What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-24 compared with 2025-08-06 · 81 added, 53 removed, 310 unchanged (30% of the section changed)

1 unchanged sentence

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing in Item 1 of this report and the more detailed information contained in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 14, 2025.

We refer to the three months ended June 30, 2025 and June 30, 2024 as the “2025 Quarter” and the “2024 Quarter,” respectively, and the six months ended June 30, 2025 and June 30, 2024 as the “2025 Period” and “2024 Period,” respectively.

We refer to the three months ended September 30, 2025 and September 30, 2024 as the “2025 Quarter” and the “2024 Quarter,” respectively, and the nine months ended September 30, 2025 and September 30, 2024 as the “2025 Period” and “2024 Period,” respectively.

Forward-Looking Statements

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the possibility that our shareholders do not approve the Portfolio Sale Transaction and/or Plan of Sale and Liquidation (together, the “Proposed Transactions”) or that other conditions to the closing of the Portfolio Sale Transaction are not satisfied or waived at all or on the anticipated timeline;

the possibility that our shareholders approve one but not both of the Portfolio Sale Transaction and the Plan of Sale and Liquidation;

unanticipated difficulties or expenditures relating to the Proposed Transactions;

changes in the amount and timing of the total liquidating distributions, including as a result of unexpected levels of transaction cost, liquidation costs or unpaid or additional liabilities and obligations;

the inability to close our proposed new debt financing on the terms or timeline or for the amount anticipated fees associated with the repayment of our existing indebtedness;

changes in the amount and timing of the total liquidating distributions, including but not limited to as a result of unexpected levels of transaction costs, unexpected additional capital or financing requirements, delayed or terminated closings, defaults under future sale agreements pursuant to the Plan of Sale and Liquidation, liquidation costs or unpaid or additional liabilities and obligations, including but not limited to tax liabilities;

the inability to close our proposed new debt financing on the terms or timeline or for the amount anticipated, including the anticipated fees associated with the repayment of our existing indebtedness;

the possibility of converting to a liquidating trust or other liquidating entity;

the ability of our board of trustees to terminate the Plan of Sale and Liquidation, whether or not approved by shareholders;

the possibility that we do not reserve adequate funds to cover expenses and liabilities, and the possibility that our creditors, in that instance, could seek repayment from our shareholders up to the amount of the total liquidating distributions;

the response of our residents, tenants and business partners to the announcement of the Proposed Transactions;

potential difficulties in employee retention as a result of announcement of the Proposed Transactions;

potential difficulties in retaining our executive officers and other key personnel as a result of announcement of the Proposed Transactions;

the occurrence of any event, change or other circumstances that could give rise to the termination of the Portfolio Sale Transaction;

the risk that disruptions caused by or relating to the Proposed Transactions will harm our business, including current plans and operations;

the outcome of legal proceedings that may be instituted against us, our trustees and others related to the Proposed Transactions;

the risk that disruptions caused by or relating to the Proposed Transactions will harm our ongoing business, including current plans and operations;

risks relating to the market value of our common shares, including following approval of the Proposed Transactions by our shareholders and any requirements that certain institutional shareholders sell their common shares;

risks relating to the delisting of our common shares from the NYSE;

risks relating to the expense of complying with public company reporting requirements;

risks associated with the limitations set forth in the Purchase Agreement regarding our ability to pursue alternatives to the Portfolio Sale Transaction;

risks associated with third party contracts containing consent and/or other provisions that may be triggered by the Proposed Transactions;

restrictions during the pendency of the Portfolio Sale Transaction that may impact our ability to pursue certain business opportunities or strategic transactions;

the risks associated with ownership of real estate in general and our real estate assets in particular, including, without limitation, the market value of our properties and potential illiquidity of our remaining real estate investments;

risks associated with any change in our basis of accounting;

general risks affecting the real estate industry and local real estate markets, including, without limitation, the market value of our properties and potential illiquidity of our remaining real estate investments;

the economic health of the areas in which our properties are located, particularly with respect to the greater Washington, DC metro and Sunbelt regions;

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risks related to not having adequate insurance to cover potential losses;

changes in the market value of securities, including following approval of the Proposed Transactions by our shareholders;

changes in the market value of securities, including following approval of the Proposed Transactions by our

shareholders;

terrorist attacks or actions and/or cyber-attacks;

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failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs;

the occurrence of any event, change or other circumstances that could give rise to the termination of one or both of the Proposed Transactions;

the risks associated with ownership of real estate in general and our real estate assets in particular;

general economic and market developments and conditions;

volatility and uncertainty in the financial markets;

and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2024 Form 10-K filed on February 14, 2025 and this Quarterly Report on Form 10-Q.

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Our revenues are derived primarily from the ownership and operation of income producing property.

As of June 30, 2025, we owned approximately 9,400 residential apartment homes in the Washington, DC and Atlanta metro regions.

As of September 30, 2025, we owned approximately 9,400 residential apartment homes in the Washington, DC and Atlanta metro regions.

We also own and operate approximately 300,000 square feet of commercial space in the Washington, DC metro region.

Proposed Purchase and Sale Agreement and Plan of Sale and Liquidation

Subsequent to quarter end, we entered into a Purchase Agreement dated August 1, 2025 (the “Purchase Agreement”), by and among Elme Communities, WashREIT OP LLC, a Delaware limited liability company and wholly owned subsidiary of Elme Communities (“Seller”), Echo Sub LLC, a Delaware limited liability company and wholly owned subsidiary of Seller (“Echo Sub” and together with Elme Communities and Seller, the “Company Parties”), CEVF VI Capital Holdings, LLC, a Delaware limited liability company (“Buyer”), and CEVF VI Co-Invest I Venture, LLC, a Delaware limited liability company (“Buyer Parent” and together with Buyer, the “Buyer Parties”).

On August 1, 2025, we entered into a Purchase Agreement (the “Purchase Agreement”), by and among Elme Communities, WashREIT OP LLC, a Delaware limited liability company and wholly owned subsidiary of Elme Communities (“Seller”), Echo Sub LLC, a Delaware limited liability company and wholly owned subsidiary of Seller (“Echo Sub” and together with Elme Communities and Seller, the “Company Parties”), CEVF VI Capital Holdings, LLC, a Delaware limited liability company (“Buyer”), and CEVF VI Co-Invest I Venture, LLC, a Delaware limited liability company (“Buyer Parent” and together with Buyer, the “Buyer Parties”).

Pursuant to and subject to the terms and conditions of the Purchase Agreement, Buyer has agreed to purchase all of the limited liability company interests of Echo Sub in exchange for an aggregate purchase price of $1,605,560,100, subject to customary adjustments (the “Portfolio Sale Transaction”).

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Operating Results

Net loss, NOI and NAREIT FFO for the three months ended June 30, 2025 and 2024 were as follows (in thousands):

Three Months Ended June 30,

Net loss, NOI and NAREIT FFO for the three months ended September 30, 2025 and 2024 were as follows (in thousands):

Three Months Ended September 30,

2025 2024 $ Change % Change

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(2) See page 34 of the MD&A for a reconciliation of NAREIT FFO to net income.

The increase in net loss is primarily due to higher general and administrative expenses ($1.6 million) and higher interest expense ($0.1 million), partially offset by lower depreciation and amortization expenses ($0.3 million) and higher NOI ($1.3 million).

The increase in NOI is primarily due to higher NOI from same-store properties ($1.6 million), partially offset by lower NOI at Watergate 600 ($0.2 million).

The higher same-store NOI was primarily due to higher rental rates.

Residential same-store average occupancy for our portfolio increased to 94.7% as of June 30, 2025 from 94.5% as of June 30, 2024.

The decrease in NAREIT FFO is primarily due to higher general and administrative expenses ($1.6 million) and higher property management expenses ($0.1 million), partially offset by higher NOI ($1.3 million).

The increase in net loss is primarily due to the real estate impairment during the 2025 Quarter ($111.7 million), higher general and administrative expenses ($7.7 million), and lower NOI ($0.8 million).

The decrease in NOI is primarily due to lower NOI from same-store properties ($0.6 million) and Watergate 600 ($0.2 million).

Residential same-store average occupancy for our portfolio decreased to 94.4% for three months ended September 30, 2025 from 95.2% for the three months ended September 30, 2024.

The decrease in NAREIT FFO is primarily due to higher general and administrative expenses ($7.7 million), higher other real estate impairment ($1.7 million), and lower NOI ($0.8 million).

Investment Activity

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Financing Activity

As of August 1, 2025, our Amended and Restated Revolving Credit Facility has a borrowing capacity of $306.0 million.

As of June 30, 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 4.45% and the facility fee was 0.20%.

As of October 21, 2025, our Amended and Restated Revolving Credit Facility has a borrowing capacity of $300.0 million.

As of September 30, 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 4.24% and the facility fee was 0.20%.

Capital Requirements

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All amounts are in thousands, except percentage amounts.

Three Months Ended June 30,

Three Months Ended September 30,

2025 2024 $ Change % Change

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Real estate depreciation and amortization 23,771 23,474 297 1.3 %

Real estate impairment 111,719 — 111,719 100.0 %

Interest expense 9,661 9,557 104 1.1 %

Loss on extinguishment of debt, net — 147 (147) 100.0 %

Total net operating income (NOI) $ 37,964 $ 38,797 $ (833) (2.1) %

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Residential revenue is comprised of (a) rent from operating leases of multifamily residential apartments with terms of approximately one year or less, recognized on a straight-line basis, (b) revenue from the recovery of operating expenses from our residents, (c) credit losses on lease related receivables, (d) revenue from leases of retail space at our apartment communities and (e) parking and other tenant charges.

Residential revenue from same-store residential properties increased $2.2 million, or 3.9%, to $57.7 million for the 2025 Quarter, compared to $55.5 million for the 2024 Quarter, primarily due to higher rental income ($0.8 million), lower vacancy loss ($0.6 million), higher recoveries ($0.3 million), higher other rental and fee income ($0.3 million) and higher ancillary income ($0.3 million).

Residential revenue from same-store residential properties increased $1.3 million, or 2.2%, to $57.7 million for the 2025 Quarter, compared to $56.4 million for the 2024 Quarter, primarily due to higher rental income ($0.7 million), higher recoveries ($0.3 million) and lower credit losses ($0.3 million).

Average occupancy for residential properties for the 2025 Quarter and 2024 Quarter was as follows:

June 30, 2025 June 30, 2024 % Change

September 30, 2025 September 30, 2024 % Change

Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total

94.4 % NA 94.4 % 95.2 % NA 95.2 % (0.8) % NA (0.8) %

The increase in same-store average occupancy was primarily due to higher average occupancy at Elme Marietta, The Ashby at McLean and Park Adams, partially offset by lower average occupancy at Elme Conyers, Elme Bethesda and Cascade at Landmark.

The decrease in same-store average occupancy was primarily due to lower average occupancy at The Kenmore, Yale West, Elme Herndon, Clayborne Apartments, and The Paramount, partially offset by higher average occupancy at Elme Marietta and Elme Eagles Landing.

Residential Expenses

Residential expenses as a percentage of residential revenue for the 2025 Quarter and the 2024 Quarter were 39.4% and 36.9%, respectively.

Residential expenses from same-store residential properties increased $0.6 million, or 3.1%, to $21.2 million for the 2025 Quarter, compared to $20.6 million for the 2024 Quarter, primarily due to higher repairs and maintenance ($0.2 million), higher utilities ($0.2 million), higher personnel compensation ($0.1 million) and higher contract services ($0.1 million) expenses.

Residential expenses from same-store residential properties increased $1.9 million, or 9.1%, to $22.6 million for the 2025 Quarter, compared to $20.8 million for the 2024 Quarter, primarily due to higher repairs and maintenance ($0.7 million), higher turnover ($0.4 million), higher personnel compensation ($0.4 million), and higher contract services ($0.3 million) expenses.

Other NOI decreased ($0.2 million) due to lower rental revenue at Watergate 600.

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General and administrative expenses :

Increase of $1.6 million primarily due to higher professional fees ($0.8 million) in connection with activities related to the board of trustee’s ongoing strategic alternatives review and higher incentive compensation ($1.0 million), partially offset by lower marketing expenses ($0.1 million) and higher internal management fee offset ($0.1 million).

Increase of $7.7 million primarily due to higher professional fees ($6.8 million) in connection with activities related to the Proposed Transactions and prepaid equity offering write-off ($0.9 million).

Real estate depreciation and amortization :

Decrease of $0.3 million primarily due to in-place lease amortization at Elme Druid Hills ($0.3 million) in the 2024 Quarter.

Increase of $0.3 million primarily due to expensing previously capitalized costs during the 2025 Quarter.

Interest expense :

Interest expense by debt type for the three months ended June 30, 2025 and 2024 was as follows (in thousands):

Three Months Ended June 30,

Interest expense by debt type for the three months ended September 30, 2025 and 2024 was as follows (in thousands):

Three Months Ended September 30,

Debt Type 2025 2024 $ Change % Change

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Decrease primarily due to a lower weighted average interest rate of 5.4% in the 2025 Quarter, as compared to a weighted average interest rate of 6.3% in the 2024 Quarter, partially offset by a higher weighted average borrowings of $186.0 million in the 2025 Quarter, as compared to weighted average borrowings of $168.8 million in the 2024 Quarter.

Real estate impairment :

We incurred a real estate impairment charge of $111.7 million during the 2025 Quarter.

Refer to note 3 to the consolidated financial statements.

Loss on Extinguishment of Debt:

Loss during the 2024 Quarter was due to a write-off of capitalized debt origination costs in association with the execution of our Amended and Restated Revolving Credit Facility in July 2024.

2025 Period Compared to 2024 Period

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All amounts are in thousands, except percentage amounts.

Six Months Ended June 30,

Nine Months Ended September 30,

2025 2024 $ Change % Change

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Real estate depreciation and amortization 70,570 72,312 (1,742) (2.4) %

Real estate impairment 111,719 — 111,719 (100.0) %

Interest expense 28,619 28,435 184 0.6 %

Loss on extinguishment of debt, net — 147 (147) (100.0) %

Other income — (1,410) 1,410 (100.0) %

18 unchanged sentences

Real estate rental revenue from our apartment communities is comprised of (a) rent from operating leases of multifamily residential apartments with terms of approximately one year or less, recognized on a straight-line basis, (b) revenue from the recovery of operating expenses from our residents, (c) credit losses on lease related receivables, (d) revenue from leases of retail space at our apartment communities and (e) parking and other tenant charges.

Real estate rental revenue from same-store residential properties increased $4.3 million, or 3.9%, to $114.7 million for the 2025 Period, compared to $110.4 million for the 2024 Period, primarily due to higher rental income ($1.7 million), lower vacancy loss ($1.0 million), higher ancillary income ($0.5 million), lower credit losses ($0.5 million), higher recoveries ($0.3 million) and higher other rental and fee income ($0.3 million).

Real estate rental revenue from same-store residential properties increased $5.6 million, or 3.3%, to $172.4 million for the 2025 Period, compared to $166.8 million for the 2024 Period, primarily due to higher rental income ($2.5 million), lower vacancy loss ($0.9 million), lower credit losses ($0.8 million), higher ancillary income ($0.7 million), and higher recoveries ($0.6 million).

Average occupancy for residential properties for the 2025 Period and 2024 Period was as follows:

June 30, 2025 June 30, 2024 % Change

September 30, 2025 September 30, 2024 % Change

Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total

94.6 % NA 94.6 % 94.6 % NA 94.6 % — % NA — %

The increase in same-store average occupancy was primarily due to higher average occupancy at The Ashby at McLean, Elme Cumberland, Elme Eagles Landing, Elme Druid Hills, Elme Germantown and Elme Marietta, partially offset by lower average occupancy at Elme Conyers, Clayborne Apartments, Elme Bethesda and Cascade at Landmark.

Same-store average occupancy remained consistent at 94.6% in the 2025 Period and the 2024 Period.

Higher average occupancy at The Ashby at McLean, Elme Cumberland, Elme Eagles Landing and Elme Marietta was partially offset by lower average occupancy at Elme Conyers, The Kenmore and Yale West.

Real Estate Expenses

Residential real estate expenses as a percentage of residential revenue for the 2025 Period and 2024 Period were 37.5% and 37.1%, respectively.

Real estate expenses from same-store residential properties increased by $0.9 million, or 2.2%, to $41.7 million for the 2025 Period, compared to $40.9 million for the 2024 Period, primarily due to higher repairs and maintenance ($0.4 million), higher utilities ($0.3 million), higher administrative ($0.3 million), higher contract services ($0.2 million) and higher insurance ($0.1 million) expenses.

Real estate expenses from same-store residential properties increased by $2.8 million, or 4.5%, to $64.4 million for the 2025 Period, compared to $61.6 million for the 2024 Period, primarily due to higher repairs and maintenance ($1.2 million), higher personnel compensation ($0.5 million), higher administrative ($0.5 million), higher contract services ($0.4 million), higher utilities ($0.3 million), higher turnover ($0.3 million) and higher insurance ($0.2 million) expenses.

The increase is partially offset by lower real estate taxes ($0.6 million).

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General and administrative expenses :

Increase of $4.6 million primarily due to higher professional fees ($3.2 million) in connection with the cooperation agreement entered into on March 19, 2025, and activities related to the board of trustee’s ongoing strategic alternatives review and higher incentive compensation ($1.5 million), partially offset by higher internal management fee offset ($0.2 million).

Increase of $12.3 million primarily due to higher professional fees ($10.0 million) in connection with activities related to the Proposed Transactions, higher incentive compensation ($1.8 million), and prepaid equity offering write-off ($0.9 million), partially offset by higher internal management fee offset ($0.2 million).

Real estate depreciation and amortization :

Decrease of $2.0 million primarily due to in-place lease amortization at Elme Druid Hills ($2.1 million) in the 2024 Period.

Decrease of $1.7 million primarily due to in-place lease amortization at Elme Druid Hills ($2.1 million) in the 2024 Period and lower other amortization ($0.2 million), partially offset by higher depreciation ($0.5 million).

Interest expense :

Interest expense by debt type for the six months ended June 30, 2025 and 2024 was as follows (in thousands):

Six Months Ended June 30,

Interest expense by debt type for the nine months ended September 30, 2025 and 2024 was as follows (in thousands):

Nine Months Ended September 30,

Debt Type 2025 2024 $ Change % Change

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Other income during the 2024 Period consists of additional payments received with respect to easements previously conveyed at The Wellington and Takoma Park, a previously owned retail property.

Real estate impairment :

We incurred a real estate impairment charge of $111.7 million during the 2025 Period.

Refer to note 3 to the consolidated financial statements.

Loss on Extinguishment of Debt:

Loss during the 2024 Period was due to a write-off of capitalized debt origination costs in association with the execution of our Amended and Restated Revolving Credit Facility in July 2024.

Liquidity and Capital Resources

Subsequent to quarter end, our board of trustees approved the Plan of Sale and Liquidation and the Portfolio Sale Transaction, and, on August 1, 2025, we entered into the Purchase Agreement.

If the Portfolio Sale Transaction and Plan of Sale and Liquidation are approved by our shareholders, we expect it will materially impact our short and long-term capital needs and our plan to meet those needs.

As of June 30, 2025, whether the Proposed Transactions are approved by our shareholders, and the Portfolio Sale Transaction is consummated, we believe we will have adequate liquidity over the next twelve months to operate our business and to meet our cash requirements, including meeting our debt obligations, capital and contractual obligations, as well as the payment of dividends.

Our board of trustees approved the Proposed Transactions , and, on August 1, 2025, we entered into the Purchase Agreement.

If the Proposed Transactions are approved by our shareholders, we expect it will materially impact our short and long-term capital needs and our plan to meet those needs.

As of September 30, 2025, whether the Proposed Transactions are approved by our shareholders, and the Portfolio Sale Transaction is consummated, we believe we will have adequate liquidity over the next twelve months to operate our business and to meet our cash requirements, including meeting our debt obligations, capital and contractual obligations, as well as the payment of dividends.

If the Proposed Transactions are not approved by our shareholders, we believe we would have adequate liquidity beyond 2025 and would have no debt maturities until 2026 and only $361.0 million of scheduled debt maturities prior to 2029, based on current amounts outstanding under our Amended and Restated Revolving Credit Facility.

As of August 1, 2025, we had cash and cash equivalents totaling $6.2 million and a borrowing capacity of $306.0 million on our Amended and Restated Revolving Credit Facility, resulting in a total liquidity position of $312.2 million.

As of October 21, 2025, we had cash and cash equivalents totaling $2.2 million and a borrowing capacity of $300.0 million on our Amended and Restated Revolving Credit Facility, resulting in a total liquidity position of $302.2 million.

Concurrently with the consummation of the Portfolio Sale Transaction, we intend to repay all of the amounts outstanding under our Amended and Restated Revolving Credit Facility, our 2023 Term Loan, our 30-Year Unsecured Notes due 2028 and our 10-year notes due 2030, and to enter into the Loan to provide liquidity while we complete the sale of our remaining assets, which we are aiming to complete in the next 12 months, and our winddown (subject to shareholder approval of the Plan of Sale and Liquidation).

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We currently believe that we will generate sufficient cash flow from operations and potential property sales, including the Portfolio Sale Transaction, and have access to the capital resources necessary to fund our requirements for the remainder of 2025 .

However, as a result of the uncertainty of the general market conditions in the greater Washington, DC metro and Sunbelt regions, economic conditions affecting the ability to attract and retain residents and tenants or achieve anticipated rental rates, declines in our share price, unfavorable changes in the supply of competing properties, the effects of our announced Portfolio Sale Transaction and Plan of Sale and Liquidation, if the Loan we expect to receive if we consummate the Portfolio Sale Transaction is not available on the amounts anticipated or our properties not performing as expected, we may not generate sufficient cash flow from operations and property sales or otherwise have access to capital on favorable terms, or at all.

However, as a result of the uncertainty of the general market conditions in the greater Washington, DC metro and Sunbelt regions, economic conditions affecting the ability to attract and retain residents and tenants or achieve anticipated rental rates, declines in our share price, unfavorable changes in the supply of competing properties, the effects of our announced Portfolio Sale Transaction and Plan of Sale and Liquidation, if the Loan we expect to receive if we consummate the Portfolio Sale Transaction is not available on the timing or for the amounts anticipated or our properties not performing as expected, we may not generate sufficient cash flow from operations and property sales or otherwise have access to capital on favorable terms, or at all.

If we are unable to obtain capital from other sources, we may need to alter capital spending to be materially different than what is stated above.

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We may either hedge our variable rate debt to give it an effective fixed interest rate or hedge fixed rate debt to give it an effective variable interest rate.

As of June 30, 2025, our future debt principal payments are scheduled as follows (in thousands):

As of September 30, 2025, our future debt principal payments are scheduled as follows (in thousands):

Future Maturities of Debt

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(2) During the third quarter of 2024, we executed the Amended Credit Agreement that provides for a revolving credit facility of $500.0 million that matures in July 2028, with two six-month extension options.

As of June 30, 2025, the weighted average maturity for our debt is 3.8 years.

As of September 30, 2025, the weighted average maturity for our debt is 3.6 years.

If principal amounts due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow may be insufficient to repay all maturing debt.

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In addition, our ability to draw on our Amended and Restated Revolving Credit Facility or incur other unsecured debt in the future could be restricted by the debt covenants.

As of June 30, 2025, we were in compliance with the covenants related to our Amended Credit Agreement, 2023 Term Loan, and unsecured notes.

As of September 30, 2025, we were in compliance with the covenants related to our Amended Credit Agreement, 2023 Term Loan, and unsecured notes.

Common Equity

We have authorized for issuance 150.0 million common shares, of which 88.2 million shares were outstanding at June 30, 2025.

We have authorized for issuance 150.0 million common shares, of which 88.2 million shares were outstanding at September 30, 2025.

On February 20, 2024, we entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Wells Fargo Securities, LLC, BNY Mellon Capital Markets, LLC, Citigroup Global Markets Inc., Goldman Sachs & Co.

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We intend to use the proceeds of the sale of any newly issued common shares issued under this program, if any, for general corporate purposes.

In September 2025, the Company suspended its dividend reinvestment program.

During the suspension period, dividend payments are not automatically reinvested in additional shares of our common shares of beneficial interest and participants in the dividend reinvestment program are not able to purchase shares of our common shares of beneficial interest through optional cash investments under the dividend reinvestment program.

We did not issue common shares under the dividend reinvestment program during the 2025 Period or 2024 Period.

1 unchanged sentence

Elme Communities’ board of trustees can, at its discretion, authorize the issuance of up to 10.0 million preferred shares.

As of June 30, 2025, no preferred shares were issued and outstanding.

As of September 30, 2025, no preferred shares were issued and outstanding.

Historical Cash Flows

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Consolidated cash flow information is summarized as follows (in thousands):

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

2025 2024 $ %

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Net cash used in investing activities decreased primarily due to lower expenditure on capital improvements during the 2025 Period, partially offset by the cash provided by the land easements in the 2024 Period.

Net cash used in financing activities increased primarily due to payment of financing costs during the 2025 Period.

Net cash used in financing activities decreased primarily due to lower payment of financing costs during the 2025 Period.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of June 30, 2025 that are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

We have no off-balance sheet arrangements as of September 30, 2025 that are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Funds From Operations

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These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently.

The following table provides the calculation of our NAREIT FFO and a reconciliation of net loss to NAREIT FFO for the three and six months ended June 30, 2025 and 2024 (in thousands):

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

The following table provides the calculation of our NAREIT FFO and a reconciliation of net loss to NAREIT FFO for the three and nine months ended September 30, 2025 and 2024 (in thousands):

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

2025 2024 2025 2024

1 unchanged sentence

Depreciation and amortization 23,771 23,474 70,570 72,312

Real estate impairment - depreciable assets 109,981 — 109,981 —

NAREIT FFO $ 10,238 $ 20,504 $ 48,796 $ 62,224

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The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

There were no changes made by management to the critical accounting policies in the three and six months ended June 30, 2025.

There were no changes made by management to the critical accounting policies in the three and nine months ended September 30, 2025.

We discuss the most critical estimates in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 14, 2025.

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 2. Management’s Discussion and Analysis