Elme Communities 10-Q

ITEM 1: FINANCIAL STATEMENTS 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. 4 ELME COMMUNITIES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET ASSETS (LIQUIDATION BASIS) (IN THOUSANDS) March 31, 2026 December 31, 2025 (Unaudited) Assets Income producing property $ 544,250 $ 776,425 Cash, cash equivalents and restricted cash 39,273 1,331,882 Rents and other receivables 1,708 5,974 Total assets $ 585,231 $ 2,114,281 Liabilities 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 Net assets in liquidation $ 203,909 $ 238,915 See accompanying notes to the consolidated financial statements. 5 ELME COMMUNITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (LIQUIDATION BASIS) (IN THOUSANDS) (UNAUDITED) 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. 6 ELME COMMUNITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GOING CONCERN BASIS) (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three Months Ended March 31, 2025 Revenue Real estate rental revenue $ 61,493 Expenses Property operating and maintenance 14,175 Real estate taxes and insurance 7,819 Property management 2,246 General and administrative 9,229 Depreciation and amortization 23,239 56,708 Real estate operating income 4,785 Other expense Interest expense ( 9,460 ) ( 9,460 ) Net loss $ ( 4,675 ) Basic net loss per common share $ ( 0.05 ) Diluted net loss per common share $ ( 0.05 ) Weighted average shares outstanding – basic 88,064 Weighted average shares outstanding – diluted 88,064 See accompanying notes to the consolidated financial statements. 7 ELME COMMUNITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (GOING CONCERN BASIS) (IN THOUSANDS) (UNAUDITED) Three Months Ended March 31, 2025 Net loss $ ( 4,675 ) Other comprehensive income: Unrealized gain on interest rate hedges 89 Reclassification of unrealized loss on interest rate derivatives to earnings 510 Comprehensive loss $ ( 4,076 ) See accompanying notes to the consolidated financial statements. 8 ELME COMMUNITIES AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EQUITY (GOING CONCERN BASIS) (IN THOUSANDS) (UNAUDITED) 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, 2024 88,029 $ 880 $ 1,740,078 $ ( 646,095 ) $ ( 13,066 ) $ 1,081,797 $ 281 $ 1,082,078 Net loss — — — ( 4,675 ) — ( 4,675 ) — ( 4,675 ) Unrealized gain on interest rate hedges — — — — 89 89 — 89 Amortization of swap settlements — — — — 510 510 — 510 Distributions to noncontrolling interests — — — — — — ( 2 ) ( 2 ) Dividends ($ 0.18 per common share) — — — ( 15,943 ) — ( 15,943 ) — ( 15,943 ) Share grants, net of forfeitures and tax withholdings 128 2 1,142 — — 1,144 — 1,144 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. 9 ELME COMMUNITIES AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (GOING CONCERN BASIS) (IN THOUSANDS) (UNAUDITED) Three Months Ended March 31, 2025 Cash flows from operating activities Net loss $ ( 4,675 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 23,239 Credit losses on lease related receivables 983 Share-based compensation expense 1,372 Net amortization of debt premiums, discounts and related financing costs 1,071 Changes in operating other assets ( 573 ) Changes in operating other liabilities ( 5,242 ) Net cash provided by operating activities 16,175 Cash flows from investing activities Capital improvements to real estate ( 5,688 ) Non-real estate capital improvements ( 10 ) Net cash used in investing activities ( 5,698 ) Cash flows from financing activities Line of credit borrowings, net 6,000 Dividends paid ( 15,898 ) Payment of financing costs ( 25 ) Distributions to noncontrolling interests ( 2 ) Payment of tax withholdings for restricted share awards ( 209 ) Net cash used in financing activities ( 10,134 ) Net increase in cash, cash equivalents and restricted cash 343 Cash, cash equivalents and restricted cash at beginning of period 8,609 Cash, cash equivalents and restricted cash at end of period $ 8,952 Supplemental disclosure of cash flow information: Cash paid for interest, net of amounts capitalized $ 11,982 Change in accrued capital improvements and development costs ( 139 ) Dividend payable 15,943 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 6,396 Restricted cash 2,556 Cash, cash equivalents and restricted cash $ 8,952 See accompanying notes to the consolidated financial statements. 10 ELME COMMUNITIES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2026 (UNAUDITED) NOTE 1: NATURE OF BUSINESS 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 11 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. U.S. Federal Income Taxes 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. NOTE 2: 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 12 discretion. 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. NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATIONS Significant Accounting Policies We have prepared our consolidated financial statements using the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2025. Recent Accounting Pronouncements 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. The new standard will be effective for public companies for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company 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 The accompanying unaudited consolidated financial statements include the consolidated accounts of Elme Communities and our subsidiaries and entities in which Elme Communities has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation. 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 13 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 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 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. NOTE 4: 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): 14 As of December 31, 2025 Cash Payments (Receipts) Remeasurements of Assets and Liabilities As of March 31, 2026 Assets 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 Liabilities 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. NOTE 5: 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. NOTE 6: REAL ESTATE 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 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. 15 Properties Number of Units (unaudited) Elme Conyers 240 Elme Marietta 420 Elme Sandy Springs 389 1,049 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. NOTE 7: 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. 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 were 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. 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. 16 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%. NOTE 8: DERIVATIVE INSTRUMENTS During the first quarter of 2023, we entered into two interest rate swap arrangements with an aggregate notional amount of $ 125.0 million that effectively fixed the interest 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 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. NOTE 9: SHARE-BASED COMPENSATION 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. 17 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 $ 1.4 million for the 2025 Quarter. Restricted Share Awards There were no unvested restricted share awards at March 31, 2026. NOTE 10: EARNINGS PER COMMON SHARE We determine “Basic earnings per share” using the two-class method as our unvested restricted share awards and units have non-forfeitable rights to dividends, and are therefore considered participating securities. We compute basic earnings per share by dividing net income less the allocation of undistributed earnings to unvested restricted share awards and units by the weighted-average number of common shares outstanding for the period. 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. Our dilutive earnings per share calculation includes the dilutive impact of operating partnership units under the if-converted method and our share-based awards with performance conditions prior to the grant date and all market condition awards under the contingently issuable method. The computations of basic and diluted earnings per share for the three months ended March 31, 2025 were as follows (in thousands, except per share data): Three Months Ended March 31, 2025 Numerator: Net loss $ ( 4,675 ) Allocation of earnings to unvested restricted share awards ( 89 ) Adjusted net loss $ ( 4,764 ) Denominator: Weighted average shares outstanding – basic and diluted 88,064 Basic net loss per common share $ ( 0.05 ) Diluted net loss per common share $ ( 0.05 ) Dividends declared per common share $ 0.18 NOTE 11: SEGMENT INFORMATION 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, 18 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. The CODM uses net operating income (“NOI”), defined as real estate rental revenue less real estate expenses (the significant segment expense), as the key basis of measurement for the reported segment profit or loss. We evaluate performance based upon NOI of the combined properties in the segment. Our reportable operating segment consolidates similar properties. GAAP requires that segment disclosures present the measure(s) used by the CODM for purposes of assessing each segment’s performance. 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 Real estate rental revenue $ 57,007 $ 4,486 $ 61,493 Real estate expenses 20,609 1,385 21,994 Net operating income $ 36,398 $ 3,101 $ 39,499 Other expense: Property management expenses ( 2,246 ) General and administrative expenses ( 9,229 ) Depreciation and amortization ( 23,239 ) Interest expense ( 9,460 ) Net loss $ ( 4,675 ) Capital expenditures $ 5,663 $ 35 $ 5,698 Total assets $ 1,703,880 $ 123,699 $ 1,827,579 NOTE 12: SHAREHOLDERS’ EQUITY 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. LLC, KeyBanc Capital Markets Inc., TD Securities (USA) LLC and Truist Securities, Inc. 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 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. 19 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. 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. 20