Period” and the “2023 Period,” respectively.

Federal Income Taxes

4 unchanged sentences

Our TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates.

As of both March 31, 2024 and December 31, 2023, our TRS had a deferred tax asset of $ 1.4 million that was fully reserved.

As of both June 30, 2024 and December 31, 2023, our TRS had a deferred tax asset of $ 1.4 million that was fully reserved.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATIONS

2 unchanged sentences

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).

In March 2020, the Financial Accounting Standards Board (“FASB”) 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 2023 Quarter, 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").

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.

1 unchanged sentence

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

In November 2023, the FASB issued an amendment to the segment reporting standards which requires disclosure for each reportable segment, on an interim and annual basis, the significant expense categories and amounts that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss.

In November 2023, the FASB issued an amendment to the segment reporting standards which requires disclosure for each reportable segment, on an interim and annual basis, of the significant expense categories and amounts that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss.

Additionally, it requires a disclosure of the title and position of the individual or the name of the group or committee identified as the chief operating decision maker.

15 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.

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.”

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 expenses.”

Restricted Cash

7 unchanged sentences

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

As of March 31, 2024, we have invested $ 30.4 million, including the cost of acquired land, in a residential development adjacent to Riverside Apartments.

As of June 30, 2024, we have invested $ 30.4 million, including the cost of acquired land, in a residential development adjacent to Riverside Apartments.

During the second quarter of 2022, we paused development activities at the aforementioned property and ceased associated capitalization of interest on spending and real estate taxes.

Properties Sold and Held for Sale

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 properties that no longer meet our long-term strategy or return objectives and where market conditions for sale are favorable.

return objectives and where market conditions for sale are favorable.

The proceeds from the sales may be reinvested into other properties, used to fund development operations or to support other corporate needs or distributed to our shareholders.

Depreciation on these properties is discontinued at the time they are classified as held for sale, but operating revenues, operating expenses and interest expense continue to be recognized until the date of sale.

We did not sell or classify any properties as held for sale during the 2024 Quarter or in 2023.

As of March 31, 2024, we assessed our properties, including assets held for development, for impairment and did no t recognize any impairment charges during the 2024 Quarter.

We applied reasonable estimates and judgments in evaluating each of the properties as of March 31, 2024.

We did not sell or classify any properties as held for sale during the 2024 Period or in 2023.

As of June 30, 2024, we assessed our properties, including assets held for development, for impairment and did no t recognize any impairment charges during the 2024 Quarter.

We applied reasonable estimates and judgments in evaluating each of the properties as of June 30, 2024.

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.

UNSECURED LINE OF CREDIT PAYABLE

During the third quarter of 2021, we entered into an amended and restated credit agreement (“Credit Agreement”) which provides for 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.

The Credit Agreement has an accordion feature that allows us to increase the aggregate facility to $ 1.5 billion, subject to the lenders’ agreement to provide additional revolving loan commitments or term loans.

During the 2023 Quarter, 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.

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

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

Under the 2021 Credit Agreement, the Revolving Credit Facility had a four-year term ending in August 2025, with two six-month extension options.

The 2021 Credit Agreement included an accordion feature that allowed us to increase the aggregate facility to $ 1.5 billion, subject to the lenders’ agreement to provide additional revolving loan commitments or term loans.

During the first quarter of 2023, we executed an amendment to the 2021 Credit Agreement to convert the benchmark interest rate from LIBOR to an adjusted SOFR, with no change in the applicable interest rate margins.

Pursuant to this amendment, the Revolving Credit Facility accrued interest at a rate of adjusted 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 March 31, 2024, 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 5.34% and the facility fee is 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.

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

The amount of the Revolving Credit Facility’s unsecured line of credit unused and available at March 31, 2024 was as follows (in thousands):

As of June 30, 2024, the interest rate on the Revolving Credit Facility was based on an adjusted daily SOFR (inclusive of the 0.10 % credit spread adjustment) plus 0.85 % applicable margin, the daily SOFR is 5.33% and the facility fee was 0.20 %.

As of June 30, 2024, all outstanding advances for the Revolving Credit Facility were 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 were due and payable generally on a monthly basis.

The amount of the Revolving Credit Facility’s unsecured line of credit unused and available at June 30, 2024 was as follows (in thousands):

Committed capacity $ 700,000

1 unchanged sentence

Unused and available $ 544,000

We executed borrowings and repayments on the Revolving Credit Facility during the 2024 Quarter as follows (in thousands):

We executed borrowings and repayments on the Revolving Credit Facility during the 2024 Period as follows (in thousands):

Balance, December 31, 2023 $ 157,000

1 unchanged sentence

Repayments ( 71,000 )

Balance, March 31, 2024 $ 160,000

Balance, June 30, 2024 $ 156,000

Subsequent to the 2024 Quarter, we entered into a third amended and restated credit agreement (the “Amended Credit Agreement”) which provides for aggregate revolving loan commitments of $ 500.0 million (the “Amended and Restated Revolving Credit Facility”) with an accordion feature that allows us to increase the aggregate revolving loan commitments or add term loans of up to $ 1.0 billion, subject to the lenders’ agreement to provide additional revolving commitments or term loans.

The Amended and Restated Revolving Credit Facility has a four-year term ending in July 2028, with two six-month extension options.

Borrowings under the Amended and Restated Revolving Credit Facility will bear interest, at Elme Communities’ option, at a rate of either (a)(i) daily SOFR plus 0.10 % (the “Adjusted Daily Simple SOFR”) or (ii) term SOFR plus 0.10 %, plus, in each case, a margin ranging from 0.70 % to 1.40 % (depending on Elme Communities’ credit rating) or (b) the base rate plus a margin ranging from 0.00 % to 0.40 % (based upon Elme Communities’ credit rating).

The base rate is the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50 % and Adjusted Daily Simple SOFR plus 1.0 %.

In addition, the Amended Credit Agreement requires the payment of a facility fee equal to 0.10 % to 0.30 % (depending on Elme

Communities’ credit rating) on the $ 500.0 million committed capacity in respect of the Amended and Restated Revolving Credit Facility, without regard to usage.

The initial interest rate is based on Adjusted Daily Simple SOFR plus a margin of 0.85 % and the initial facility fee equals 0.20 %.

All outstanding advances for the Amended and Restated Revolving Credit Facility are due and payable upon maturity in July 2028, 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.

NOTES PAYABLE

During the 2023 Quarter, we entered into a $ 125.0 million unsecured term loan (“2023 Term Loan”) with an interest rate of adjusted 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).

During the first quarter of 2023, we entered into a $ 125.0 million unsecured term loan (“2023 Term Loan”) with an interest rate of adjusted 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.

We used the proceeds to prepay the $ 100.0 million 2018 Term Loan in full and a portion of our borrowings under our Revolving Credit Facility.

Subsequent to the 2024 Quarter, we entered into a first amendment of the 2023 Term Loan (the “Term Loan Amendment”).

The Term Loan Amendment implements various covenant and technical amendments to make the 2023 Term Loan consistent with corresponding provisions in the Amended Credit Agreement.

The Term Loan Amendment does not change the maturity or any of the pricing terms of the term loan outstanding under the 2023 Term Loan.

DERIVATIVE INSTRUMENTS

During the 2023 Quarter, 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.

Subsequent to the end of the 2024 Quarter, we entered into two forward interest rate swap arrangements with an aggregate notional amount of $ 150.0 million beginning on January 10, 2025 through January 10, 2026.

These forward interest rate swap arrangements will effectively fix a portion of our variable rate debt based on an adjusted daily SOFR at 4.72 % (subject to applicable interest rate margins).

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.

During the 2024 Quarter, we entered into two forward interest rate swap arrangements with an aggregate notional amount of $ 150.0 million beginning on January 10, 2025 through January 10, 2026.

These forward interest rate swap arrangements effectively fix a portion of our variable rate debt based on an adjusted daily SOFR at 4.72 % (subject to applicable interest rate margins).

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

3 unchanged sentences

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

The fair values of the interest rate swaps as of March 31, 2024 and December 31, 2023, were as follows (in thousands):

Derivative Assets

Derivative Instrument Aggregate Notional Amount Effective Date Maturity Date March 31, 2024 December 31, 2023

The fair values of the interest rate swaps as of June 30, 2024 and December 31, 2023, were as follows (in thousands):

Derivative Assets (Liabilities)

Derivative Instrument Aggregate Notional Amount Effective Date Maturity Date June 30, 2024 December 31, 2023

Interest rate swap $ 75,000 July 21, 2023 January 10, 2025 $ 587 $ 740

Interest rate swap 50,000 July 21, 2023 January 10, 2025 392 494

Interest rate swap 100,000 January 10, 2025 January 10, 2026 ( 305 ) —

Interest rate swap 50,000 January 10, 2025 January 10, 2026 ( 153 ) —

$ 521 $ 1,234

1 unchanged sentence

The net unrealized gains and losses on the effective swaps were recognized in Other comprehensive income (loss), as follows (in thousands):

Three Months Ended March 31,

Unrealized gain (loss) on interest rate hedges $ 83 $ ( 333 )

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Unrealized (loss) gain on interest rate hedges $ ( 796 ) $ 854 $ ( 713 ) $ 521

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 $ 1.3 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 loss into interest expense for the three months ended March 31, 2024 and 2023, were as follows (in thousands):

Three Months Ended March 31,

During the next twelve months, we estimate that an additional $ 0.9 million related to our outstanding interest rate swap arrangements will be reclassified as a net decrease to interest expense.

The losses reclassified from Accumulated other comprehensive loss into interest expense for the three and six months ended June 30, 2024 and 2023, were as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Loss reclassified from accumulated other comprehensive loss into interest expense $ 510 $ 509 $ 1,020 $ 1,019

1 unchanged sentence

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

As of March 31, 2024, the fair value of derivative assets, including accrued interest, was $ 1.3 million and we did no t have any derivatives in a liability position.

As of March 31, 2024, we have not posted any collateral related to these agreements.

As of June 30, 2024, the fair value of derivative assets, including accrued interest, was $ 1.0 million and the fair value of derivative liabilities was $ 0.5 million.

As of June 30, 2024, we have not posted any collateral related to these agreements.

Derivative instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of the interest rate hedge agreements.

7 unchanged sentences

Significant unobservable inputs

The only assets or liabilities we had at March 31, 2024 and December 31, 2023 that are recorded at fair value on a recurring basis are the assets held in the Supplemental Executive Retirement Plan (“SERP”), which primarily consist of investments in mutual funds, and the interest rate derivatives (see note 6).

The only assets or liabilities we had at June 30, 2024 and December 31, 2023 that are recorded at fair value on a recurring basis are the assets held in the Supplemental Executive Retirement Plan (“SERP”), which primarily consist of investments in mutual funds, and the interest rate derivatives (see note 6).

We base the valuations related to the SERP on quoted prices in active markets and accordingly these valuations fall into Level 1 in the fair value hierarchy.

8 unchanged sentences

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

The fair values of these assets as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

March 31, 2024 December 31, 2023

The fair values of these assets as of June 30, 2024 and December 31, 2023 were as follows (in thousands):

June 30, 2024 December 31, 2023

Value Level 1 Level 2 Level 3 Fair

2 unchanged sentences

Interest rate derivatives 979 — 979 — 1,234 — 1,234 —

Interest rate derivatives $ ( 458 ) $ — $ ( 458 ) $ — $ — $ — $ — $ —

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

6 unchanged sentences

The use of different market assumptions or estimation methodologies could have an effect on the estimated fair value amounts.

In addition, fair value estimates are made at a point in time and thus, estimates of fair value subsequent to March 31, 2024 may differ significantly from the amounts presented.

In addition, fair value estimates are made at a point in time and thus, estimates of fair value subsequent to June 30, 2024 may differ significantly from the amounts presented.

The valuations of cash and cash equivalents and restricted cash fall into Level 1 in the fair value hierarchy and the valuations of debt instruments fall into Level 3 in the fair value hierarchy.

As of March 31, 2024 and December 31, 2023, the carrying values and estimated fair values of our financial instruments were as follows (in thousands):

March 31, 2024 December 31, 2023

As of June 30, 2024 and December 31, 2023, the carrying values and estimated fair values of our financial instruments were as follows (in thousands):

June 30, 2024 December 31, 2023

Carrying Value Fair Value Carrying Value Fair Value

5 unchanged sentences

Elme Communities maintains short-term (“STIP”) and long-term (“LTIP”) incentive plans that allow for stock-based awards to officers and non-officer employees.

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

Stock based awards are provided to officers and non-officer employees, as well as trustees, under the Washington Real Estate Investment Trust 2016 Omnibus Incentive Plan (the “Omnibus Incentive Plan”).

An amendment and restatement of the Omnibus Incentive Plan was approved by our board of trustees in April 2024 and approved by our shareholders in May 2024 to, among other changes, increase the number of shares available to be issued by 2,900,000 , from 2,400,000 shares to 5,300,000 shares (including shares issued pursuant to awards made under the Omnibus Incentive Plan prior to its amendment).

The Omnibus Incentive Plan, as amended, allows for awards in the form of restricted shares, restricted share units, options and other awards up to an aggregate of 5,300,000 shares over the ten-year period in which the plan is in effect.

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

Total Compensation Expense

Total compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $ 1.1 million and $ 1.2 million for the 2024 Quarter and 2023 Quarter, respectively.

Total compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $ 1.0 million and $ 1.4 million for the 2024 Quarter and 2023 Quarter, respectively, and $ 2.1 million and $ 2.6 million for the 2024 Period and 2023 Period, respectively.

Restricted Share Awards

The total fair values of restricted share awards vested was $ 0.6 million and $ 3.4 million for the 2024 Quarter and 2023 Quarter, respectively.

The total unvested restricted share awards at March 31, 2024 was 443,439 shares, which had a weighted average grant date fair value of $ 16.96 per share.

As of March 31, 2024, the total compensation cost related to unvested restricted share awards was $ 6.2 million, which we expect to recognize over a weighted average period of 27 months.

The total fair values of restricted share awards vested was $ 0.9 million and $ 4.0 million for the 2024 Period and 2023 Period, respectively.

The total unvested restricted share awards at June 30, 2024 was 436,834 shares, which had a weighted average grant date fair value of $ 16.96 per share.

As of June 30, 2024, the total compensation cost related to unvested restricted share awards was $ 5.2 million, which we expect to recognize over a weighted average period of 24 months.

EARNINGS PER COMMON SHARE

4 unchanged sentences

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

The computations of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023 were as follows (in thousands, except per share data):

Three Months Ended March 31,

The computations of basic and diluted earnings per share for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands, except per share data):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net loss $ ( 3,471 ) $ ( 2,611 ) $ ( 7,118 ) $ ( 6,254 )

16 unchanged sentences

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

The following tables present revenues, NOI, capital expenditures and total assets for the three months ended March 31, 2024 and 2023 from our Residential segment as well as Other, and reconcile NOI to net loss as reported (in thousands):

Three Months Ended March 31, 2024

The following tables present revenues, NOI, capital expenditures and total assets for the three and six months ended June 30, 2024 and 2023 from our Residential segment as well as Other, and reconcile NOI to net loss as reported (in thousands):

Three Months Ended June 30, 2024

Residential Other (1)

7 unchanged sentences

Interest expense ( 9,384 )

Other income 1,410

Net loss $ ( 3,471 )

1 unchanged sentence

Total assets $ 1,738,354 $ 123,121 $ 1,861,475

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Residential Other (1)

8 unchanged sentences

Interest expense ( 6,794 )

Loss on extinguishment of debt ( 54 )

Other income 569

Net loss $ ( 2,611 )

2 unchanged sentences

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

Six Months Ended June 30, 2024

Residential Other (1)

Real estate rental revenue $ 110,363 9,253 $ 119,616

Real estate expenses 40,980 2,721 43,701

Net operating income $ 69,383 $ 6,532 $ 75,915

Other income (expense):

Property management expenses ( 4,393 )

General and administrative expenses ( 12,334 )

Depreciation and amortization ( 48,838 )

Interest expense ( 18,878 )

Other income 1,410

Net loss $ ( 7,118 )

Capital expenditures $ 21,437 $ 109 $ 21,546

Six Months Ended June 30, 2023

Residential Other (1)

Real estate rental revenue 103,091 9,317 $ 112,408

Real estate expenses 37,198 2,581 39,779

Net operating income $ 65,893 $ 6,736 $ 72,629

Other income (expense):

Property management expenses ( 3,947 )

General and administrative expenses ( 13,521 )

Transformation costs ( 5,354 )

Depreciation and amortization ( 42,951 )

Interest expense ( 13,625 )

Loss on extinguishment of debt ( 54 )

Other income 569

Net loss $ ( 6,254 )

Capital expenditures $ 9,547 $ 636 $ 10,183

______________________________

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

SHAREHOLDERS' EQUITY

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as agents and forward sellers, as applicable, (collectively, the “Agents” or “Forward Sellers”, as applicable), and Wells Fargo Bank, National Association, The Bank of New York Mellon, Citibank, N.A., Goldman Sachs & Co.

LLC, KeyBanc Capital Markets Inc., The Toronto-Dominion Bank and Truist Bank as forward purchasers pursuant to which up to an aggregate gross sales price of $ 350,000,000 of Elme’s common shares of beneficial interest, $ 0.01 par value per share, may be offered and sold from time to time through the Agents, acting as the Company’s sales agents or, if applicable, the Forward Sellers, or directly to the Agents as principals for their own accounts.

LLC, KeyBanc Capital Markets Inc., The Toronto-Dominion Bank and Truist Bank as forward purchasers pursuant to which up to an aggregate gross sales price of $ 350,000,000 of Elme Communities’ common shares of beneficial interest, $ 0.01 par value per share, may be offered and sold from time to time through the Agents, acting as the Company’s sales agents or, if applicable, the Forward Sellers, or directly to the Agents as principals for their own accounts.

In connection with entry into the Equity Distribution Agreement, we terminated our prior at-the-market offering program.

At the time of such termination, approximately $ 340.0 million remained unsold under such prior program.

We did not issue common shares under the Equity Distribution Agreement or any prior equity distribution agreements during the 2024 Quarter or 2023 Quarter.

We did not issue common shares under the Equity Distribution Agreement or any prior equity distribution agreements during the 2024 Period or 2023 Period.

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

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Net proceeds under this program are used for general corporate purposes.

We did not issue common shares under the dividend reinvestment program during the 2024 Quarter.

Our issuances and net proceeds on the dividend reinvestment program for the three months ended March 31, 2023 were as follows ($ in thousands, except per share data):

Three Months Ended March 31,

We did not issue common shares under the dividend reinvestment program during the 2024 Period.

Our issuances and net proceeds on the dividend reinvestment program for the three and six months ended June 30, 2023 were as follows ($ in thousands, except per share data):

Three Months Ended June 30, Six Months Ended June 30,

Issuance of common shares 14 28

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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-Q

Item 1. Financial Statements