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Item 2. Management’s Discussion and Analysis

2026-05-11 compared with 2025-10-24 · 130 added, 358 removed, 33 unchanged (94% of the section changed)

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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, 2025 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2026.

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.

We refer to the three months ended March 31, 2026 and March 31, 2025 as the “2026 Quarter” and the “2025 Quarter,” respectively.

Forward-Looking Statements

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Additional factors which may cause our actual results, performance, or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to:

the satisfaction or waiver of other conditions to closing the Portfolio Sale Transaction pursuant to the Purchase Agreement;

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 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 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 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;

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;

reductions in or actual or threatened changes to the timing of federal government spending;

the economic health of our residents;

the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdowns or recessions, tariffs and trade barriers, supply chain disruptions and geopolitical conflicts);

risks related to our ability to control our expenses if revenues decrease;

compliance with applicable laws and corporate social responsibility goals, including those concerning the environment and access by persons with disabilities;

risks related to legal proceedings, including those proceedings related to the Proposed Transactions;

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;

terrorist attacks or actions and/or cyber-attacks;

whether we will succeed in the day-to-day property management and leasing activities that we have previously outsourced;

the availability and terms of financing and capital and the general volatility of securities markets;

the risks related to our organizational structure and limitations of share ownership;

whether or not the sale of one or more of our properties may be considered a prohibited transaction under the Code;

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

Elme’s ability to remain listed on the NYSE and Elme’s expected timeline for doing so;

Elme’s ability to transfer its remaining assets and liabilities to a liquidating trust and terminate its existence by voluntary dissolution on the terms and timeline anticipated;

Elme’s ability to successfully complete the marketing and sale of its remaining assets, including successful completion of any remaining inspection periods and all closing conditions applicable to assets under contract, on the terms and timeline anticipated, or at all;

changes in the amount and timing of the additional liquidating distributions, including as a result of unexpected levels of transaction cost, changes in the gross asset sales proceeds from the sale of the remaining properties from prior estimates, delayed or terminated closings, liquidation costs or unpaid or additional liabilities and obligations;

Elme’s ability to repay the Secured Term Loan (as defined below) with the net proceeds from the sales of the remaining properties which secure the Secured Term Loan and to release the mortgages securing the Secured Term Loan as they are sold;

the possibility, mechanics and timing of converting to a liquidating trust or other liquidating entity;

the ability of Elme’s Board of Trustees to terminate the Plan of Sale and Liquidation (as defined below);

the response of Elme’s residents, tenants and business partners to the Plan of Sale and Liquidation;

potential difficulties in employee retention as a result of the on-going Plan of Sale and Liquidation;

the outcome of legal proceedings that may be instituted against Elme, its trustees and others, including those related to the Portfolio Sale Transaction (as defined below), completed and future property sales and the Plan of Sale and Liquidation;

the risk that disruptions caused by or relating to the Plan of Sale and Liquidation will harm our ongoing business, including current plans and operations;

risks relating to the market value of our common shares;

risks associated with third party contracts containing consent and/or other provisions that may be triggered by the Plan of Sale and Liquidation;

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

whether or not the sale of one or more of our properties may be considered a prohibited transaction under the Code (as defined below);

Elme’s ability to maintain our status as a REIT for U.S.

federal income tax purposes;

the occurrence of any event, change or other circumstances that could give rise to the termination of the Plan of Sale and Liquidation;

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

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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.

and other risks and uncertainties detailed from time to time in Elme’s filings with the SEC, including our 2025 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance.

We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.

Introductory Matters

We provide our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations and financial condition.

We organize the MD&A as follows:

Discussion of our business outlook, operating results, investment and financing activity and capital requirements to provide context for the remainder of MD&A.

• Results of Operations.

Discussion of our financial results comparing the 2025 Quarter to the 2024 Quarter and the 2025 Period to the 2024 Period.

• Liquidity and Capital Resources.

Discussion of our financial condition and analysis of changes in our capital structure and cash flows.

• Funds From Operations .

Calculation of NAREIT Funds From Operations (“NAREIT FFO”), a non-GAAP supplemental measure to net income.

• Critical Accounting Estimates.

Descriptions of accounting policies that reflect significant judgments and estimates used in the preparation of our consolidated financial statements.

When evaluating our financial condition and operating performance, we focus on the following financial and non-financial indicators:

• Net operating income (“NOI”) , calculated as set forth below under the caption “ Results of Operations - Net Operating Income.

” NOI is a non-GAAP supplemental measure to net income.

• Funds From Operations (“NAREIT FFO”) , calculated as set forth below under the caption “Funds from Operations.” NAREIT FFO is a non-GAAP supplemental measure to net income.

• Average occupancy , calculated as average daily occupied apartment homes as a percentage of total apartment homes.

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or “non-same-store.” Same-store portfolio properties include properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared.

We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan.

Development properties are categorized as same-store when they have reached stabilized occupancy (90%) before the start of the prior year.

We define redevelopment properties as those for which we have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property.

We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared.

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

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

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”).

Immediately prior to the consummation of the Portfolio Sale Transaction, Echo Sub will hold all of the equity interests of our subsidiaries which own The Wellington;

Elme Alexandria;

Elme Manassas;

Elme Druid Hills;

Elme Herndon;

Cascade at Landmark;

Elme Eagles Landing;

The Paramount;

Roosevelt Towers;

Elme Cumberland;

Elme Leesburg;

Bennett Park;

and Clayborne Apartments (collectively, the “Sale Portfolio”).

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

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

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 our 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.

Commitment Letter

In connection with entering into the Purchase Agreement and approval of the Plan of Sale and Liquidation by the board of trustees, we 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 our 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.

Operating Results

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

Net loss $ (123,514) $ (2,970) $ (120,544) 4,058.7 %

$ 37,964 $ 38,797 $ (833) (2.1) %

NAREIT FFO (2)

$ 10,238 $ 20,504 $ (10,266) (50.1) %

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(1) See page 25 of the MD&A for a reconciliation of NOI to net income.

(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 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

There were no significant investment transactions during the 2025 Period.

We provide Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations and financial condition.

Prior to adoption of the Plan of Sale and Liquidation, for purposes of evaluating comparative operating performance, we categorized our properties as “same-store” or “non-same-store.” Same-store portfolio properties included properties that were owned for the entirety of the years being compared and excluded properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared.

Following our adoption of a liquidation

basis of accounting, our properties are no longer categorized in this manner and therefore we have not provided operating metrics on a same-store/non same-store basis.

On February 13, 2025, the Company announced that its Board had initiated a formal review to evaluate strategic alternatives.

On August 4, 2025, the Company announced that its 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”).

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.

Subsequent to the 2026 Quarter, we completed the sale of Elme Germantown 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.

Additionally, as discussed further below, as of May 11, 2026, the Company has entered into four purchase and sale agreements for four of the Remaining Company Properties – Elme Watkins Mill, The Kenmore, 3801 Connecticut Avenue and Riverside Apartments.

Given the Plan of Sale and Liquidation, our efforts are focused on selling the remaining properties, winding down the Company’s affairs and, when appropriate and in the Board’s discretion, distributing the net proceeds to our shareholders subject to the creation of necessary reserves for, and payment or other satisfaction of, the Company’s expenses and other liabilities and obligations.

If we have not sold all of our remaining properties and paid all of our liabilities within 24 months after shareholder approval of the Plan of Sale and Liquidation, which was received on October 30, 2025, or if the Board otherwise determines that it is advantageous to do so earlier, we may transfer our remaining assets and liabilities to a liquidating trust and distribute interests in the liquidating trust to our shareholders or otherwise convert Elme to a liquidating limited liability company, partnership, or trust.

We cannot predict the exact amount to be distributed or the timing of the completion of the liquidation and termination of the Elme’s existence.

Initial Liquidating Distribution

In accordance with the Plan of Sale and Liquidation, the Board approved a special liquidating distribution of $14.67 per common share of beneficial interest, par value $0.01 per share (“common shares”) to its shareholders of record as of the close of business on December 22, 2025.

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

Disposition Activity

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, our portfolio consisted of the following assets located in the Washington, DC metro region.

Properties Location

Riverside Apartments (1)

Alexandria, VA

3801 Connecticut Avenue Washington, DC

The Kenmore Washington, DC

Elme Bethesda Bethesda, MD

Elme Watkins Mills Gaithersburg, MD

Elme Germantown (2)

Germantown, MD

(1) Includes an undeveloped land parcel held for development adjacent to the Riverside Apartments.

(2) Sold subsequent to quarter end.

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.

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 purchase and sale agreements related 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 Elme’s 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.

While the New York Stock Exchange (“NYSE”) has discretionary authority to delist the Company’s common shares following shareholder approval of the Plan of Sale and Liquidation, the Company intends for its common shares to continue to be listed on the NYSE, subject to continued compliance with NYSE listing requirements, until such time in the future as the Board determines to voluntarily delist its common shares from the NYSE in order to reduce operating expenses and maximize liquidating distributions.

The Company does not currently expect to voluntarily delist prior to completing the sale of Riverside Apartments, and – assuming completion of the property sales in the mid-year 2026 timeframe – currently expects the NYSE delisting and Company dissolution process to occur in the third quarter of 2026.

While the Board currently intends to take the actions as outlined above, consistent with the Plan of Sale and Liquidation, the timing of these actions remains subject to change, including as a result of any changes in the timing of property sale closings.

In addition, the Board may modify or delay these actions if it determines that doing so is in the best interest of the Company and its shareholders.

Financing Activity

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

We have no debt maturities scheduled until 2026.

We expect to have additional capital requirements as set forth on page 30 (Liquidity and Capital Resources – Capital Requirements).

As of March 31, 2026, the interest rate on the Secured Term Loan is 5.92%, which is based on the one-month term SOFR plus 2.25% applicable margin.

As of May 11, 2026, after giving effect to the sales of Elme Sandy Springs, Elme Marietta, Elme Conyers, Watergate 600 and Elme Germantown, and corresponding partial paydown of the Secured Term Loan, $288.5 million of the principal under the Secured Term Loan remains outstanding at the current interest rate of 5.90%.

Recent Tax Legislation

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tax law were approved that may impact us and our shareholders.

Among other changes, this legislation (i) permanently extended the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate taxpayers under Section 199A of the Internal Revenue Code (the “Code”), (ii) increased the percentage limit under the REIT asset test applicable to taxable REIT subsidiaries (“TRSs”) from 20% to 25% for taxable years beginning after December 31, 2025, and (iii) increased the base on which the 30% interest deduction limit under Section 163(j) of the Code applies by excluding depreciation, amortization and depletion from the definition of “adjusted taxable income” (i.e.

based on EBITDA rather than EBIT) for taxable years beginning after December 31, 2024.

Results of Operations

The discussion that follows is based on our consolidated results of operations for the 2025 Quarter and the 2024 Quarter and the 2025 Period and 2024 Period.

Net Operating Income

NOI, defined as real estate rental revenue less direct real estate operating expenses, is a non-GAAP measure.

NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain or loss on sale, if any), plus interest expense, depreciation and amortization, lease origination expenses, general and administrative expenses, acquisition costs, real estate impairment, casualty gain and losses and gain or loss on extinguishment of debt.

NOI does not include management expenses, which consist of corporate property management costs and property management fees paid to third parties.

NOI is the primary performance measure we use to assess the results of our operations at the property level.

We believe that NOI is a useful performance measure because, when compared across periods, it reflects the impact on operations of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from net income.

NOI excludes certain components from net income in order to provide results more closely related to a property’s results of operations.

For example, interest expense is not necessarily linked to the operating performance of a real estate asset.

In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level.

As a result of the foregoing, we provide NOI as a supplement to net income, calculated in accordance with GAAP.

NOI does not represent net income or income from continuing operations calculated in accordance with GAAP.

As such, NOI should not be considered an alternative to these measures as an indication of our operating performance.

A reconciliation of net loss to NOI follows.

2025 Quarter Compared to 2024 Quarter

The following table reconciles net loss to NOI and provides the basis for our discussion of our consolidated results of operations and NOI in the 2025 Quarter compared to the 2024 Quarter.

All amounts are in thousands, except percentage amounts.

Three Months Ended September 30,

2025 2024 $ Change % Change

Net loss $ (123,514) $ (2,970) $ (120,544) 4,058.7 %

Property management expenses 2,263 2,235 28 1.3 %

General and administrative expenses 14,064 6,354 7,710 121.3 %

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) %

Residential revenue:

Same-store portfolio $ 57,687 $ 56,427 $ 1,260 2.2 %

Total 57,687 56,427 1,260 2.2 %

Residential expenses:

Same-store portfolio 22,644 20,759 1,885 9.1 %

Development 62 61 1 1.6 %

Total 22,706 20,820 1,886 9.1 %

Residential NOI:

Same-store portfolio 35,043 35,668 (625) (1.8) %

Development (62) (61) (1) 1.6 %

Total 34,981 35,607 (626) (1.8) %

Other NOI (1)

2,983 3,190 (207) (6.5) %

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

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Watergate 600

Residential Revenue

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 $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:

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 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 $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.

Other Income and Expenses

General and administrative expenses :

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 :

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 September 30, 2025 and 2024 was as follows (in thousands):

Three Months Ended September 30,

Debt Type 2025 2024 $ Change % Change

Notes payable $ 6,403 $ 6,130 $ 273 4.5 %

Line of credit 3,258 3,427 (169) (4.9) %

Total $ 9,661 $ 9,557 $ 104 1.1 %

• Notes payable :

Increase primarily due to a higher effective interest rate in the 2025 Quarter driven by the interest rate swap arrangements that became effective on January 10, 2025.

• Line of credit :

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

The following tables reconcile net loss to NOI and provide the basis for our discussion of our consolidated results of operations and NOI in the 2025 Period compared to the 2024 Period.

All amounts are in thousands, except percentage amounts.

Nine Months Ended September 30,

2025 2024 $ Change % Change

Net loss $ (131,755) $ (10,088) $ (121,667) 1206.1 %

Property management expenses 6,765 6,628 137 2.1 %

General and administrative expenses 30,982 18,688 12,294 65.8 %

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) %

Total net operating income (NOI) $ 116,900 $ 114,712 $ 2,188 1.9 %

Residential revenue:

Same-store portfolio $ 172,377 $ 166,790 $ 5,587 3.3 %

Total 172,377 166,790 5,587 3.3 %

Residential expenses:

Same-store portfolio 64,390 61,625 2,765 4.5 %

Development 186 175 11 6.3 %

Total 64,576 61,800 2,776 4.5 %

Residential NOI:

Same-store portfolio 107,987 105,165 2,822 2.7 %

Development (186) (175) (11) 6.3 %

Total 107,801 104,990 2,811 2.7 %

Other NOI (1)

9,099 9,722 (623) (6.4) %

Total NOI $ 116,900 $ 114,712 $ 2,188 1.9 %

______________________________

Watergate 600

Real Estate Rental Revenue

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 $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:

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 — %

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 $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).

Other NOI decreased $0.6 million due to lower rental revenue ($0.5 million) and higher operating expenses ($0.1 million) at Watergate 600.

Other Income and Expenses

Property management expenses:

Increase of $0.1 million primarily due to higher internal management fee expenses at same-store properties.

General and administrative expenses :

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 $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 nine months ended September 30, 2025 and 2024 was as follows (in thousands):

Nine Months Ended September 30,

Debt Type 2025 2024 $ Change % Change

Notes payable $ 19,126 $ 18,368 $ 758 4.1 %

Line of credit 9,493 10,067 (574) (5.7) %

Total $ 28,619 $ 28,435 $ 184 0.6 %

• Notes payable :

Increase primarily due to a higher effective interest rate in the 2025 Period driven by the interest rate swap arrangements that became effective on January 10, 2025.

• Line of credit :

Decrease primarily due to a lower weighted average interest rate of 5.4% in the 2025 Period, as compared to a weighted average interest rate of 6.3% in the 2024 Period, partially offset by a higher weighted average borrowings of $183.1 million in the 2025 Period, as compared to weighted average borrowings of $166.2 million in the 2024 Period.

Other Income :

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.

As of March 31, 2026, we owned approximately 2,500 residential apartment homes in the Washington, DC metro region compared to 9,400 residential apartment homes in the Washington, DC and Atlanta metro regions as of March 31, 2025.

We also owned and operated approximately 300,000 square feet of commercial space in the Washington, DC metro region as of March 31, 2025, which was sold during the 2026 Quarter, as described above.

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

In light of the approval of the Plan of Sale and Liquidation on October 30, 2025, the adoption of the liquidation basis of accounting as of November 1, 2025, the sale of 19 assets in the Portfolio Sale Transaction in November 2025 for approximately gross proceeds of $1.6 billion, and the sales during the 2026 Quarter of Elme Sandy Springs, Elme Marietta, Elme Conyers and Watergate 600, comprising of approximately 1,000 residential apartment homes and 300,000 square feet of commercial space, for aggregate gross proceeds of approximately $199.0 million, the results of operations for the 2026 Quarter are not comparable to the 2025 Quarter.

Operating Metrics

Average Occupancy and Ending Occupancy for our six remaining residential properties for the quarter ended March 31, 2026 was 93.0% and 93.6%, respectively, compared to 95.5% and 95.7%, respectively, for the same six properties for the quarter ended March 31, 2025.

Liquidity and Capital Resources

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 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).

Capital Requirements

As of the end of the 2025 Period, our full-year 2025 capital requirements are summarized below:

• Funding dividends and distributions to our shareholders (following the closing of the Portfolio Sale Transaction, we expect to suspend our regular quarterly distributions);

• Approximately $28.0 - $33.0 million to invest in our existing portfolio of operating assets, inclusive of $14.0 - $18.0 million of major capital expenditures.

There can be no assurance that our capital requirements will not be materially higher or lower than the above expectations.

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 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.

If capital were not available, we may be unable to satisfy the distribution requirement applicable to REITs, make required principal and interest payments or make necessary and/or routine capital improvements.

As described in the “Overview” section, our Board and our shareholders approved the 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 to our shareholders, subject to the creation of necessary reserves for, and payment or other satisfaction of, the Company’s expenses and other liabilities and obligations and winding up our operations and dissolving our company.

On November 25, 2025, we announced a special liquidating distribution of $14.67 per common share which was paid on January 7, 2026 to shareholders of record at the close of business on December 22, 2025.

We may pay one or more additional liquidating distribution(s) to our shareholders during the remainder of the liquidation process.

It is the Company’s current expectation that, prior to delisting from the NYSE, the Company would make an additional liquidating distribution in an amount to be determined by the Board.

However, as noted above, the amount and timing of all additional liquidating distributions remain subject to the Board’s discretion.

We expect to pay the final liquidating distribution after we sell all of our assets, pay or provide for all of our known liabilities and obligations and provide for unknown liabilities and obligations.

We expect to complete these activities within 24 months of October 30, 2025, the day we received shareholder approval of the Plan of Sale and Liquidation.

A final liquidating distribution to our shareholders may not be paid until all of our liabilities have been satisfied.

Our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on many estimates and assumptions, one or more of which may prove to be incorrect.

As a result, the actual amount of the remaining liquidating distributions we pay to our shareholders may be more or less than we estimate and the remaining liquidating distributions may be paid later than we predict.

We intend to maintain adequate cash reserves for liquidity, debt repayments and other future capital needs.

We expect our principal demands for funds during the liquidation period are and will be for the payment of operating expenses, principal and interest payments on our Secured Term Loan, general and administrative expenses, including expenses in connection with the Plan of Sale and Liquidation, transaction costs related to asset sales and payments of distributions to shareholders pursuant to the Plan of Sale and Liquidation.

We expect to use our cash on hand and net sales proceeds from the sale of our assets as our primary source of liquidity.

We believe we will have adequate liquidity to operate our business and to meet our cash requirements, including meeting our debt obligations, through the wind-down of the Company’s business and affairs and the termination of the Company’s existence by voluntary dissolution.

To the extent available, we also intend to use cash flow generated by our real estate assets;

however, asset sales will further reduce cash flow from these sources.

As of March 31, 2026, our cash and cash equivalents were approximately $19.8 million and we had $19.5 million of restricted cash (funds held by 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).

Liquidating Distributions

On May 11, 2026, the Company announced that its current estimate of the total amount of remaining liquidating distributions to be funded from the net proceeds of sales of the Remaining Company Properties was estimated to be between $2.07 and $2.35 per share.

Based on this updated estimate, the total amount of liquidating distributions (including the initial $14.67 per common share liquidating distribution paid in January 2026) was estimated to be between $16.74 and $17.02 per share.

The Company’s estimate of the ranges of liquidating distributions were derived from a number of assumptions and estimates, including the estimated range of gross asset sales proceeds for the Remaining Company Properties, many of which are outside the Company’s control and may not prove to be accurate, which could cause actual liquidating distributions to be less or more than the estimated ranges.

For more information regarding the estimates and assumptions, and various risks associated with such estimates and assumptions, see the risk factor previously disclosed in “Part I - Item 1A.

Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025, titled “We cannot determine at this time the amount or timing of the remaining liquidating distributions, if any, to our shareholders in connection with the Plan of Sale and Liquidation because there are many factors that could affect the amount or timing of any such liquidating distributions, if any, some of which are not within our control.”

Debt Financing

We generally use secured or unsecured, corporate-level debt, including unsecured notes, our Amended and Restated Revolving Credit Facility, bank term loans and mortgages to meet our borrowing needs.

Long-term, we generally use fixed rate debt instruments in order to match the returns from our real estate assets.

If we issue unsecured debt in the future, we will seek to “ladder” the maturities of our debt to mitigate exposure to interest rate risk in any particular future year.

We also utilize variable rate debt for short-term financing purposes.

At times, our mix of variable and fixed rate debt may not suit our needs.

At those times, we may use derivative financial instruments including interest rate swaps and caps, forward interest rate options or interest rate options in order to assist us in managing our debt mix.

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

Future Maturities of Debt

Year Unsecured Debt Amended and Restated Revolving Credit Facility Total Debt Average Interest Rate

2025 $ — $ — $ — —%

2026 125,000 (1)

— 125,000 5.8%

2027 — — — —%

2028 50,000 186,000 (2)

2029 — — — —%

Thereafter 350,000 — 350,000 4.1%

Scheduled principal payments $ 525,000 $ 186,000 $ 711,000 4.9%

Net discounts/premiums (54) — (54)

Loan costs, net of amortization (1,616) — (1,616)

Total maturities $ 523,330 $ 186,000 $ 709,330 4.9%

______________________________

(1) During 2023, we entered into the 2023 Term Loan, which had an initial two-year term ending in January 2025, and provided for two one-year extension options.

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

In 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 2023 Term Loan’s interest rate at 4.73% beginning on July 21, 2023 through the 2023 Term Loan’s initial maturity date of January 10, 2025.

In the second quarter of 2024, we entered into two forward interest rate swap arrangements with an aggregate notional amount of $150.0 million beginning on January 10, 2025 through the loan maturity date of 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 loan maturity date of January 10, 2026.

(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 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.

Prevailing interest rates or other factors at the time of a refinancing, such as possible reluctance of lenders to make commercial real estate loans, may result in higher interest rates and increased interest expense or inhibit our ability to finance our obligations.

From time to time, we may seek to repurchase and cancel our outstanding unsecured notes and term loans through open market purchases, privately negotiated transactions or otherwise.

Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

The amounts involved may be material.

In connection with entering into the Purchase Agreement and approval of the Plan of Sale and Liquidation by the board of trustees, we obtained a commitment for the Loan which will be secured by substantially all of our real estate assets and subsidiary equity interests that remain after the closing under the Purchase Agreement, pursuant to the Commitment Letter.

The Loan is a property portfolio mortgage financing with 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 Loan is expected to be repaid with the proceeds of each sale of the our remaining real estate assets.

Aside from the Secured Term Loan described in the “Overview” section, the Company does not have any other outstanding debt obligations as of March 31, 2026.

Debt Covenants

Pursuant to the terms of the Amended Credit Agreement, 2023 Term Loan and unsecured notes, we are subject to customary operating covenants and maintenance of various financial ratios.

Failure to comply with any of the covenants under the Amended Credit Agreement, 2023 Term Loan, unsecured notes or other debt instruments, could result in a default under one or more of our debt instruments.

This could cause our lenders to accelerate the timing of payments and could therefore have a material adverse effect on our business, operations, financial condition and liquidity.

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

As of March 31, 2026, we were in compliance with the covenants related to the Secured Term Loan, including those covenants with respect to maintenance of insurance, single-purpose bankruptcy, remote entity requirements, reporting requirements and restrictions on property and equity transfers and the granting of liens.

Common Equity

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

We have authorized for issuance 150.0 million common shares, of which 88.9 million shares were outstanding at March 31, 2026.

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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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 our sales agents or, if applicable, the Forward Sellers, or directly to the Agents as principals for their own accounts.

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

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

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

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.

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 not 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.

Preferred Equity

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

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

Our Board can, at its discretion, authorize the issuance of up to 10.0 million preferred shares.

The ability to issue preferred equity provides Elme Communities an additional financing tool that may be used to raise capital for business purposes.

As of March 31, 2026, no preferred shares were issued and outstanding.

Contractual Obligations

We owed $337.5 million and $288.5 million, respectively, as of March 31, 2026 and May 11, 2026, our Secured Term Loan.

We currently lease and occupy office space for our corporate headquarters.

The corporate office lease has an expiration date of September 30, 2033 and we would expect to incur approximately $3.2 million in prepayment penalties if we terminate the lease during 2026.

We are actively exploring alternatives to reduce the total cost of our corporate headquarters.

We have and will continue to incur severance, retention and benefit obligations in association with our Plan of Sale and Liquidation.

As of March 31, 2026, we estimate that remaining payments in 2026 related to such obligations will total approximately $15.1 million.

In addition to our Secured Term Loan, office lease and severance obligations, we have various standing or renewable contracts with vendors.

The majority of these contracts can be canceled with immaterial or no cancellation penalties, with the exception of our elevator maintenance agreements and our electricity and gas purchase agreements.

Contract terms on leases that can be canceled are generally one year or less.

Historical Cash Flows

Cash flows from operations are an important factor in our ability to sustain our dividend at its current rate.

If our cash flows from operations were to decline significantly from current levels, we may have to reduce our dividend.

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

Nine Months Ended September 30, Change

2025 2024 $ %

Net cash provided by operating activities $ 61,935 $ 70,739 $ (8,804) (12.4) %

Net cash used in investing activities (23,136) (29,622) 6,486 (21.9) %

Net cash used in financing activities (38,027) (42,457) 4,430 (10.4) %

Net cash provided by operating activities decreased primarily due to higher net loss due to higher general and administrative expenses.

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 decreased primarily due to lower payment of financing costs during the 2025 Period.

Cash provided by operating activities was $16.2 million for the quarter ended March 31, 2025.

Cash used in investing activities was $5.7 million for the quarter ended March 31, 2025, primarily due to capital improvement expenditures at our residential communities.

Cash used in financing activities was $10.1 million for the quarter ended March 31, 2025, primarily due to the payment of quarterly dividends partially offset by net borrowings on prior line of credit facility.

Off-Balance Sheet Arrangements

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

NAREIT FFO is a widely used measure of operating performance for real estate companies.

In its 2018 NAREIT FFO White Paper Restatement, the National Association of Real Estate Investment Trusts, Inc.

(“NAREIT”) defines NAREIT FFO as net income (computed in accordance with GAAP) excluding gains (or losses) associated with sales of properties;

impairments of depreciable real estate, and real estate depreciation and amortization.

We consider NAREIT FFO to be a standard supplemental measure for REITs, and believe it is a useful metric because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time.

Since real estate values have instead historically risen or fallen with market conditions, we believe that NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs.

Our NAREIT FFO may not be comparable to FFO reported by other REITs.

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 nine months ended September 30, 2025 and 2024 (in thousands):

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

2025 2024 2025 2024

Net loss $ (123,514) $ (2,970) $ (131,755) $ (10,088)

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

We have no off-balance sheet arrangements as of March 31, 2026 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.

Critical Accounting Estimates

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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 nine months ended September 30, 2025.

There were no changes made by management to the critical accounting policies in the three months ended March 31, 2026.

We discuss the most critical estimates in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on February 27, 2026.

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