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Item 1. Financial Statements

2026-05-11 compared with 2025-10-24 · 221 added, 320 removed, 140 unchanged (79% of the section changed)

FINANCIAL STATEMENTS

The information furnished in the accompanying unaudited Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Equity and Consolidated Statements of Cash Flows reflects all adjustments, consisting of normal recurring items, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods.

The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes for the three years ended December 31, 2024 included in our 2024 Annual Report on Form 10-K filed on February 14, 2025.

The information furnished in the accompanying unaudited Consolidated Statements of Net Assets (Liquidation Basis), Condensed Consolidated Statement of Changes in Net Assets (Liquidation Basis), Condensed Consolidated Statement of Operations (Going Concern Basis), Condensed Consolidated Statement of Comprehensive Income (Loss) (Going Concern Basis), Consolidated Statement of Equity (Going Concern Basis) and Consolidated Statement of Cash Flows (Going Concern Basis) reflects all adjustments, consisting of normal recurring items, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods.

The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes for the three years ended December 31, 2025 included in our 2025 Annual Report on Form 10-K.

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA )

September 30, 2025 December 31, 2024

Land $ 358,359 $ 383,808

CONSOLIDATED STATEMENTS OF NET ASSETS

(LIQUIDATION BASIS)

(IN THOUSANDS)

March 31, 2026 December 31, 2025

Income producing property $ 544,250 $ 776,425

2,249,831 2,383,333

Accumulated depreciation and amortization ( 638,522 ) ( 618,299 )

Net income producing property 1,611,309 1,765,034

Properties under development or held for future development 30,980 30,980

Total real estate held for investment, net 1,642,289 1,796,014

Cash and cash equivalents 7,088 6,144

Restricted cash 2,293 2,465

Cash, cash equivalents and restricted cash 39,273 1,331,882

Rents and other receivables 1,708 5,974

Prepaid expenses and other assets 21,876 28,628

Total assets $ 585,231 $ 2,114,281

Notes payable, net $ 523,329 $ 522,953

Line of credit 186,000 176,000

Accounts payable and other liabilities 41,656 36,293

Dividend payable 15,943 15,898

Advance rents 4,761 6,257

Tenant security deposits 5,991 6,283

Liabilities for estimated costs in excess of estimated receipts during liquidation 37,661 43,599

Debt payable 337,492 520,000

Accounts payable and accrued expenses 6,169 8,044

Liquidating distribution payable — 1,303,723

Total liabilities $ 381,322 $ 1,875,366

Shareholders’ equity

Preferred shares, $ 0.01 par value;

10,000 shares authorized;

no shares issued or outstanding

Shares of beneficial interest, $ 0.01 par value;

150,000 shares authorized;

88,161 and 88,029 shares issued and outstanding, as of September 30, 2025 and December 31, 2024, respectively

Additional paid in capital 1,744,621 1,740,078

Distributions in excess of net income ( 825,659 ) ( 646,095 )

Accumulated other comprehensive loss ( 10,939 ) ( 13,066 )

Total shareholders’ equity 908,905 1,081,797

Noncontrolling interests in subsidiaries 274 281

Total equity 909,179 1,082,078

Total liabilities and equity $ 1,686,859 $ 1,845,762

Net assets in liquidation $ 203,909 $ 238,915

See accompanying notes to the consolidated financial statements.

ELME COMMUNITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

(LIQUIDATION BASIS)

(IN THOUSANDS)

Three Months Ended March 31, 2026

Net assets in liquidation, beginning of period $ 238,915

Changes in net assets in liquidation

Liquidation value of income producing property ( 33,175 )

Remeasurement of assets and liabilities, net ( 1,831 )

Net decrease in liquidation value ( 35,006 )

Changes in net assets in liquidation ( 35,006 )

Net assets in liquidation, end of period $ 203,909

See accompanying notes to the consolidated financial statements.

ELME COMMUNITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(GOING CONCERN BASIS)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

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

2025 2024 2025 2024

Three Months Ended March 31, 2025

Real estate rental revenue $ 61,493

4 unchanged sentences

Depreciation and amortization 23,239

Real estate impairment 111,719 — 111,719 —

175,956 54,321 288,831 163,587

Real estate operating income 4,785

Other income (expense)

Other expense

Interest expense ( 9,460 )

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

Other income — — — 1,410

( 9,661 ) ( 9,704 ) ( 28,619 ) ( 27,172 )

Net loss $ ( 4,675 )

5 unchanged sentences

ELME COMMUNITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(GOING CONCERN BASIS)

(IN THOUSANDS)

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

2025 2024 2025 2024

Three Months Ended March 31, 2025

Net loss $ ( 4,675 )

Other comprehensive income:

Unrealized gain (loss) on interest rate hedges 175 ( 2,181 ) 598 ( 2,894 )

Unrealized gain on interest rate hedges 89

Reclassification of unrealized loss on interest rate derivatives to earnings 510

2 unchanged sentences

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

CONSOLIDATED STATEMENT OF EQUITY

(GOING CONCERN BASIS)

(IN THOUSANDS)

9 unchanged sentences

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

Balance, September 30, 2025 88,161 $ 882 $ 1,744,621 $ ( 825,659 ) $ ( 10,939 ) $ 908,905 $ 274 $ 909,179

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, December 31, 2023 87,867 $ 879 $ 1,735,530 $ ( 569,391 ) $ ( 12,958 ) $ 1,154,060 $ 290 $ 1,154,350

Net loss — — — ( 10,088 ) — ( 10,088 ) — ( 10,088 )

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

Amortization of swap settlements — — — — 1,529 1,529 — 1,529

Distributions to noncontrolling interests — — — — — — ( 7 ) ( 7 )

Dividends ($ 0.54 per common share)

— — — ( 47,707 ) — ( 47,707 ) — ( 47,707 )

Share grants, net of forfeitures and tax withholdings 143 1 3,789 — — 3,790 — 3,790

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

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, 2025 88,162 $ 882 $ 1,743,161 $ ( 686,226 ) $ ( 11,624 ) $ 1,046,193 $ 277 $ 1,046,470

Net loss — — — ( 123,514 ) — ( 123,514 ) — ( 123,514 )

Unrealized gain on interest rate hedges — — — — 175 175 — 175

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

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

Dividends ($ 0.18 per common share)

— — — ( 15,919 ) — ( 15,919 ) — ( 15,919 )

Share grants, net of share grant amortization and forfeitures ( 1 ) — 1,460 — — 1,460 — 1,460

Balance, September 30, 2025 88,161 $ 882 $ 1,744,621 $ ( 825,659 ) $ ( 10,939 ) $ 908,905 $ 274 $ 909,179

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 forfeitures and tax withholdings ( 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

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

See accompanying notes to the consolidated financial statements.

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENT OF CASH FLOWS

(GOING CONCERN BASIS)

(IN THOUSANDS)

Nine Months Ended September 30,

Three Months Ended March 31, 2025

Cash flows from operating activities

3 unchanged sentences

Credit losses on lease related receivables 983

Real estate impairment 111,719 —

Share-based compensation expense 1,372

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

Loss on extinguishment of debt — 147

Gain on land easements — ( 1,410 )

Changes in operating other assets ( 573 )

4 unchanged sentences

Non-real estate capital improvements ( 10 )

Payments received for land easements — 3,862

Net cash used in investing activities ( 5,698 )

1 unchanged sentence

Line of credit borrowings, net

10,000 11,000

Dividends paid ( 15,898 )

3 unchanged sentences

Net cash used in financing activities ( 10,134 )

Net increase (decrease) in cash, cash equivalents and restricted cash 772 ( 1,340 )

Net increase in cash, cash equivalents and restricted cash 343

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025

March 31, 2026

NATURE OF BUSINESS

Elme Communities, a Maryland real estate investment trust (the “Company”), is a self-administered equity real estate investment trust, and successor to a trust organized in 1960.

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, 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 the “2024 Period,” respectively.

Elme Communities, a Maryland real estate investment trust, formerly known as Washington Real Estate Investment Trust (“Elme” or the “Company”), is a self-administered equity real estate investment trust (“REIT”) within the meaning of Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”) and successor to a trust organized in 1960.

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

As of December 31, 2025, we owned nine apartment communities, six in the Washington, DC metro region and three in the Atlanta metro region, and one office property.

As of March 31, 2026, we owned six apartment communities in the Washington, DC metro region.

As of May 11, 2026, we own five apartment communities in the Washington, DC metro region.

Within these notes to the financial statements, we refer to the three months ended March 31, 2026 and March 31, 2025 as the “2026 Quarter” and the “2025 Quarter,” respectively.

Plan of Liquidation

On February 13, 2025, the Company announced that its Board of Trustees (the “Board”) had initiated a formal review to evaluate strategic alternatives.

On August 4, 2025, the Company announced that the Board had completed its review, that Elme had entered into a Purchase and Sale Agreement, dated as of August 1, 2025, for the sale of 19 multifamily properties from Elme for approximately $ 1.6 billion in cash, subject to certain adjustments and prorations (the “Portfolio Sale Transaction”), and that the Board had also approved a plan of sale and liquidation (the “Plan of Sale and Liquidation”), which contemplates the sale or disposition of all the Company’s assets, the wind-down of the Company’s business and affairs and the termination of the Company’s existence by voluntary dissolution.

The Plan of Sale and Liquidation includes a plan of liquidation that provides for the Company’s complete liquidation and dissolution in accordance with Section 331, Section 336 and Section 346(a) of the Code.

On October 30, 2025, our shareholders approved the Portfolio Sale Transaction and the Plan of Sale and Liquidation, and on November 12, 2025, Elme completed the Portfolio Sale Transaction.

Also on November 12, 2025, certain indirect subsidiaries of the Company, as borrowers (collectively, the “Borrowers”), and Goldman Sachs Bank USA, as lender (the “Lender”), entered into that certain Loan Agreement (the “Loan Agreement”) pursuant to which the Lender has made a senior secured term loan of $ 520.0 million (the “Secured Term Loan”) to the Borrowers.

Pursuant to the Loan Agreement, the Secured Term Loan was secured by first priority mortgages and security interests on all ten properties that remained under the Company following the closing of the Portfolio Sale Transaction (which are directly owned by the Borrowers) and included:

Riverside Apartments, Elme Bethesda, Elme Germantown, Elme Watkins Mill, 3801 Connecticut Avenue, The Kenmore, Elme Conyers, Elme Marietta, Elme Sandy Springs, and Watergate 600 (the “Remaining Company Properties” and “Loan Collateral”).

In addition, the Secured Term Loan was secured by pledges of all equity interests in the Borrowers, along with all other personal property of the Borrowers.

During the 2026 Quarter, we completed the sale of four of the Remaining Company Properties, Elme Sandy Springs, Elme Marietta, Elme Conyers and Watergate 600, comprising approximately 1,000 residential apartment homes and 300,000 square feet of commercial space, for aggregate gross proceeds of approximately $ 199.0 million.

For each of these sales, a portion of the net proceeds was used to repay a portion of the Secured Term Loan, and those sold properties were released from the mortgages securing the Secured Term Loan.

In addition, during the 2026 Quarter, we entered into separate purchase and sale agreements for the sales of Elme Watkins Mill and Elme Germantown.

In May 2026, we completed the sale of Elme Germantown, comprising 218 residential apartments, for aggregate gross proceeds of approximately $ 53.7 million.

A portion of the net proceeds from the sale of Elme Germantown was used to repay a portion of the Secured Term Loan, and Elme Germantown was released from the mortgage securing the Secured Term Loan.

The sale of Elme Watkins Mill, which is no longer subject to an ongoing inspection period, is expected to close later in the second quarter of 2026.

In May 2026, we also entered into two separate purchase and sale agreements, which are no longer subject to ongoing inspection periods, pursuant to which we expect to sell The Kenmore and 3801 Connecticut Avenue, and a purchase and sale agreement, which is subject to an ongoing inspection period, pursuant to which we expect to sell Riverside Apartments.

The aggregate gross proceeds under the four purchase and sale agreements relating to Elme Watkins Mill, The Kenmore, 3801 Connecticut Avenue and Riverside Apartments is approximately $ 431.3 million, subject to certain adjustments and prorations.

The closings of these transactions are expected to occur later in the second quarter or early in the third quarter of 2026, subject to satisfaction of customary closing conditions, including requirements related to the Tenant

Opportunity to Purchase Act (“TOPA”) for the two DC assets and, for Riverside Apartments, the satisfactory completion of the inspection period.

The marketing and sale process with respect to the last Remaining Company Property, Elme Bethesda, remains ongoing.

Elme continues to target completion of the sale of all Remaining Company Properties, including Elme Bethesda, by mid-year 2026.

Because the sales of our remaining properties are subject to, as applicable, negotiation of purchase and sale agreement terms and conditions, satisfactory completion of inspection periods and satisfaction of closing conditions, the exact timing of completing the sales of the unsold Remaining Company Properties cannot be determined at this time and no assurance can be given as to how long it will take to complete the sale of any or all of its unsold Remaining Company Properties.

In accordance with the Plan of Sale and Liquidation, our objectives are to pursue an orderly liquidation of our Company by selling or otherwise disposing of our remaining assets, paying or otherwise settling our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, when appropriate, and in the Board’s discretion, distributing the net proceeds from liquidation to our shareholders, subject to the creation of necessary reserves for, and the payment or other satisfaction of, the Company’s expenses and other liabilities and obligations, and winding up our operations and dissolving our Company.

We do not intend to continue or to engage in the conduct of a trade or business, except as necessary for the orderly liquidation of our assets.

Elme is not required to obtain any further shareholder approval with respect to its liquidation and dissolution.

Under the Plan of Sale and Liquidation, the Board may modify, amend or terminate the Plan of Sale and Liquidation (and authorize us to seek to dispose of all our assets through a merger, business combination or similar transaction) without approval by the shareholders if it determines that such action would be advisable and in the best interests of Elme.

Elme has no present plans or intentions to modify, amend or abandon the Plan of Sale and Liquidation.

As a result of the approval of the Plan of Sale and Liquidation by our shareholders in October 2025, we adopted the liquidation basis of accounting on November 1, 2025, as described further in Note 3, “Summary of Significant Accounting Policies And Basis of Presentations.”

Initial Liquidating Distribution

In accordance with the Plan of Sale and Liquidation, following completion of the Portfolio Sale Transaction in November 2025, the Board approved a special liquidating distribution of $ 14.67 per common share of the Company’s shares of beneficial interest, par value $ 0.01 per share (“common shares”), to our shareholders of record as of the close of business on December 22, 2025.

The special liquidating distribution was paid on January 7, 2026.

Federal Income Taxes

We believe that we qualify as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), and intend to continue to qualify as such.

To maintain our status as a REIT, we are, among other things, required to distribute 90% of our REIT taxable income (determined before the deduction for dividends paid and excluding net capital gains to our shareholders) on an annual basis.

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

We believe that we qualify as a REIT under Sections 856-860 of the Code.

We expect to remain qualified as a REIT until the end of our final REIT tax year in accordance with the Plan of Sale and Liquidation, which we anticipate, but cannot be certain, will occur after most of the remaining assets have been sold.

To maintain our status as a REIT, we are, among other things, required to distribute 90% of our REIT taxable income (which is generally our ordinary taxable income, with certain modifications), excluding any net capital gains and any deductions for dividends paid to our shareholders on an annual basis.

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

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

As of both September 30, 2025 and December 31, 2024, our TRS had a deferred tax asset of $ 1.4 million that was fully reserved.

Proposed Portfolio Sale Transaction and Plan of Sale and Liquidation

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

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, which at the consummation of the transactions will indirectly own 19 of the Company’s multifamily properties, in exchange for an aggregate purchase price of $ 1.6 billion, subject to customary adjustments (the “Portfolio Sale Transaction”).

In connection with approval of the Purchase Agreement, the board of trustees approved a Plan of Sale and Liquidation (“Plan of Sale and Liquidation”).

Consummation of the Portfolio Sale Transaction and effectiveness of the Plan of Sale and Liquidation are subject to approval by the affirmative vote of the holders of the Company’s shares of beneficial interests entitled to cast a majority of all the votes entitled to be cast on the matter.

The Portfolio Sale Transaction is also subject to other customary closing conditions.

The Portfolio Sale Transaction and the Plan of Sale and Liquidation are referred to herein as the “Proposed Transactions”.

Commitment Letter

In connection with entering into the Purchase Agreement and approval of the Plan of Sale and Liquidation by the board of trustees, the Company obtained a commitment to provide debt financing in the original principal amount of $ 520 million (or $ 565 million if one of the 19 properties is not included in the closing of the Portfolio Sale Transaction) (the “Loan”), which will be secured by substantially all of the Company’s real estate assets and subsidiary equity interests that remain after the closing under the Purchase Agreement, pursuant to a commitment letter (the “Commitment Letter”) from Goldman Sachs Bank USA.

The Loan will have an initial term of one year with a one-year extension option, that may be exercised subject to certain

conditions specified in the Commitment Letter.

The funding of the Loan provided for in the Commitment Letter is contingent on the satisfaction of customary conditions, including but not limited to (a) execution and delivery of definitive documentation with respect to the Loan in accordance with the terms set forth in the Commitment Letter, and (b) closing of the Portfolio Sale Transaction.

The actual documentation governing the Loan has not been finalized, and accordingly, the actual terms may differ from the description of such terms in the Commitment Letter.

PLAN OF SALE AND LIQUIDATION

In accordance with the Plan of Sale and Liquidation, our objectives are to pursue an orderly liquidation of our Company by selling or otherwise disposing of our remaining assets, paying or otherwise settling our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, when appropriate and in the Board’s discretion, distributing the net proceeds from liquidation to our shareholders, subject to the creation of necessary reserves for, and the payment or other satisfaction of, the Company’s expenses and other liabilities and obligations, and winding up our operations and dissolving our Company.

In connection with the Plan of Sale and Liquidation, the Company paid a special liquidating distribution on January 7, 2026 to shareholders of record at the close of business on December 22, 2025.

The Plan of Sale and Liquidation enables the Company to sell any and all of its assets without further approval of its shareholders and provides that the amounts and timing of liquidating distributions will be determined by the Board in its

Pursuant to applicable REIT rules, liquidating distributions the Company pays pursuant to the Plan of Sale and Liquidation will qualify for the dividends paid deduction, provided that they are paid within 24 months of the October 30, 2025 approval of the Plan of Sale and Liquidation by the Company’s shareholders.

However, if the Company cannot sell its properties and pay its debts within such time period, or if the Board determines that it is otherwise advisable to do so, the Company may transfer and assign its remaining assets to a liquidating trust or other liquidating entity.

Upon such transfer and assignment, the Company’s shareholders would receive beneficial interests in the liquidating trust or other liquidating entity.

The liquidating trust or other liquidating entity would pay or provide for all of the Company’s liabilities and distribute any remaining net proceeds from liquidation to the holders of beneficial interests in the liquidating trust or other liquidating entity.

If the Company is not able to sell its properties and pay its debt within the 24-month period and the remaining assets are not transferred to a liquidating trust or other liquidating entity, any distributions made during the 24 months may not qualify for the dividends paid deduction and may increase the Company’s tax liability.

No assurance can be given that any liquidating distributions the Company pays to its shareholders will equal or exceed the estimate of net assets in liquidation presented on the Consolidated Statement of Net Assets as of March 31, 2026.

For a discussion of risks related to the Plan of Sale and Liquidation, see the previously disclosed “Part I - Item 1A.

Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025 filed on February 27, 2026.

The Company expects to comply with the requirements necessary to continue to qualify as a REIT through the completion of the liquidation process, or until such time as the Company terminates its status as a REIT and/or any remaining assets are transferred into a liquidating trust or other liquidating entity.

The Board shall use commercially reasonable efforts to continue to cause the Company to maintain its REIT status;

provided, however, that the Board may elect to terminate the Company’s status as a REIT if it determines that such termination would be in the best interest of the shareholders.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATIONS

2 unchanged sentences

Recent Accounting Pronouncements

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.

In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Disaggregation of Income Statement Expenses (“DISE”), 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.

2 unchanged sentences

Early adoption is permitted.

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

The Company concluded there is no impact from this accounting standard update on our consolidated financial statements due to the adoption of the liquidation basis of accounting.

Principles of Consolidation and Basis of Presentation

1 unchanged sentence

All intercompany balances and transactions have been eliminated in consolidation.

We have prepared the accompanying unaudited financial statements pursuant to the rules and regulations of the SEC.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information presented not misleading.

In addition, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the periods presented have been included.

These unaudited financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Lessee Accounting

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

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

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

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.”

As a result of the change to the liquidation basis of accounting on November 1, 2025, the Company no longer presents a consolidated balance sheet, a consolidated statement of operations, a consolidated statement of equity or a consolidated statement of cash flows for the current period.

These statements are only presented for prior year periods to the extent required.

We have prepared the accompanying unaudited consolidated financial statements in accordance with GAAP, as contained within the FASB’s ASC, including Subtopic 205-30, “Liquidation Basis of Accounting,” as indicated, and pursuant to the rules and regulations of the Securities and Exchange Commission.

Pursuant to the Company’s shareholders’ approval of the Plan of Sale and Liquidation on October 30, 2025, the Company adopted the liquidation basis of accounting as of and for the periods subsequent to November 1, 2025 (as the approval of the Plan of Sale and Liquidation by the Company’s shareholders became imminent in late October 2025 based on the results of the

Company’s solicitation of proxies from its shareholders for their approval of the Plan of Sale and Liquidation).

Accordingly, on November 1, 2025, assets were adjusted to their estimated net realizable value, also referred to as liquidation value, which represents the estimated amount of cash or other consideration that the Company expected to realize through the disposal of assets.

The liquidation values of the Company’s real estate properties are presented on a net realizable value basis at March 31, 2026.

Liabilities are carried at their contractual amounts due or estimated settlement amounts.

The Company accrues costs and revenues that it expects to incur and earn as it carries out its liquidation activities through the end of the projected liquidation period to the extent it has a reasonable basis for estimation.

Estimated costs expected to be incurred through the end of the liquidation period included budgeted property expenses and corporate overhead, costs to dispose of its real estate property, costs associated with satisfying known and contingent liabilities, including repayment of the Secured Term Loan, and other costs associated with the winding down and dissolution of the Company.

These amounts are classified as a liability for estimated costs in excess of estimated receipts during liquidation on the consolidated statement of net assets.

Actual costs and income may differ from amounts reflected in the financial statements because of the inherent uncertainty in estimating future events.

These differences may be material.

See Note 2, “Plan of Sale and Liquidation” and Note 4, “Liabilities for Estimated Costs in Excess of Estimated Receipts During Liquidation” for further discussion.

Revenues are based on in place leases and forecasted operations at properties prior to their sale.

Actual costs incurred but unpaid prior to the Company’s adoption of the liquidation basis of accounting on November 1, 2025, and yet to be derecognized, are included in accounts payable and accrued expenses at March 31, 2026 on the consolidated statement of net assets.

All our liabilities under either the going concern basis of accounting or the liquidation basis of accounting are derecognized when we pay the obligation or when we are legally released from being the primary obligor under the liability.

Net assets in liquidation at March 31, 2026 represent the remaining estimated liquidation value available to shareholders upon liquidation.

Due to the uncertainty in the estimated cash flows from operations and the time required to complete the Plan of Sale and Liquidation, actual liquidation costs and sale proceeds may differ materially from the amounts estimated.

All financial results and disclosure prior to the adoption of the liquidation basis of accounting, are presented on a going concern basis.

As a result, the statement of operations, the statement of comprehensive income (loss), the statement of equity and the statement of cash flow for the three months ended March 31, 2025 are presented using the going concern basis of accounting.

Restricted Cash

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

Restricted cash includes funds held in escrow for tenant security deposits and funds held by Goldman Sachs Bank USA (the “Lender”) in lender-controlled reserve accounts under the Secured Term Loan, including reserves for property taxes and insurance premiums, capital expenditures and certain other approved operating expenses and capital items.

Use of Estimates in the Financial Statements

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

Actual results could differ from those estimates.

Development/Redevelopment

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

As of September 30, 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.

The preparation of financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts in these financial statements and related notes.

The Company is required to estimate all costs and revenue it expects to incur and earn through the end of liquidation.

All of the estimates and evaluations are susceptible to change and actual results could differ from these estimates.

LIABILITIES FOR ESTIMATED COSTS IN EXCESS OF ESTIMATED RECEIPTS DURING LIQUIDATION

The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the Plan of Sale and Liquidation.

As of March 31, 2026, the Company estimated that it will have costs in excess of estimated receipts during the liquidation process.

These amounts can vary significantly due to, among other things, the timing and estimates for executing and renewing leases, estimates of capital expenditures, the timing and value of property sales, estimates of direct costs incurred to complete the sales, the timing and estimated amounts associated with discharging known and contingent liabilities and the estimated costs associated with the winding up of operations.

These costs are estimated and are anticipated to be paid out over the liquidation period which is estimated to be complete within 24 months from October 30, 2025, the date on which the Company received shareholder approval of the Plan of Sale and Liquidation;

however, no assurances can be provided that this date will be met.

The change in the liabilities for estimated costs in excess of estimated receipts during liquidation as of March 31, 2026 is as follows (in thousands):

As of December 31, 2025 Cash Payments (Receipts) Remeasurements of Assets and Liabilities As of March 31, 2026

Estimated net inflows from income producing property $ 18,091 $ ( 11,198 ) $ 407 $ 7,300

Estimated net inflows from interest income 1,874 ( 2,009 ) 281 146

19,965 ( 13,207 ) 688 7,446

Liquidation transaction costs (1)

( 33,446 ) 6,928 ( 582 ) ( 27,100 )

General and administrative expenses ( 16,020 ) 4,994 ( 714 ) ( 11,740 )

Capital expenditures ( 2,885 ) 1,941 ( 730 ) ( 1,674 )

Interest expense ( 10,385 ) 6,285 ( 493 ) ( 4,593 )

Debt repayment and origination costs, net ( 828 ) 828 — —

( 63,564 ) 20,976 ( 2,519 ) ( 45,107 )

Liabilities for estimated costs in excess of estimated receipts during liquidation $ ( 43,599 ) $ 7,769 $ ( 1,831 ) $ ( 37,661 )

(1) Liquidation transaction costs primarily include disposal costs and severance expenses.

NET ASSETS IN LIQUIDATION

The net assets in liquidation as of March 31, 2026 were $ 203.9 million.

Net assets in liquidation include projections of costs and expenses to be incurred during the estimated period required to complete the Plan of Sale and Liquidation.

There is inherent uncertainty with these estimates and projections, and they could change materially based on the timing of the disposition and value received in the sale of the Company’s remaining real estate properties, the performance of the Company’s remaining assets and any changes in the underlying assumptions of the projected cash flows from such properties.

Cumulative liquidating distributions paid to shareholders included the $ 14.67 per common share distribution paid on January 7, 2026 to our shareholders of record as of the close of business on December 22, 2025 and will include any future distribution of our net assets in liquidation.

As of March 31, 2026 the Company’s portfolio was composed of six multifamily properties with a liquidation value of real estate of $ 544.3 million.

Properties Sold and Held for Sale

The Company periodically classifies real estate assets as held for sale when the held for sale criteria is met in accordance with GAAP.

At that time, depreciation on these properties is discontinued, but operating revenues, operating expenses and interest expense continue to be recognized until the date of sale.

No properties met the criteria for classification as held for sale as of September 30, 2025, since shareholder approval, which is required as a part of the Proposed Transaction, had not yet been received.

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

Real Estate Impairment

During the 2025 Quarter, the Company recognized an aggregate impairment charge of $ 111.7 million related to several properties not included as part of the Portfolio Sale Transaction.

The estimated cash flows for those certain properties were less than their respective carrying values primarily due to a revision of their estimated holding periods.

Within our Residential segment and Other, defined in note 10 and primarily consisting of Watergate 600, we recognized an impairment charge of $ 81.4 million and $ 30.3 million, respectively.

For all impairment charges recognized, the fair valuation of the assets fell into Level 3 in the fair value hierarchy due to the reliance on significant unobservable inputs (see note 7).

In accordance with ASC 820, we estimated the Watergate 600 fair value using a discounted cash flow model which required certain significant assumptions, including a discounted cash flow term of 5 years, an average economic occupancy of 66.1 %, and a terminal capitalization rate of 10.5 %.

We estimated the residential properties fair value using a model which required certain significant assumptions, including cash flow projections over a term of 5 years, a range of market rent per square foot of $ 114 to $ 159 , and a range of in-place capitalization rates ranging from 4.75 % to 5.77 % for each property.

No other properties, including assets held for development, had any recognized impairment charges during the 2025 Quarter.

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 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.

Borrowings under the Amended and Restated Revolving Credit Facility will bear interest, at our 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 our credit rating) or (b) the base rate plus a margin ranging from 0.00 % to 0.40 % (based upon our 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 our 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 %.

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 %.

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, 2025 was as follows (in thousands):

Committed capacity $ 500,000

Borrowings outstanding ( 186,000 )

Unused and available $ 314,000

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

Balance, December 31, 2024 $ 176,000

Borrowings 119,000

Repayments ( 109,000 )

Balance, September 30, 2025 $ 186,000

NOTES PAYABLE

During 2023, we entered into a $ 125.0 million unsecured term loan (the “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 an initial 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 2018 term loan in full and a portion of our borrowings under our previous revolving credit facility.

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 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).

Under the going concern basis, when we classified properties as held for sale, we discontinued the recording of depreciation expense and estimated their fair value less costs to sell.

If we determined that the carrying value for these properties exceeded their estimated fair value less costs to sell, we recorded a loss on asset impairment.

During the 2026 Quarter, we sold our interests in the properties below.

We did not sell, classify any properties as held for sale or record an impairment during the 2026 Quarter or 2025 Quarter.

Properties Number of Units (unaudited)

Elme Conyers 240

Elme Marietta 420

Elme Sandy Springs 389

Property Net Rentable Square Feet (unaudited)

Watergate 600 300,000

Subsequent to the 2026 Quarter, we sold our Elme Germantown property, comprising 218 units.

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

SECURED TERM LOAN PAYABLE

On November 12, 2025, the Borrowers and the Lender entered into that certain Loan Agreement pursuant to which the Lender has made the Secured Term Loan to the Borrowers.

Riverside Apartments, Elme Bethesda, Elme Germantown, Elme Watkins Mill, 3801 Connecticut Avenue, The Kenmore, Elme Conyers, Elme Marietta, Elme Sandy Springs, and Watergate 600.

In addition, the Secured Term Loan was secured by pledges of all equity interests in the Borrowers, along with all other personal property of the Borrowers.

The Company has provided a customary non-recourse carveout guaranty.

The Loan Agreement contains certain affirmative and negative covenants with which Borrowers must comply, including maintenance of insurance, single-purpose bankruptcy, remote entity requirements, reporting requirements and restrictions on property and equity transfers and the granting of liens.

Customary events of default are included in the Loan Agreement, including nonpayment of principal and other amounts when due, nonperformance of covenants, breach of representations and warranties, certain bankruptcy or insolvency events and changes in control, the occurrence of which give Lender the right to accelerate repayment of the Secured Term Loan .

The Secured Term Loan matures on November 9, 2026, subject to a one-year Borrowers’ extension option, which is subject to satisfaction of certain specified conditions, including the payment of an extension fee equal to 0.25 % of the then outstanding principal amount of the Secured Term Loan and the requirement that no more than $ 312 million of the Secured Term Loan may be outstanding on the first day of the extended term.

The Secured Term Loan bears interest at a per annum rate equal to the one-month term SOFR (subject to a term SOFR floor of 3.00 %) plus the spread.

The spread is 2.25 % and will increase in May 2026 to 2.75 % and further increase to 4.00 % in June 2027 (if extended).

The Company has purchased an interest rate cap that effectively caps term SOFR at 5.00 % per annum.

On February 9, 2026, a duration fee equal to 0.20 % of the then outstanding principal amount of the Secured Term Loan was paid to the Lender.

The Secured Term Loan requires that the Company enter into cash management arrangements set forth in the certain cash management agreements pursuant to which the Company will maintain a restricted account into which all revenue from the Loan Collateral will be deposited during the term of the Secured Term Loan.

Amounts on deposit in the restricted account will be transferred weekly to an account under the sole control of the lender, and provided an event of default is not continuing under the Secured Term Loan, funds deposited in the account controlled by the lender will be applied to pay items such as real estate taxes, insurance premiums, debt service obligations, the lender required reserves for budgeted capital expenditures and operating expenses, with excess funds deposited available to pay general and administrative expenses subject to certain limitations.

Excess cash remaining after the sale of Loan Collateral and the payment of a release price paid to the lender to release the lien of its mortgages shall be deposited with the Lender as additional cash collateral unless certain conditions, including a minimum balance of $ 10 million in the shortfall account, certain debt yield requirements, and no events of default, are met, in which case such excess cash may be disbursed to the Company for distribution.

The cash management agreement contains provisions for the cure of certain of these events.

The cash management arrangements could limit or restrict the Company from paying dividends or other distributions during the term of the Secured Term Loan.

The Secured Term Loan is intended to be repaid with the net proceeds from one or more sales of the properties securing the Secured Term Loan, and such properties shall be released from the mortgages securing the Secured Term Loan as they are sold, upon satisfaction of certain conditions and payment of a minimum release price applied to the prepayment of the Secured Term Loan.

An exit fee equal to 0.50 % of the principal amount of the Secured Term Loan repaid is payable with any prepayment or repayment of the Secured Term Loan, including at maturity, provided, that no exit fee is payable (i) if the Secured Term Loan is refinanced by the lender or its affiliates or (ii) if the Secured Term Loan is repaid with the proceeds of an arm’s length sale of one or more of the properties securing the Secured Term Loan.

During the 2026 Quarter, we completed the sale of four of the Remaining Company Properties, Elme Sandy Springs, Elme Marietta, Elme Conyers and Watergate 600, for aggregate gross proceeds of approximately $ 199.0 million.

Subsequent to the 2026 Quarter, we completed the sale of our Elme Germantown property for gross proceeds of approximately $ 53.7 million.

For each of these sales, a portion of the net proceeds was used to repay a portion of the Secured Term Loan, and those sold properties were released from the mortgages securing the Secured Term Loan.

As of March 31, 2026, the interest rate on the Secured Term Loan is based on the one-month term SOFR plus 2.25 % applicable margin and the one-month term SOFR is 3.67%.

DERIVATIVE INSTRUMENTS

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

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

We assess the effectiveness of a cash flow hedge both at inception and on an ongoing basis.

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 rate at 4.73 % for a $ 125.0 million unsecured term loan (“2023 Term Loan”) beginning on July 21, 2023 through the 2023 Term Loan’s initial maturity date of January 10, 2025.

These two interest rate swap arrangements matured on January 25, 2025.

During the second quarter of 2024, we entered into two forward interest rate swap arrangements for the 2023 Term Loan 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 fixed a portion of our variable rate debt based on an adjusted daily SOFR at 4.72 % (subject to applicable interest rate margins).

These two interest rate swap arrangements were terminated on November 12, 2025 in connection with the prepayment of the Company’s unsecured debt, as previously disclosed.

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

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

We assessed the effectiveness of a cash flow hedge both at inception and on an ongoing basis.

If a cash flow hedge is no longer expected to be effective, hedge accounting is discontinued.

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

The fair values of the interest rate swaps as of September 30, 2025 and December 31, 2024, were as follows (in thousands):

Derivative Assets (Liabilities)

Derivative Instrument Aggregate Notional Amount Effective Date Maturity Date September 30, 2025 December 31, 2024

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

Interest rate swap 50,000 July 21, 2023 January 10, 2025 — 9

Interest rate swap 100,000 January 10, 2025 January 10, 2026 ( 210 ) ( 624 )

Interest rate swap 50,000 January 10, 2025 January 10, 2026 ( 105 ) ( 312 )

$ ( 315 ) $ ( 913 )

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,

2025 2024 2025 2024

Unrealized gain (loss) on interest rate hedges $ 175 $ ( 2,181 ) $ 598 $ ( 2,894 )

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 $ 0.3 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, 2025 and 2024, were as follows (in thousands):

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

2025 2024 2025 2024

Loss reclassified from accumulated other comprehensive loss into interest expense $ 510 $ 509 $ 1,529 $ 1,529

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

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, 2025, the fair value of derivative liabilities was $ 0.3 million.

As of September 30, 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.

We believe that we minimize our credit risk on these transactions by dealing with major, creditworthy financial institutions.

We monitor the credit ratings of counterparties and our exposure to any single entity, thus minimizing our credit risk concentration.

FAIR VALUE DISCLOSURES

Assets and Liabilities Measured at Fair Value on a Recurring Basis

For assets and liabilities measured at fair value on a recurring basis, quantitative disclosures about the fair value measurements are required to be disclosed separately for each major category of assets and liabilities, as follows:

Quoted prices in active markets for identical assets

Significant other observable inputs

Significant unobservable inputs

The only assets or liabilities we had at September 30, 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.

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

This analysis reflects the contractual terms of the interest rate derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

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 Topic 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.

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

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

The fair values of these assets as of September 30, 2025 and December 31, 2024 were as follows (in thousands):

September 30, 2025 December 31, 2024

Value Level 1 Level 2 Level 3 Fair

Value Level 1 Level 2 Level 3

SERP $ 3,270 $ 3,270 $ — $ — $ 2,648 $ 2,648 $ — $ —

Interest rate swaps — — — — 23 — 23 —

Interest rate swaps ( 315 ) — ( 315 ) — ( 936 ) — ( 936 ) —

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

In the 2025 Quarter, we measured the fair value of several residential communities and other properties as there was evidence of impairment (see note 3).

Financial Assets and Liabilities Not Measured at Fair Value

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

Many of these estimates involve significant judgment.

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

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

September 30, 2025 December 31, 2024

Carrying Value Fair Value Carrying Value Fair Value

Cash and cash equivalents $ 7,088 $ 7,088 $ 6,144 $ 6,144

Restricted cash 2,293 2,293 2,465 2,465

Line of credit 186,000 186,000 176,000 176,000

Notes payable, net 523,329 490,245 522,953 472,412

The net unrealized gain on the effective swaps is recognized in Other comprehensive income (loss) for the three months ended March 31, 2025 as $ 0.1 million.

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

The losses reclassified from Accumulated other comprehensive loss into interest expense for the three months ended March 31, 2025 were $ 0.5 million.

SHARE-BASED COMPENSATION

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”).

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 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.

Elme Communities maintained short-term and long-term incentive plans, each effective January 1, 2020, as amended, that allowed for cash and share-based awards to officers, respectively, and short-term and long-term incentive plans, that allowed for cash and share-based awards, respectively, to non-officer employees.

Share-based awards were 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”).

An amendment and restatement of the Omnibus Incentive Plan was approved by our Board 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 allowed 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.

Due to the Plan of Sale and Liquidation, the above-referenced officer short-term and long-term incentive plans have been terminated.

During the 2026 Quarter, the Board approved the Elme Communities Executive Officer Short-Term Incentive Plan, effective as of November 13, 2025 (the “New Officer STIP”), which provides for a cash award opportunity based on achievement of three metrics:

(i) the value of the additional liquidating distributions to Elme’s shareholders, which will be 40 % of the award opportunity, (ii) the timing of completion of the sales of Elme’s remaining assets, which will be 40 % of the award opportunity, and (iii) performance measures in furtherance of implementing the Plan of Sale and Liquidation, consisting of efficient operation of Elme’s remaining assets, employee retention and successfully implementing the Plan of Sale and Liquidation, which will be 20 % of the award opportunity.

The performance period under the New Officer STIP runs from November 13, 2025 through the earlier of (i) November 13, 2026 and (ii) the date on which the actual levels of achievement of the additional liquidating distributions and timing metrics discussed above are otherwise determined by the Compensation Committee of the Board.

Total Compensation Expense

Total compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $ 1.7 million and $ 1.6 million for the 2025 Quarter and 2024 Quarter, respectively, and $ 4.8 million and $ 3.7 million for the 2025 Period and 2024 Period, respectively.

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

Restricted Share Awards

The total fair values of restricted share awards vested was $ 1.2 million and $ 1.0 million for the 2025 Period and 2024 Period, respectively.

The total unvested restricted share awards at September 30, 2025 was 461,080 shares, which had a weighted average grant date fair value of $ 15.82 per share.

As of September 30, 2025, the total compensation cost related to unvested restricted share awards was $ 3.9 million, which we expect to recognize over a weighted average period of 19 months.

There were no unvested restricted share awards at March 31, 2026.

EARNINGS PER COMMON SHARE

2 unchanged sentences

We also determine “Diluted earnings per share” as the more dilutive of the two-class method or the treasury stock method with respect to the unvested restricted share awards.

We further evaluate any other potentially dilutive securities at the end of the

period and adjust the basic earnings per share calculation for the impact of those securities that are dilutive.

We further evaluate any other potentially dilutive securities at the end of the period and adjust the basic earnings per share calculation for the impact of those securities that are dilutive.

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, 2025 and 2024 were as follows (in thousands, except per share data):

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

2025 2024 2025 2024

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

Three Months Ended March 31,

Net loss $ ( 4,675 )

6 unchanged sentences

SEGMENT INFORMATION

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.

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.

For the 2025 Quarter, we operated 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 for the period presented based on size (as of March 31, 2025, only one community,

Riverside Apartments, comprised more than 10 % of consolidated revenues), type (all assets in the segment are residential) or geography (as of March 31, 2025, all but six communities were within the Washington, DC metro region).

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

For the 2025 Quarter, we had one office property, Watergate 600, which did not meet the quantitative or qualitative criteria for a reportable segment and was 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.

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

The following tables present revenues, NOI, capital expenditures and total assets for the three and nine months ended September 30, 2025 and 2024 from our Residential segment as well as Other, and reconcile NOI to net loss as reported (in thousands):

Three Months Ended September 30, 2025

Residential Other Consolidated

Real estate rental revenue $ 57,687 $ 4,416 $ 62,103

Real estate expenses 22,706 1,433 24,139

Net operating income $ 34,981 $ 2,983 $ 37,964

Other expense:

Property management expenses ( 2,263 )

General and administrative expenses ( 14,064 )

Depreciation and amortization ( 23,771 )

Interest expense ( 9,661 )

Real estate impairment ( 111,719 )

Net loss $ ( 123,514 )

Capital expenditures $ 8,684 $ 1 $ 8,685

Total assets $ 1,598,307 $ 88,552 $ 1,686,859

Three Months Ended September 30, 2024

The following tables present revenues, NOI, capital expenditures and total assets for the three months ended March 31, 2025 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

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Interest expense ( 9,460 )

Loss on extinguishment of debt ( 147 )

Net loss $ ( 4,675 )

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

Nine Months Ended September 30, 2025

Residential Other Consolidated

Real estate rental revenue $ 172,377 13,318 $ 185,695

Real estate expenses 64,576 4,219 68,795

Net operating income $ 107,801 $ 9,099 $ 116,900

Other income (expense):

Property management expenses ( 6,765 )

General and administrative expenses ( 30,982 )

Depreciation and amortization ( 70,570 )

Interest expense ( 28,619 )

Real estate impairment ( 111,719 )

Net loss $ ( 131,755 )

Capital expenditures $ 23,054 $ 82 $ 23,136

Nine Months Ended September 30, 2024

Residential Other Consolidated

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

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 $ 350.0 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 2025 Period or 2024 Period.

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

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.

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

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 the Company’s common shares, 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.

We did no t issue common shares under the Equity Distribution Agreement during the 2026 Quarter or 2025 Quarter and we terminated the Equity Distribution Agreement during the 2026 Quarter.

We have a dividend reinvestment program, whereby shareholders were able to use their dividends and optional cash payments to purchase common shares, which was suspended in September 2025.

Prior to the suspension, the common shares sold under this program were either common shares issued by us or common shares purchased in the open market.

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.

No common shares were sold under the dividend reinvestment program during the 2026 Quarter or 2025 Quarter.

We do not intend to restart the dividend reinvestment program and, instead, are in the process of formally terminating the program in the second quarter of 2026.

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What changed 10-Q

Item 1. Financial Statements