Elme Communities leverages decades of experience to create value through strategic property management and redevelopment initiatives in the Washington Metro area. Its focus on diversified asset types and prime locations provides a competitive edge in attracting and retaining tenants in one of the nation's most dynamic real estate markets.As of Wednesday, shares were priced at $17.41, up 10% over the past year and well underperforming the S&P 500, which is 12% in the same period.According to a Securities and ...

Core Points - Elme Communities has announced a special liquidating distribution of $14.67 per share, to be paid on January 7, 2026, to shareholders of record as of December 22, 2025 [1][2] - This distribution follows the completion of the sale of Elme's 19-property portfolio on November 12, 2025, and is part of a voluntary Plan of Sale and Liquidation approved by shareholders [2][6] Distribution Details - The Special Dividend is more than 25% of the price of Elme's common shares, leading to the NYSE advising that shares will trade with "due bills" from December 22, 2025, to January 7, 2026 [3][4] - Investors must hold shares through the payment date to be eligible for the Special Dividend, with the record date being used for due bill tracking [4][5] Tax Implications - Information regarding the expected U.S. federal income tax consequences of the Special Dividend and additional liquidating distributions is summarized in the Definitive Proxy filed on September 24, 2025 [6] Company Overview - Elme Communities is a multifamily real estate investment trust that owns and operates apartment homes in the Washington, DC metro and the Atlanta metro [7]

Core Viewpoint - Elme Communities has completed the sale of 19 multifamily communities to Cortland Partners for $1.6 billion, marking a significant step in its Plan of Sale and Liquidation approved by shareholders [1][2]. Group 1: Portfolio Sale Details - The portfolio sale was finalized after receiving shareholder approval on October 30, 2025 [1]. - The sale is part of a broader strategy to liquidate all of the Company's assets, including nine remaining multifamily properties and Watergate 600 [2]. Group 2: Financial Arrangements - Following the portfolio sale, Elme entered into a loan agreement with Goldman Sachs for a senior secured term loan of $520 million, maturing on November 9, 2026, with a possible one-year extension [3]. - The term loan will be repaid using the net proceeds from the sales of the properties securing the loan [3]. Group 3: Shareholder Returns - Elme plans to return net proceeds from the portfolio sale and part of the new term loan to shareholders through an initial special liquidating distribution estimated between $14.50 and $14.82 per common share [4]. - The initial distribution is expected to be declared later this year and paid in January 2026, pending Board approval [4]. - Additional distributions may occur at the Board's discretion following future asset sales [4]. Group 4: Management's Focus - The Company aims to maximize shareholder value by monetizing remaining assets and plans to complete all remaining sales by June 2026 [5].

Core Points - The special meeting of Elme Communities was called to order by the Lead Independent Trustee, Benjamin Butcher [1] - The meeting's rules and technical support information were provided to participants [2] - All members of the Board of Trustees and executive officers were present, highlighting the leadership strength of Elme Communities [3]

Financial Performance - For the three months ended September 30, 2025, the net loss was $123.5 million, a significant increase of 4,058.7% compared to a net loss of $3.0 million in the same period of 2024[100] - Net operating income (NOI) decreased by 2.1% to $38.0 million in the 2025 Quarter from $38.8 million in the 2024 Quarter[100] - NAREIT Funds From Operations (FFO) dropped by 50.1% to $10.2 million in the 2025 Quarter compared to $20.5 million in the 2024 Quarter[100] - Net loss for the 2025 Quarter was $123.5 million, a significant increase of 4,058.7% compared to a net loss of $3.0 million in the 2024 Quarter[109] - Total net operating income (NOI) for the 2025 Quarter decreased by $0.8 million, or 2.1%, to $38.0 million from $38.8 million in the 2024 Quarter[109] - Residential revenue from same-store properties increased by $1.3 million, or 2.2%, to $57.7 million in the 2025 Quarter compared to $56.4 million in the 2024 Quarter[110] - Net cash provided by operating activities decreased by 12.4% to $61,935,000 in 2025 from $70,739,000 in 2024[154] - For the nine months ended September 30, 2025, NAREIT FFO was $48.796 million, down 21.5% from $62.224 million in 2024[160] - The company reported real estate impairment of $109.981 million for the nine months ended September 30, 2025, with no impairment reported in 2024[160] Occupancy and Revenue - The average occupancy for residential same-store properties decreased to 94.4% in the 2025 Quarter from 95.2% in the 2024 Quarter[101] - Average occupancy for same-store residential properties decreased to 94.4% in the 2025 Quarter from 95.2% in the 2024 Quarter, a decline of 0.8%[111] - Residential expenses as a percentage of residential revenue increased to 39.4% in the 2025 Quarter from 36.9% in the 2024 Quarter[112] - Residential revenue from same-store properties for the 2025 Period increased by $5.6 million, or 3.3%, to $172.4 million compared to $166.8 million in the 2024 Period[122] - Real estate expenses from same-store properties increased by $2.8 million, or 4.5%, to $64.4 million for the 2025 Period compared to $61.6 million in the 2024 Period[126] Debt and Financing - The company entered into a Purchase Agreement for a Portfolio Sale Transaction valued at approximately $1.61 billion[94] - The company plans to repay all outstanding amounts under its credit facilities and notes concurrently with the consummation of the Portfolio Sale Transaction[98] - A commitment for debt financing of $520 million has been secured, contingent on the closing of the Portfolio Sale Transaction[99] - The company has no debt maturities scheduled until 2026, indicating a stable capital structure in the near term[104] - The company has no debt maturities until 2026 and only $361 million of scheduled debt maturities prior to 2029[135] - The total unsecured fixed-rate debt outstanding as of September 30, 2025, was $525 million, with a weighted average interest rate of 4.9%[163] - The company has a variable rate debt of $186 million, with a variable interest rate of 5.3%[163] - Interest payments for the unsecured fixed-rate debt for 2025 are projected to be $1.803 million, increasing to $18.189 million in 2026[163] - The company has entered into interest rate swap arrangements to hedge against interest rate fluctuations, with a total notional amount of $225 million as of September 30, 2025[165] - The fair value of interest rate swap contracts as of September 30, 2025, was $(315,000), indicating a liability position[165] Expenses and Impairments - General and administrative expenses rose by $7.7 million, or 121.3%, primarily due to higher professional fees related to proposed transactions[115] - Real estate impairment charge of $111.7 million was recorded in the 2025 Quarter, compared to no impairment in the 2024 Quarter[121] - The company incurred a real estate impairment charge of $111.7 million during the 2025 Period[132] Compliance and Governance - As of September 30, 2025, the company was in compliance with the covenants related to its Amended Credit Agreement, 2023 Term Loan, and unsecured notes[147] - The company has authorized the issuance of 150 million common shares, with 88.2 million shares outstanding as of September 30, 2025[148] - The company suspended its dividend reinvestment program in September 2025, meaning dividends will not be automatically reinvested during the suspension period[151] Liquidity - As of September 30, 2025, the company had cash and cash equivalents of $2.2 million and a borrowing capacity of $300 million, resulting in a total liquidity position of $302.2 million[135] - The weighted average interest rate for the line of credit decreased to 5.4% in 2025 from 6.3% in 2024, despite higher average borrowings of $183.1 million in 2025 compared to $166.2 million in 2024[133] Tax Legislation - Recent tax legislation may impact the company, including a permanent extension of the 20% deduction for qualified REIT dividends[105] Investment Activity - There were no significant investment transactions during the 2025 Period[103] - The company expects to invest approximately $28.0 - $33.0 million in its existing portfolio of operating assets, including $14.0 - $18.0 million for major capital expenditures[138]

Financial Performance - Elme Communities reported a net loss per diluted share of $1.40 for Q3 2025, compared to a loss of $0.03 in Q3 2024[4]. - For the three months ended September 30, 2025, Elme Communities reported a net loss of $123.514 million compared to a net loss of $2.970 million for the same period in 2024[24]. - The company reported a net loss of $131.8 million for the nine months ended September 30, 2025, compared to a net loss of $10.1 million in the same period of 2024, reflecting a significant increase in losses[47]. - The company reported a net loss of $131,755,000 for the nine months ended September 30, 2025, compared to a net loss of $10,088,000 for the same period in 2024[50]. Revenue and Income Metrics - Real estate rental revenue for Q3 2025 was $62.1 million, an increase from $61.1 million in Q3 2024[20]. - Real estate rental revenue for the nine months ended September 30, 2025, was $185.7 million, up from $180.7 million in the same period of 2024, representing a growth of 0.6%[47]. - Total rental and other property revenues for the nine months ended September 30, 2025, reached $172,377, a 3.3% increase compared to $166,790 for the same period in 2024[57]. - The total Net Operating Income (NOI) for the nine months ended September 30, 2025, was $116.900 million, compared to $114.712 million in 2024[24]. - Same-store multifamily NOI decreased by 1.8% year-over-year, primarily due to higher operating expenses[7]. Funds from Operations - Core FFO per diluted share was $0.22, slightly down from $0.23 in the prior year[4]. - The NAREIT FFO (Basic) for the three months ended September 30, 2025, was $0.12, a decrease from $0.23 in 2024[25]. - Core funds from operations for the three months ended September 30, 2025, were $19.497 million, down from $20.664 million in 2024[25]. - Funds from operations (FFO) for the nine months ended September 30, 2025, were $48,796,000, down 21.6% from $62,224,000 for the same period in 2024[50]. Assets and Liabilities - Total assets as of September 30, 2025, were $1.686 billion, down from $1.846 billion as of December 31, 2024[23]. - The total liabilities increased to $777.680 million as of September 30, 2025, compared to $763.684 million at the end of 2024[23]. - Total liabilities as of September 30, 2025, were $777,680,000, an increase of 3.2% from $754,186,000 on September 30, 2024[49]. - Total shareholders' equity decreased to $908,905,000 as of September 30, 2025, down from $1,098,690,000 on September 30, 2024, a decline of 17.3%[49]. Debt and Liquidity - Available liquidity as of September 30, 2025, was $321 million, consisting of cash and availability under the revolving credit facility[7]. - Year-to-date Net Debt to Adjusted EBITDA ratio was 5.7x, with only $125 million of debt maturing before 2028[7]. - The total long-term debt outstanding as of September 30, 2025, was $709.329 million, with a weighted average interest rate of 4.9%[71]. - The average interest rate on total debt is 4.9%, with scheduled principal payments totaling $711 million[77]. - The company has a revolving credit facility of $500 million that matures in July 2028, with two six-month extension options[78]. Dividends - The company paid a quarterly dividend of $0.18 per share on October 3, 2025, but does not intend to declare future dividends if the liquidation plan is approved[10]. - The company declared a common dividend per share of $0.54 for the nine months ended September 30, 2025, unchanged from the same period in 2024[51]. - The total dividends declared for the nine months ended September 30, 2025, amounted to $47.8 million[85]. Operating Metrics - Average occupancy for the same-store multifamily portfolio was 94.4%, down 0.8% from the prior year[7]. - The average effective monthly rent per home increased by 1.1% to $1,921 in Q3 2025 from $1,900 in Q3 2024[57]. - Total same-store operating expenses for Q3 2025 were $22,644, reflecting a 9.1% increase from $20,759 in Q3 2024[59]. - The operating margin for same-store properties remained stable at 63% for both Q3 2025 and Q3 2024[56]. Impairment and Charges - The company recognized an impairment charge of $111.7 million during the quarter related to properties not included in the portfolio sale[9]. - Real estate impairment for the three months ended September 30, 2025, was $111.719 million, with no impairment recorded in the same period of 2024[24]. - Real estate impairment for depreciable assets was reported at $109,981,000 for the nine months ended September 30, 2025[50]. Community and Property Details - The total multifamily communities consist of 9,374 apartment homes with an average occupancy of 94.6% and an ending occupancy of 94.1%[62]. - The Riverside Apartments in Alexandria, VA, contributed 13% to the total portfolio NOI, with an ending occupancy of 95.0%[62]. - The Elme Druid Hills community in Atlanta, GA, had an average occupancy of 93.5% and an ending occupancy of 93.4%[62]. - The Elme Marietta community experienced a fire on March 24, 2024, resulting in 24 down units, with 15 units placed back into service by September 30, 2025[64].

Financial Results - Elme Communities reported a net loss per diluted share of $1.40 for the quarter ended September 30, 2025, compared to a loss of $0.03 in the same quarter of 2024 [1] - Core Funds From Operations (FFO) per diluted share was $0.22, slightly down from $0.23 in the prior year [1] Operational Highlights - Same-store multifamily Net Operating Income (NOI) decreased by 1.8% year-over-year, primarily due to higher operating expenses [7][8] - Average occupancy for the same-store multifamily portfolio was 94.4%, down 0.8% compared to the prior year [7][8] - The average effective monthly rent per home increased by 1.1% compared to the prior year [7] Balance Sheet - As of September 30, 2025, available liquidity was $321 million, consisting of cash on hand and availability under the revolving credit facility [7] - The year-to-date Net Debt to Adjusted EBITDA ratio was 5.7x, with only $125 million of debt maturing before 2028 [7] Portfolio Sale and Liquidation Plan - Elme has entered into a Purchase and Sale Agreement for the sale of 19 multifamily communities for approximately $1.6 billion [4] - The Board of Trustees approved a voluntary plan of sale and liquidation, subject to shareholder approval at a special meeting on October 30, 2025 [4] Impairments - The company recognized an impairment charge of $111.7 million related to several properties not included in the Portfolio Sale Transaction, due to estimated cash flows being less than their carrying values [9] Dividends - On October 3, 2025, Elme paid a quarterly dividend of $0.18 per share, but does not intend to declare future dividends if the Plan of Sale and Liquidation is approved [10]

Core Insights - Elme Communities will release its third quarter earnings results on October 23rd, 2025, after market close [1] - The company will not hold a conference call following the earnings release [1] Company Overview - Elme Communities is a multifamily real estate investment trust (REIT) focused on owning and operating apartment homes in the Washington, DC metro and Atlanta metro areas [2] - The company aims to enhance the quality, service, and experience of home living [2]

Core Thesis - Elme Communities has opted for full liquidation after years of disappointing shareholder returns, selling 19 properties to Cortland for $1.6 billion, with remaining assets to be marketed separately [2][4] Financial Overview - As of September 18, Elme Communities' share was trading at $16.93, with a trailing P/E of 38.57 [1] - Shareholders will receive an initial special distribution of $14.50 to $14.82 per share, along with a $0.18 quarterly dividend payable on October 3, 2025 [2] - Future distributions are projected at $2.90 to $3.50 per share, indicating a total payout that implies a 7% to 12.6% upside from current levels [3] Investment Potential - Based on the September 19 closing price of $16.46, investors are expected to recoup approximately 89% to 91% of value via the initial distribution by year-end [3] - Conservative assumptions suggest potential IRRs of 14% to 26%, making the liquidation attractive for event-driven and special situation investors [3][4] Market Position - Elme's apartment portfolio is concentrated in the Washington, D.C. and Atlanta markets, primarily consisting of older assets included in the Cortland deal [4] - The primary $1.6 billion transaction appears low risk due to Cortland's credible track record, although risks include potential delays in liquidation or lower-than-expected proceeds from remaining asset sales [4]

[Part I: Financial Information](index=4&type=section&id=Part%20I%3A%20Financial%20Information) [Item 1. Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Details Elme Communities' unaudited consolidated financial statements, including balance sheets, income, equity, and cash flows, with notes on strategic developments [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Presents a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total assets | $1,845,762 | $1,810,204 | $(35,558) | -1.93% | | Total liabilities | $763,684 | $763,734 | $50 | 0.01% | | Total equity | $1,082,078 | $1,046,470 | $(35,608) | -3.29% | | Net income producing property | $1,765,034 | $1,735,430 | $(29,604) | -1.68% | | Cash and cash equivalents | $6,144 | $4,786 | $(1,358) | -22.10% | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Summarizes the company's revenues, expenses, and net loss over specific reporting periods | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change | % Change | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :------- | :-------------------------- | :-------------------------- | :----- | :------- | | Real estate rental revenue | $62,099 | $60,103 | $1,996 | 3.32% | $123,592 | $119,616 | $3,976 | 3.32% | | Total expenses | $56,167 | $54,190 | $1,977 | 3.65% | $112,875 | $109,266 | $3,609 | 3.30% | | Net loss | $(3,566) | $(3,471) | $(95) | 2.74% | $(8,241) | $(7,118) | $(1,123) | 15.78% | | Basic net loss per common share | $(0.04) | $(0.04) | $0.00 | 0.00% | $(0.10) | $(0.08) | $(0.02) | 25.00% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Details the company's net loss and other comprehensive income items, such as unrealized gains or losses on hedges | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | Change | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :-------------------------- | :-------------------------- | :----- | | Net loss | $(3,566) | $(3,471) | $(95) | $(8,241) | $(7,118) | $(1,123) | | Unrealized gain (loss) on interest rate hedges | $334 | $(796) | $1,130 | $423 | $(713) | $1,136 | | Reclassification of unrealized loss on interest rate derivatives to earnings | $509 | $510 | $(1) | $1,019 | $1,020 | $(1) | | Comprehensive loss | $(2,723) | $(3,757) | $1,034 | $(6,799) | $(6,811) | $12 | [Consolidated Statements of Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Equity) Outlines changes in the company's total equity, including net loss, dividends, and share grants | Metric (in thousands) | Dec 31, 2024 | Jun 30, 2025 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Equity | $1,082,078 | $1,046,470 | $(35,608) | | Net loss (6 months) | N/A | $(8,241) | N/A | | Dividends paid (6 months) | N/A | $(31,890) | N/A | | Share grants, net (6 months) | N/A | $3,085 | N/A | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Reports the cash generated and used by operating, investing, and financing activities over specific periods | Metric (in thousands) | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Net cash provided by operating activities | $46,023 | $50,073 | $(4,050) | -8.1% | | Net cash used in investing activities | $(14,451) | $(17,684) | $3,233 | -18.3% | | Net cash used in financing activities | $(33,088) | $(33,035) | $(53) | 0.2% | | Net decrease in cash, cash equivalents and restricted cash | $(1,516) | $(646) | $(870) | 134.67% | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and additional information supporting the consolidated financial statements [NOTE 1: NATURE OF BUSINESS](index=11&type=section&id=NOTE%201%3A%20NATURE%20OF%20BUSINESS) Describes the company's primary operations as an equity REIT and outlines significant strategic transactions - Elme Communities is a self-administered equity REIT, primarily owning apartment communities in the greater Washington, DC metro and Sunbelt regions[27](index=27&type=chunk) - The company entered into a Purchase Agreement on August 1, 2025, to sell 19 multifamily properties for an aggregate purchase price of **$1.6 billion**, subject to customary adjustments[30](index=30&type=chunk) - A Plan of Sale and Liquidation has been approved by the board of trustees, providing for the company's complete liquidation and dissolution, both subject to shareholder approval[31](index=31&type=chunk)[32](index=32&type=chunk) - A commitment letter for **$520 million** in debt financing (or **$565 million** if one property is excluded) has been obtained from Goldman Sachs Bank USA, secured by remaining real estate assets, contingent on the Portfolio Sale Transaction closing[33](index=33&type=chunk)[34](index=34&type=chunk) [NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATIONS](index=12&type=section&id=NOTE%202%3A%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES%20AND%20BASIS%20OF%20PRESENTATIONS) Outlines the key accounting policies and principles used in preparing the consolidated financial statements - The company adopted ASU 2023-07, 'Segment Reporting - Improvements to Reportable Segments Disclosures,' in fiscal year 2024[36](index=36&type=chunk) - The company is currently evaluating the impact of ASU 2024-03, 'Disaggregation of Income Statement Expenses,' effective for public companies for fiscal years beginning after December 15, 2026[37](index=37&type=chunk) - Consolidated financial statements include Elme Communities and its subsidiaries, with all intercompany balances and transactions eliminated[38](index=38&type=chunk) [NOTE 3: REAL ESTATE](index=13&type=section&id=NOTE%203%3A%20REAL%20ESTATE) Details the company's real estate investments, including development projects and property sales - Investment in residential development adjacent to Riverside Apartments: **$30.4 million** as of June 30, 2025, with development activities paused since Q2 2022[43](index=43&type=chunk) - No properties were sold or classified as held for sale during the 2025 Period or in 2024[45](index=45&type=chunk) - No impairment charges were recognized during the 2025 Quarter[46](index=46&type=chunk) [NOTE 4: UNSECURED LINE OF CREDIT PAYABLE](index=13&type=section&id=NOTE%204%3A%20UNSECURED%20LINE%20OF%20CREDIT%20PAYABLE) Provides details on the company's revolving credit facility, including capacity, outstanding borrowings, and interest rates - Amended and Restated Revolving Credit Facility: **$500.0 million** committed capacity, maturing July 2028[47](index=47&type=chunk) - Borrowings outstanding as of June 30, 2025: **$175.0 million**[50](index=50&type=chunk) - Unused and available capacity as of June 30, 2025: **$325.0 million**[50](index=50&type=chunk) - Interest rate as of June 30, 2025: Adjusted Daily Simple SOFR (**4.45%**) + **0.85%** margin + **0.10%** credit spread adjustment[48](index=48&type=chunk) [NOTE 5: NOTES PAYABLE](index=14&type=section&id=NOTE%205%3A%20NOTES%20PAYABLE) Details the company's unsecured term loan, including its principal amount, maturity, and effective interest rate - The 2023 Term Loan is a **$125.0 million** unsecured term loan[51](index=51&type=chunk) - Maturity extended to January 10, 2026, using a one-year extension option[53](index=53&type=chunk) - Interest rate effectively fixed at **5.77%** through interest rate swap arrangements until maturity[53](index=53&type=chunk) [NOTE 6: DERIVATIVE INSTRUMENTS](index=14&type=section&id=NOTE%206%3A%20DERIVATIVE%20INSTRUMENTS) Explains the company's use of interest rate swap arrangements to manage variable rate debt exposure - Two forward interest rate swap arrangements with an aggregate notional amount of **$150.0 million** became effective January 10, 2025, and expire January 10, 2026[55](index=55&type=chunk) - These swaps effectively fix a portion of variable rate debt at **4.72%** and the 2023 Term Loan's interest rate at **5.77%**[55](index=55&type=chunk) - Fair value of interest rate swaps as of June 30, 2025: **$(490) thousand** (net liability)[57](index=57&type=chunk) - Estimated reclassification to interest expense in the next twelve months: **$0.5 million** from outstanding swaps and **$2.0 million** from previously settled swaps[57](index=57&type=chunk)[58](index=58&type=chunk) [NOTE 7: FAIR VALUE DISCLOSURES](index=15&type=section&id=NOTE%207%3A%20FAIR%20VALUE%20DISCLOSURES) Provides information on assets and liabilities measured at fair value, categorized by valuation input levels - Assets measured at fair value on a recurring basis: SERP investments (Level 1) and interest rate derivatives (Level 2)[62](index=62&type=chunk)[63](index=63&type=chunk) Fair Value of Assets and Liabilities (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :-------------------------- | :-------------------------- | | SERP assets | $3,008 | $2,648 | | Interest rate swaps (net liability) | $(490) | $(913) | - Financial assets and liabilities not measured at fair value: Cash and cash equivalents, restricted cash (Level 1), Line of credit, Notes payable (Level 3)[66](index=66&type=chunk)[67](index=67&type=chunk) [NOTE 8: SHARE-BASED COMPENSATION](index=17&type=section&id=NOTE%208%3A%20SHARE-BASED%20COMPENSATION) Details the compensation expense related to share-based awards and information on unvested restricted shares Share-Based Compensation Expense (in thousands) | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total compensation expense | $1,700 | $1,000 | $3,100 | $2,100 | - Unvested restricted share awards at June 30, 2025: **490,833 shares**, with a weighted average grant date fair value of **$15.81 per share**[70](index=70&type=chunk) - Total compensation cost related to unvested awards: **$5.1 million**, expected to be recognized over a weighted average period of **21 months**[70](index=70&type=chunk) [NOTE 9: EARNINGS PER COMMON SHARE](index=17&type=section&id=NOTE%209%3A%20EARNINGS%20PER%20COMMON%20SHARE) Presents basic and diluted net loss per common share, along with dividends declared per common share Earnings Per Common Share | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic net loss per common share | $(0.04) | $(0.04) | $(0.10) | $(0.08) | | Diluted net loss per common share | $(0.04) | $(0.04) | $(0.10) | $(0.08) | | Dividends declared per common share | $0.18 | $0.18 | $0.36 | $0.36 | [NOTE 10: SEGMENT INFORMATION](index=18&type=section&id=NOTE%2010%3A%20SEGMENT%20INFORMATION) Identifies the company's primary reportable segment and the key performance measure used by management - The company operates primarily in a single reportable segment: Residential (apartment communities)[75](index=75&type=chunk) - Watergate 600, an office property, is classified within 'Other' and does not meet reportable segment criteria[76](index=76&type=chunk) - Net Operating Income (NOI) is the key performance measure used by the Chief Operating Decision Maker (CODM)[77](index=77&type=chunk) Residential and Total NOI (in thousands) | Period | Residential NOI 2025 | Residential NOI 2024 | Residential NOI Change | Residential NOI % Change | Total NOI 2025 | Total NOI 2024 | Total NOI Change | Total NOI % Change | | :----- | :------------------- | :------------------- | :--------------------- | :----------------------- | :------------- | :------------- | :--------------- | :--------------- | | Q2 | $36,422 | $34,870 | $1,552 | 4.5% | $39,437 | $38,121 | $1,316 | 3.5% | | 6 Months | $72,820 | $69,383 | $3,437 | 5.0% | $78,936 | $75,915 | $3,021 | 4.0% | [NOTE 11: SHAREHOLDERS' EQUITY](index=20&type=section&id=NOTE%2011%3A%20SHAREHOLDERS%27%20EQUITY) Details the company's equity distribution agreements and share issuance activities - The company has an Equity Distribution Agreement allowing for the sale of up to **$350.0 million** of common shares[81](index=81&type=chunk) - No common shares were issued under the Equity Distribution Agreement or any prior equity distribution agreements during the 2025 Period or 2024 Period[82](index=82&type=chunk) - No common shares were issued under the dividend reinvestment program during the 2025 Period or 2024 Period[83](index=83&type=chunk) [NOTE 12: SUBSEQUENT EVENTS](index=20&type=section&id=NOTE%2012%3A%20SUBSEQUENT%20EVENTS) Reports significant events occurring after the reporting period, including a major property sale and liquidation plan - Subsequent to quarter-end, the company entered into a Purchase Agreement on August 1, 2025, to sell 19 multifamily properties for an aggregate purchase price of **$1.6 billion**[84](index=84&type=chunk) - In connection with the Purchase Agreement, the board of trustees approved a Plan of Sale and Liquidation, providing for the company's complete liquidation and dissolution, both subject to shareholder approval[85](index=85&type=chunk)[86](index=86&type=chunk) - A commitment letter for **$520 million** in debt financing was secured from Goldman Sachs Bank USA, contingent on the Portfolio Sale Transaction closing, to be secured by remaining real estate assets[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operational results, focusing on the proposed Portfolio Sale and Liquidation, liquidity, capital, and FFO [General](index=22&type=section&id=General) Provides an overview of the company's property portfolio and outlines recent strategic developments and tax legislation impacts - The company owns approximately **9,400 residential apartment homes** in the Washington, DC and Atlanta metro regions, and **300,000 square feet of commercial space** in the Washington, DC metro region[92](index=92&type=chunk) - Subsequent to quarter end, the company entered into a Purchase Agreement to sell 19 multifamily properties for **$1.6 billion**, subject to shareholder approval and customary closing conditions[93](index=93&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk) - The board of trustees approved a Plan of Sale and Liquidation, providing for the company's complete liquidation and dissolution, also subject to shareholder approval[96](index=96&type=chunk)[97](index=97&type=chunk) - A commitment for **$520 million** (or **$565 million**) in debt financing was obtained from Goldman Sachs Bank USA, secured by remaining real estate assets, contingent on the Portfolio Sale Transaction closing[99](index=99&type=chunk) - No significant investment transactions occurred during the 2025 Period[104](index=104&type=chunk) - Recent tax legislation includes a permanent extension of the **20% deduction** for 'qualified REIT dividends,' an increase in the TRS asset test limit to **25%**, and a change in the interest deduction limit calculation (based on EBITDA rather than EBIT)[106](index=106&type=chunk) [Operating Results Summary](index=23&type=section&id=Operating%20Results%20Summary) Summarizes key financial metrics including net loss, NOI, and NAREIT FFO, highlighting factors influencing changes Operating Results Summary (in thousands) | Metric (in thousands) | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | $ Change | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Net loss | $(3,566) | $(3,471) | $(95) | 2.7% | | NOI | $39,437 | $38,121 | $1,316 | 3.5% | | NAREIT FFO | $19,994 | $20,424 | $(430) | (2.1)% | - Increase in net loss primarily due to higher general and administrative expenses (**$1.6 million**) and interest expense (**$0.1 million**), partially offset by lower depreciation and amortization (**$0.3 million**) and higher NOI (**$1.3 million**)[100](index=100&type=chunk) - Increase in NOI primarily due to higher NOI from same-store properties (**$1.6 million**), driven by higher rental rates. Residential same-store average occupancy increased to **94.7%** from **94.5%**[101](index=101&type=chunk) - Decrease in NAREIT FFO primarily due to higher general and administrative expenses (**$1.6 million**) and property management expenses (**$0.1 million**), partially offset by higher NOI (**$1.3 million**)[102](index=102&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, focusing on Net Operating Income and period-over-period comparisons [Net Operating Income (NOI)](index=25&type=section&id=Net%20Operating%20Income) Defines Net Operating Income (NOI) as a non-GAAP measure and its significance in assessing property-level performance - NOI is a non-GAAP measure, defined as real estate rental revenue less direct real estate operating expenses[109](index=109&type=chunk) - It is the primary performance measure for property-level operations, reflecting trends in occupancy, rental rates, and operating costs on an unleveraged basis[109](index=109&type=chunk) [2025 Quarter Compared to 2024 Quarter](index=25&type=section&id=2025%20Quarter%20Compared%20to%202024%20Quarter) Compares the company's financial performance for the three months ended June 30, 2025, against the prior year Quarterly Performance Comparison (in thousands) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | $ Change | % Change | | :----- | :-------------------------- | :-------------------------- | :------- | :------- | | Net loss | $(3,566) | $(3,471) | $(95) | 2.7% | | Total NOI | $39,437 | $38,121 | $1,316 | 3.5% | - Residential revenue from same-store properties increased by **$2.2 million** (**3.9%**) to **$57.7 million**, driven by higher rental income (**$0.8 million**), lower vacancy loss (**$0.6 million**), and higher recoveries (**$0.3 million**)[112](index=112&type=chunk) - Residential expenses from same-store properties increased by **$0.6 million** (**3.1%**) to **$21.2 million**, primarily due to higher repairs and maintenance (**$0.2 million**) and utilities (**$0.2 million**)[115](index=115&type=chunk) - Residential NOI from same-store properties increased by **$1.6 million** (**4.5%**) to **$36.5 million**[111](index=111&type=chunk) - Same-store average occupancy increased to **94.7%** as of June 30, 2025, from **94.5%** as of June 30, 2024[113](index=113&type=chunk) - General and administrative expenses increased by **$1.6 million** (**25.3%**) to **$7.7 million**, mainly due to higher professional fees (**$0.8 million**) and incentive compensation (**$1.0 million**)[117](index=117&type=chunk) - Interest expense increased by **$0.1 million** (**1.2%**) to **$9.5 million**, with notes payable interest up **$0.3 million** (**4.4%**) and line of credit interest down **$0.2 million** (**4.8%**) due to a lower weighted average interest rate[118](index=118&type=chunk)[119](index=119&type=chunk) [2025 Period Compared to 2024 Period](index=28&type=section&id=2025%20Period%20Compared%20to%202024%20Period) Compares the company's financial performance for the six months ended June 30, 2025, against the prior year Six-Month Performance Comparison (in thousands) | Metric | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | $ Change | % Change | | :----- | :-------------------------- | :-------------------------- | :------- | :------- | | Net loss | $(8,241) | $(7,118) | $(1,123) | 15.8% | | Total NOI | $78,936 | $75,915 | $3,021 | 4.0% | - Real estate rental revenue from same-store residential properties increased by **$4.3 million** (**3.9%**) to **$114.7 million**, primarily due to higher rental income (**$1.7 million**), lower vacancy loss (**$1.0 million**), and higher ancillary income (**$0.5 million**)[122](index=122&type=chunk) - Real estate expenses from same-store residential properties increased by **$0.9 million** (**2.2%**) to **$41.7 million**, mainly due to higher repairs and maintenance (**$0.4 million**) and utilities (**$0.3 million**), partially offset by lower real estate taxes (**$0.4 million**)[126](index=126&type=chunk) - Residential NOI from same-store properties increased by **$3.4 million** (**5.0%**) to **$72.9 million**[121](index=121&type=chunk) - Same-store average occupancy increased to **94.7%** from **94.4%**[123](index=123&type=chunk) - General and administrative expenses increased by **$4.6 million** (**37.2%**) to **$16.9 million**, primarily due to higher professional fees (**$3.2 million**) related to strategic alternatives review and higher incentive compensation (**$1.5 million**)[129](index=129&type=chunk) - Interest expense increased by **$0.1 million** (**0.4%**) to **$19.0 million**, with notes payable interest up **$0.5 million** (**4.0%**) and line of credit interest down **$0.4 million** (**6.1%**) due to a lower weighted average interest rate[131](index=131&type=chunk)[132](index=132&type=chunk) - Other income decreased by **$1.4 million** (**100%**) due to the absence of payments received for land easements in 2025[131](index=131&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's ability to meet short-term and long-term financial obligations and fund operations - As of August 1, 2025, if the Proposed Transactions are not approved, the company's total liquidity position is **$312.2 million**, comprising **$6.2 million** in cash and cash equivalents and **$306.0 million** in available borrowing capacity on its revolving credit facility[134](index=134&type=chunk) - Full-year 2025 capital requirements include funding dividends (regular quarterly distributions expected to be suspended post-sale) and approximately **$29.0 - $34.0 million** for existing portfolio capital improvements[137](index=137&type=chunk) Debt Maturities as of June 30, 2025 (in thousands) | Year | Unsecured Debt | Amended and Restated Revolving Credit Facility | Total Debt | Average Interest Rate | | :--- | :------------- | :--------------------------------------------- | :--------- | :-------------------- | | 2025 | $— | $— | $— | —% | | 2026 | $125,000 | $— | $125,000 | 5.8% | | 2027 | $— | $— | $— | —% | | 2028 | $50,000 | $175,000 | $225,000 | 5.8% | | 2029 | $— | $— | $— | —% | | Thereafter | $350,000 | $— | $350,000 | 4.1% | | **Total Scheduled Principal Payments** | **$525,000** | **$175,000** | **$700,000** | **4.9%** | - The weighted average maturity for the company's debt is **3.8 years** as of June 30, 2025[140](index=140&type=chunk) - The company was in compliance with all debt covenants related to its Amended Credit Agreement, 2023 Term Loan, and unsecured notes as of June 30, 2025[146](index=146&type=chunk) - Net cash provided by operating activities decreased by **8.1%** for the six months ended June 30, 2025, to **$46.0 million**, primarily due to a higher net loss[153](index=153&type=chunk) - No off-balance sheet arrangements as of June 30, 2025[156](index=156&type=chunk) [Funds From Operations](index=34&type=section&id=Funds%20From%20Operations) Defines NAREIT FFO as a non-GAAP measure and its role in evaluating the company's operating performance and financial capacity - NAREIT FFO is a non-GAAP measure used to assess operating performance by excluding real estate depreciation and amortization, providing an indication of the company's ability to incur and service debt, make capital expenditures, and fund other needs[158](index=158&type=chunk) NAREIT FFO (in thousands) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(3,566) | $(3,471) | $(8,241) | $(7,118) | | Depreciation and amortization | $23,560 | $23,895 | $46,799 | $48,838 | | **NAREIT FFO** | **$19,994** | **$20,424** | **$38,558** | **$41,720** | [Critical Accounting Estimates](index=34&type=section&id=Critical%20Accounting%20Estimates) Confirms that no changes were made to critical accounting policies or estimates during the reporting period - No changes were made by management to the critical accounting policies or estimates during the three and six months ended June 30, 2025[160](index=160&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Details the company's primary market risk as interest rate risk, managed through fixed-rate debt and interest rate swaps - The principal material financial market risk to which the company is exposed is interest rate risk, primarily related to refinancing long-term fixed-rate obligations and its variable rate line of credit[162](index=162&type=chunk) Debt Outstanding as of June 30, 2025 (in thousands) | Debt Type | Principal | Interest Payments (2025-Thereafter) | Weighted Average Interest Rate | | :-------------------- | :-------- | :---------------------------------- | :----------------------------- | | Unsecured fixed rate debt | $525,000 | $93,574 | 4.9% | | Unsecured variable rate debt | $175,000 | N/A | 5.3% | | **Total** | **$700,000** | **N/A** | **4.9%** | - The company uses interest rate swap arrangements, designated as cash flow hedges, to reduce exposure to variability in future cash flows attributable to changes in interest rates[164](index=164&type=chunk) - The fair value of interest rate swap contracts in place as of June 30, 2025, was a net liability of **$(490) thousand**[165](index=165&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls and procedures, with no material changes in internal control over financial reporting - The company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[168](index=168&type=chunk) - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the period[169](index=169&type=chunk) [Part II: Other Information](index=37&type=section&id=Part%20II%3A%20Other%20Information) [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) No legal proceedings were reported by the company during the period - No legal proceedings were reported[172](index=172&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, focusing on the proposed Portfolio Sale and Liquidation, including completion risks, expenses, distribution uncertainty, and REIT status impacts - The proposed Portfolio Sale Transaction and Plan of Sale and Liquidation present certain risks to the company's current business and operations[174](index=174&type=chunk) - Key risks include: failure to complete the Portfolio Sale Transaction, substantial expenses (whether or not completed), adverse effects on business operations due to pendency, and potential shareholder litigation[175](index=175&type=chunk)[178](index=178&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - There is uncertainty regarding the amount or timing of distributions to shareholders due to factors such as operational costs, liquidation time, financial obligations, and transaction costs[177](index=177&type=chunk)[179](index=179&type=chunk) - The Purchase Agreement significantly limits the company's ability to pursue alternatives to the Portfolio Sale Transaction and includes a potential termination fee of up to **$37.5 million**[186](index=186&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - The sale of properties may cause the company to incur penalty taxes or fail to maintain its REIT status, which would reduce the amount available for distribution to shareholders[193](index=193&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the authorized share repurchase program of **$50.0 million**, noting no shares were repurchased during the second quarter of 2025 - A share repurchase program of up to **$50.0 million** of common shares was authorized, scheduled to expire on October 25, 2025[199](index=199&type=chunk) - No shares were repurchased under the program during the 2025 Quarter[199](index=199&type=chunk) [Item 3. Defaults upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) No defaults upon senior securities were reported by the company - No defaults upon senior securities[200](index=200&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were reported by the company - No mine safety disclosures[201](index=201&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) No trustee or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the second quarter of 2025 - No trustee or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2025[202](index=202&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including key agreements for the proposed Portfolio Sale and Liquidation, and various certifications - Key exhibits include the Purchase and Sale Agreement (Exhibit 2.1), Plan of Sale and Liquidation (Exhibit 2.2), Commitment Letter (Exhibit 10.1), and Certifications of the Chief Executive Officer, Chief Financial Officer, and Chief Administrative Officer (Exhibits 31.1, 31.2, 31.3, and 32)[204](index=204&type=chunk) [Signatures](index=42&type=section&id=Signatures) The report is signed by Elme Communities' President and CEO, EVP and CFO, and SVP, Chief Administrative Officer and Treasurer - The report is signed by Paul T. McDermott (President and Chief Executive Officer), Steven M. Freishtat (Executive Vice President and Chief Financial Officer), and W. Drew Hammond (Senior Vice President, Chief Administrative Officer and Treasurer)[206](index=206&type=chunk)