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Item 1. Financial Statements

2025-05-02 compared with 2024-11-05 · 84 added, 177 removed, 288 unchanged (48% of the section changed)

5 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE DATA )

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Land $ 383,808 $ 383,808

23 unchanged sentences

150,000 shares authorized;

88,010 and 87,867 shares issued and outstanding, as of September 30, 2024 and December 31, 2023, respectively

88,157 and 88,029 shares issued and outstanding, as of March 31, 2025 and December 31, 2024, respectively

Additional paid in capital 1,741,220 1,740,078

9 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Real estate rental revenue $ 61,493 $ 59,513

3 unchanged sentences

General and administrative 9,229 6,196

Transformation costs — 985 — 6,339

Depreciation and amortization 23,239 24,943

Real estate impairment — 41,860 — 41,860

56,708 55,076

2 unchanged sentences

Interest expense ( 9,460 ) ( 9,494 )

Loss on extinguishment of debt ( 147 ) — ( 147 ) ( 54 )

Other income — 1,410

9 unchanged sentences

(IN THOUSANDS)

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Net loss $ ( 4,675 ) $ ( 3,647 )

Other comprehensive income:

Unrealized (loss) gain on interest rate hedges ( 2,181 ) ( 149 ) ( 2,894 ) 372

Unrealized gain on interest rate hedges 89 83

Reclassification of unrealized loss on interest rate derivatives to earnings 510 510

8 unchanged sentences

Net loss — — — ( 4,675 ) — ( 4,675 ) — ( 4,675 )

Unrealized loss on interest rate hedges — — — — ( 2,894 ) ( 2,894 ) — ( 2,894 )

Unrealized gain on interest rate hedges — — — — 89 89 — 89

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

3 unchanged sentences

Share grants, net of forfeitures and tax withholdings 128 2 1,142 — — 1,144 — 1,144

Balance, September 30, 2024 88,010 $ 880 $ 1,739,319 $ ( 627,186 ) $ ( 14,323 ) $ 1,098,690 $ 283 $ 1,098,973

Balance, March 31, 2025 88,157 $ 882 $ 1,741,220 $ ( 666,713 ) $ ( 12,467 ) $ 1,062,922 $ 279 $ 1,063,201

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

7 unchanged sentences

— — — ( 15,885 ) — ( 15,885 ) — ( 15,885 )

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

Share grants, net of forfeitures and tax withholdings 136 1 994 — — 995 — 995

Balance, September 30, 2023 87,832 $ 878 $ 1,734,657 $ ( 550,442 ) $ ( 12,332 ) $ 1,172,761 $ 292 $ 1,173,053

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

Net loss — — — ( 2,970 ) — ( 2,970 ) — ( 2,970 )

Unrealized loss on interest rate hedges — — — — ( 2,181 ) ( 2,181 ) — ( 2,181 )

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

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

Dividends ($ 0.18 per common share)

— — — ( 15,906 ) — ( 15,906 ) — ( 15,906 )

Share grants, net of share grant amortization and forfeitures ( 1 ) — 1,378 — — 1,378 — 1,378

Balance, September 30, 2024 88,010 $ 880 $ 1,739,319 $ ( 627,186 ) $ ( 14,323 ) $ 1,098,690 $ 283 $ 1,098,973

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

Net loss — — — ( 43,618 ) — ( 43,618 ) — ( 43,618 )

Unrealized loss on interest rate hedges

— — — — ( 149 ) ( 149 ) — ( 149 )

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

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

Dividends ($ 0.18 per common share)

— — — ( 15,885 ) — ( 15,885 ) — ( 15,885 )

Share grants, net of forfeitures and tax withholdings 23 — 1,269 — — 1,269 — 1,269

Balance, September 30, 2023 87,832 $ 878 $ 1,734,657 $ ( 550,442 ) $ ( 12,332 ) $ 1,172,761 $ 292 $ 1,173,053

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

See accompanying notes to the consolidated financial statements.

2 unchanged sentences

(IN THOUSANDS)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

3 unchanged sentences

Credit losses on lease related receivables 983 1,451

Real estate impairment — 41,860

Share-based compensation expense 1,372 1,090

Net amortization of debt premiums, discounts and related financing costs 1,071 1,058

Loss on extinguishment of debt 147 54

Gain on land easements — ( 1,410 )

3 unchanged sentences

Cash flows from investing activities

Real estate acquisitions, net — ( 107,595 )

Capital improvements to real estate ( 5,688 ) ( 13,617 )

4 unchanged sentences

Line of credit borrowings, net

11,000 94,000

Dividends paid ( 15,898 ) ( 15,911 )

Repayments of unsecured term loan debt — ( 100,000 )

Proceeds from term loan — 125,000

Payment of financing costs ( 25 ) —

Distributions to noncontrolling interests ( 2 ) ( 2 )

Proceeds from dividend reinvestment program — 497

Payment of tax withholdings for restricted share awards ( 209 ) ( 178 )

Net cash (used in) provided by financing activities ( 42,457 ) 68,798

Net (decrease) increase in cash, cash equivalents and restricted cash

( 1,340 ) 331

Net cash used in financing activities ( 10,134 ) ( 13,091 )

Net increase (decrease) in cash, cash equivalents and restricted cash 343 ( 1,635 )

Cash, cash equivalents and restricted cash at beginning of period 8,609 8,538

11 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

March 31, 2025

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 September 30, 2024 and September 30, 2023 as the “2024 Quarter” and the “2023 Quarter,” respectively, and the nine months ended September 30, 2024 and September 30, 2023 as the “2024 Period” and the “2023 Period,” respectively.

Within these notes to the financial statements, we refer to the three months ended March 31, 2025 and March 31, 2024 as the “2025 Quarter” and the “2024 Quarter,” 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 September 30, 2024 and December 31, 2023, our TRS had a deferred tax asset of $ 1.4 million that was fully reserved.

As of both March 31, 2025 and December 31, 2024, 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 (“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 first quarter of 2023, we executed an amendment to the 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.

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.

The new standard will be effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025 on a retrospective basis.

We are currently evaluating the impact of adopting the standard on our consolidated financial statements.

In March 2024, the Securities and Exchange Commission (“SEC”) issued its final rule that requires registrants to provide climate disclosures in their annual reports and registration statements, beginning with annual reports for the year ending December 31, 2025.

On April 4, 2024, the SEC voluntarily stayed the final rule pending the completion of judicial review of cases pending in the Eighth Circuit.

We are continuing to evaluate the disclosure impact of the final rule.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting - Improvements to Reportable Segments Disclosures,” which enhances disclosures of significant segment expenses and other segment items regularly provided to the chief operating decision maker (“CODM”).

The new standard is effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

We adopted the new standard on our consolidated financial statements and related disclosures for the year ended December 31, 2024.

In November 2024, the Financial Accounting Standards Board issued ASU 2024-03, Disaggregation of Income Statement Expenses, which will require additional disclosure of the nature of expenses included in the income statement in response to longstanding requests from investors for more information about an entity’s expenses.

The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

The new standard will be effective for public companies for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

The requirements will be applied prospectively with the option for retrospective application.

Early adoption is permitted.

The Company is currently evaluating the impact of this accounting standard update on our consolidated financial statements.

Principles of Consolidation and Basis of Presentation

12 unchanged sentences

Restricted cash includes funds held in escrow for tenant security deposits.

Transformation Costs

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

Use of Estimates in the Financial Statements

3 unchanged sentences

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

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

As of March 31, 2025, 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.

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 Period or in 2023.

As of September 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 September 30, 2024.

We did not sell or classify any properties as held for sale during the 2025 Quarter or in 2024.

As of March 31, 2025, we assessed our properties, including assets held for development, for impairment and did no t recognize any impairment charges during the 2025 Quarter.

We applied reasonable estimates and judgments in evaluating each of the properties as of March 31, 2025.

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 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.

During 2024, 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.

3 unchanged sentences

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 %.

As of September 30, 2024, the interest rate on the Amended and Restated Revolving Credit Facility was based on the Adjusted Daily Simple SOFR (inclusive of the 0.10 % credit spread adjustment) plus 0.85 % applicable margin, the daily SOFR is 4.96% and the facility fee was 0.20 %.

As of March 31, 2025, the interest rate on the Amended and Restated Revolving Credit Facility was based on the Adjusted Daily Simple SOFR (inclusive of the 0.10 % credit spread adjustment) plus 0.85 % applicable margin, the daily SOFR was 4.41% and the facility fee was 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.

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

The amount of the Amended and Restated Revolving Credit Facility’s unsecured line of credit unused and available at March 31, 2025 was as follows (in thousands):

Committed capacity $ 500,000

1 unchanged sentence

Unused and available $ 318,000

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

We executed borrowings and repayments on the Amended and Restated Revolving Credit Facility during the 2025 Quarter as follows (in thousands):

Balance, December 31, 2024 $ 176,000

1 unchanged sentence

Repayments ( 40,000 )

Balance, September 30, 2024 $ 168,000

Balance, March 31, 2025 $ 182,000

NOTES PAYABLE

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 remaining $ 100.0 million portion of the $ 250.0 million unsecured term loan (the “2018 Term Loan”) in full and a portion of our borrowings under our Revolving Credit Facility.

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

During 2023, we entered into 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 had a two-year term ending in January 2025, with two one-year extension options.

During 2024, 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.

During the fourth quarter of 2024, we exercised one of two one-year extension options on the 2023 Term Loan to extend the maturity of the loan to January 10, 2026.

The interest rate on the 2023 Term Loan is effectively fixed at 5.77 % by two interest rate swap arrangements through its maturity date of January 10, 2026 (see note 6).

DERIVATIVE INSTRUMENTS

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 second quarter of 2024, 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).

These forward interest rate swap arrangements effectively fix (i) a portion of our variable rate debt based on an adjusted daily SOFR at 4.72 % (subject to applicable interest rate margins) and (ii) the 2023 Term Loan’s interest rate at 5.77 % beginning on January 10, 2025 through the extended loan maturity date of January 10, 2026.

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 September 30, 2024 and December 31, 2023, were as follows (in thousands):

The fair values of the interest rate swaps as of March 31, 2025 and December 31, 2024, were as follows (in thousands):

Derivative Assets (Liabilities)

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

Derivative Instrument Aggregate Notional Amount Effective Date Maturity Date March 31, 2025 December 31, 2024

Interest rate swap $ 75,000 July 21, 2023 January 10, 2025 $ — $ 14

4 unchanged sentences

We record interest rate swaps on our consolidated balance sheets within Prepaid expenses and other assets when in a net asset position and within Accounts payable and other liabilities when in a net liability position.

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Unrealized (loss) gain on interest rate hedges $ ( 2,181 ) $ ( 149 ) $ ( 2,894 ) $ 372

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

Three Months Ended March 31,

Unrealized gain on interest rate hedges $ 89 $ 83

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 $ 0.8 million related to our outstanding interest rate swap arrangements will be reclassified as a net increase to interest expense.

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

The losses reclassified from Accumulated other comprehensive loss into interest expense for the three months ended March 31, 2025 and 2024, were as follows (in thousands):

Three Months Ended March 31,

Loss reclassified from accumulated other comprehensive loss into interest expense $ 510 $ 510

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 September 30, 2024, the fair value of derivative assets, including accrued interest, was $ 0.3 million and the fair value of derivative liabilities was $ 2.0 million.

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

As of March 31, 2025, the fair value of derivative liabilities was $ 0.8 million.

As of March 31, 2025, 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 September 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).

The only assets or liabilities we had at March 31, 2025 and December 31, 2024 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.

2 unchanged sentences

The fair values of interest rate derivatives are determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments).

The variable cash payments (or receipts) are based on an expectation of future interest rates (forward

curves) derived from observable market interest rate curves.

To comply with the provisions of ASC 820, Fair Value Measurement , we incorporate credit valuation adjustments in the fair value measurements to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.

The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

To comply with the provisions of ASC 820, Fair Value Measurement , we incorporate credit valuation adjustments in the fair value measurements to appropriately reflect both our own

nonperformance risk and the respective counterparty’s nonperformance risk.

These credit valuation adjustments were concluded to not be significant inputs for the fair value calculations for the periods presented.

1 unchanged sentence

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

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

September 30, 2024 December 31, 2023

The fair values of these assets as of March 31, 2025 and December 31, 2024 were as follows (in thousands):

March 31, 2025 December 31, 2024

Value Level 1 Level 2 Level 3 Fair

1 unchanged sentence

SERP $ 2,678 $ 2,678 $ — $ — $ 2,648 $ 2,648 $ — $ —

Interest rate derivatives 329 — 329 — 1,234 — 1,234 —

Interest rate derivatives $ ( 1,988 ) $ — $ ( 1,988 ) $ — $ — $ — $ — $ —

Interest rate swaps — — — — 23 — 23 —

Interest rate swaps ( 824 ) — ( 824 ) — ( 936 ) — ( 936 ) —

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 September 30, 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 March 31, 2025 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 September 30, 2024 and December 31, 2023, the carrying values and estimated fair values of our financial instruments were as follows (in thousands):

September 30, 2024 December 31, 2023

As of March 31, 2025 and December 31, 2024, the carrying values and estimated fair values of our financial instruments were as follows (in thousands):

March 31, 2025 December 31, 2024

Carrying Value Fair Value Carrying Value Fair Value

4 unchanged sentences

SHARE-BASED COMPENSATION

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

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

Stock based awards are provided to officers and non-officer employees, as well as trustees, under the Elme Communities 2016 Omnibus Incentive Plan, as amended and restated effective May 30, 2024 (the “Omnibus Incentive Plan”).

3 unchanged sentences

Total Compensation Expense

Total compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $ 1.6 million and $ 1.4 million for the 2024 Quarter and 2023 Quarter, respectively, and $ 3.7 million and $ 4.0 million for the 2024 Period and 2023 Period, respectively.

Total compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $ 1.4 million and $ 1.1 million for the 2025 Quarter and 2024 Quarter, respectively.

Restricted Share Awards

The total fair values of restricted share awards vested was $ 1.0 million and $ 4.0 million for the 2024 Period and 2023 Period, respectively.

The total unvested restricted share awards at September 30, 2024 was 432,954 shares, which had a weighted average grant date fair value of $ 16.96 per share.

As of September 30, 2024, the total compensation cost related to unvested restricted share awards was $ 4.4 million, which we expect to recognize over a weighted average period of 22 months.

The total fair values of restricted share awards vested was $ 0.7 million and $ 0.6 million for the 2025 Quarter and 2024 Quarter, respectively.

The total unvested restricted share awards at March 31, 2025 was 493,625 shares, which had a weighted average grant date fair value of $ 15.82 per share.

As of March 31, 2025, the total compensation cost related to unvested restricted share awards was $ 6.0 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 and nine months ended September 30, 2024 and 2023 were as follows (in thousands, except per share data):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

The computations of basic and diluted earnings per share for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except per share data):

Three Months Ended March 31,

Net loss $ ( 4,675 ) $ ( 3,647 )

6 unchanged sentences

SEGMENT INFORMATION

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.

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

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.

As a result, our operating properties are aggregated into a single reportable segment:

We have one remaining office property, Watergate 600, which does not meet the criteria for a reportable segment, and has been classified within “Other” on our segment disclosure tables.

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

We have one office property, Watergate 600, which does not meet the quantitative or qualitative criteria for a reportable segment and has been classified within “Other”, along with business activities that are not part of an operating segment, on our segment disclosure tables.

Our CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of assessing the performance and allocating resources to the operating segment.

The CODM uses net operating income (“NOI”), defined as real estate rental revenue less real estate expenses (the significant segment expense), as the key basis of measurement for the reported segment profit or loss.

We evaluate performance based upon NOI of the combined properties in the segment.

Our reportable operating segment consolidates similar properties.

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

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

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 and nine months ended September 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 September 30, 2024

Residential Other (1)

Real estate rental revenue $ 56,427 $ 4,628 $ 61,055

Real estate expenses 20,820 1,438 22,258

Net operating income $ 35,607 $ 3,190 $ 38,797

Other income (expense):

Property management expenses ( 2,235 )

General and administrative expenses ( 6,354 )

Depreciation and amortization ( 23,474 )

Interest expense ( 9,557 )

Loss on extinguishment of debt ( 147 )

Net loss $ ( 2,970 )

Capital expenditures $ 11,883 $ 55 $ 11,938

Total assets $ 1,728,078 $ 125,081 $ 1,853,159

Three Months Ended September 30, 2023

Residential Other (1)

The following tables present revenues, NOI, capital expenditures and total assets for the three months ended March 31, 2025 and 2024 from our Residential segment as well as Other, and reconcile NOI to net loss as reported (in thousands):

Three Months Ended March 31, 2025

Residential Other Consolidated

Real estate rental revenue $ 57,007 $ 4,486 $ 61,493

1 unchanged sentence

Net operating income $ 36,398 $ 3,101 $ 39,499

Other expense:

Property management expenses ( 2,246 )

General and administrative expenses ( 9,229 )

Transformation costs ( 985 )

Depreciation and amortization ( 23,239 )

Interest expense ( 9,460 )

Real estate impairment ( 41,860 )

Net loss $ ( 4,675 )

1 unchanged sentence

Total assets $ 1,703,880 $ 123,699 $ 1,827,579

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

Nine Months Ended September 30, 2024

Residential Other (1)

Real estate rental revenue $ 166,790 13,881 $ 180,671

Real estate expenses 61,800 4,159 65,959

Net operating income $ 104,990 $ 9,722 $ 114,712

Other income (expense):

Property management expenses ( 6,628 )

General and administrative expenses ( 18,688 )

Depreciation and amortization ( 72,312 )

Interest expense ( 28,435 )

Loss on extinguishment of debt ( 147 )

Other income 1,410

Net loss $ ( 10,088 )

Capital expenditures

$ 33,320 $ 164 $ 33,484

Nine Months Ended September 30, 2023

Residential Other (1)

Three Months Ended March 31, 2024

Residential Other Consolidated

Real estate rental revenue $ 54,871 $ 4,642 $ 59,513

1 unchanged sentence

Net operating income $ 34,513 $ 3,281 $ 37,794

Other income (expense):

Property management expenses ( 2,218 )

General and administrative expenses ( 6,196 )

Transformation costs ( 6,339 )

Depreciation and amortization ( 24,943 )

Interest expense ( 9,494 )

Loss on extinguishment of debt ( 54 )

Real estate impairment ( 41,860 )

Other income 1,410

1 unchanged sentence

Capital expenditures $ 13,565 $ 57 $ 13,622

______________________________

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

Total assets $ 1,751,228 $ 125,311 $ 1,876,539

SHAREHOLDERS' EQUITY

2 unchanged sentences

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 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.

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 $ 350.0 million 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 no t issue common shares under the Equity Distribution Agreement or any prior equity distribution agreements during the 2024 Period or 2023 Period.

We did no t issue common shares under the Equity Distribution Agreement or any prior equity distribution agreements during the 2025 Quarter or 2024 Quarter.

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

The shares sold under this program may either be common shares issued by us or common shares purchased in the open market.

The common shares sold under this program may either be common shares issued by us or common shares purchased in the open market.

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 Period.

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

Nine Months Ended September 30,

Issuance of common shares 28

Weighted average price per share $ 17.64

Net proceeds $ 497

We did not issue common shares under the dividend reinvestment program during the 2025 Quarter and 2024 Quarter.

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