Elme Communities (NYSE: ELME) advances liquidation, targets late‑2026 wind‑down
Elme Communities is executing a shareholder‑approved Plan of Sale and Liquidation and reports under the liquidation basis of accounting. Net assets in liquidation were $167.7 million as of June 30, 2026, down from $238.9 million at December 31, 2025, mainly from lower estimated property liquidation values and remeasurement of assets and liabilities.
Following a $1.6 billion portfolio sale in November 2025, Elme paid a special liquidating distribution of $14.67 per share on January 7, 2026. In 2026 it sold four properties for aggregate gross proceeds of approximately $199.0 million and, in the 2026 Quarter, two additional properties for about $95.0 million, applying portions of the proceeds to repay its senior secured term loan, which had $251.0 million outstanding at June 30, 2026 at an interest rate of roughly 6.38%.
As of June 30, 2026 Elme owned four Washington, DC–area multifamily assets with a combined liquidation value of $418.0 million and had signed purchase and sale agreements for three of them totaling about $168.0 million, plus a new $250.0 million contract for Riverside Apartments, all subject to inspections, regulatory requirements and other closing conditions. The company held about $41.3 million of cash and $17.3 million of restricted cash, and accrued $36.6 million of liabilities for estimated costs in excess of receipts during liquidation. On July 24, 2026, it estimated remaining liquidating distributions of $1.74–$1.94 per share, implying total liquidating distributions of $16.41–$16.61 per share including the initial payment, while cautioning that actual amounts and timing may differ.
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Filing Explained
Remaining distributions depend on asset sales and liability settlement, with delisting and dissolution currently expected in the fourth quarter of 2026.
The filing presents Elme’s ongoing liquidation using a liquidation-basis statement of net assets: assets are shown at estimated net realizable value and liabilities at contractual or estimated settlement amounts, so reported net assets represent an estimate of what may remain for shareholders after the wind-down.
As a result, the current filing does not provide 2026 statements of operations, equity, or cash flows; those statements are presented only for 2025 comparative periods. Elme also reports that no common shares were issued under its equity distribution agreement or dividend reinvestment program during 2026, and both programs were terminated, so those programs produced no disclosed new-share issuance.
The secured term loan of
Key Figures
Net assets in liquidation: $167.7 million
Liquidation value of income producing property: $418.0 million
Secured Term Loan outstanding: $251.0 million
+5 more
8 metrics
Net assets in liquidation
$167.7 million
Estimated amount available to shareholders as of June 30, 2026
Liquidation value of income producing property
$418.0 million
Value of four multifamily properties as of June 30, 2026
Secured Term Loan outstanding
$251.0 million
Senior secured term loan balance as of June 30, 2026
Secured Term Loan interest rate
6.38%
One‑month term SOFR plus 2.75% margin at June 30 and July 30, 2026
Cash and cash equivalents
$41.3 million
Unrestricted cash balance as of June 30, 2026
Restricted cash
$17.3 million
Lender‑controlled reserves under the Secured Term Loan at June 30, 2026
Initial liquidating distribution
$14.67 per share
Special liquidating distribution paid January 7, 2026
Estimated remaining liquidating distributions
$1.74–$1.94 per share
Company estimate announced July 24, 2026
Key Terms
liquidation basis of accounting, Secured Term Loan, Tenant Opportunity to Purchase Act ("TOPA"), liquidating distribution, +2 more
6 terms
liquidation basis of accounting financial
"the Company adopted the liquidation basis of accounting as of and for the periods"
Secured Term Loan financial
"a senior secured term loan of $520.0 million (the “Secured Term Loan”) to the Borrowers"
A secured term loan is a bank or investor loan with a set repayment schedule and interest, backed by specific company assets that the lender can claim if payments stop—think of it like a mortgage on a business asset. It matters to investors because it sits higher in the company’s payment order than equity, reducing lender risk but adding fixed cash obligations that affect free cash flow, leverage and the likelihood of losses for shareholders if the company struggles.
Tenant Opportunity to Purchase Act ("TOPA") regulatory
"including, in the case of the two DC properties, regulatory requirements related to the Tenant Opportunity to Purchase Act"
liquidating distribution financial
"approved a special liquidating distribution of $14.67 per common share"
A liquidating distribution is a payment made to shareholders when a company is winding up or selling off its assets, returning the investors’ share of the cash left after debts are paid. Think of it as splitting the proceeds from selling a house: creditors are paid first, then remaining money is handed back to owners; for investors this signals a company is ending operations and affects how much capital they recover and how it’s taxed.
qualified REIT dividends financial
"extended the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate"
Qualified REIT dividends are the portion of payments from a real estate investment trust that receives special tax treatment for individual U.S. taxpayers: they are reported separately so investors can claim a targeted deduction (commonly the 20% qualified business income deduction) rather than being taxed only as ordinary income. This matters to investors because it changes the after-tax income from a REIT—similar to getting a partial tax break on part of a paycheck—affecting the real yield and attractiveness of the investment.
interest rate cap financial
"The Company has purchased an interest rate cap that effectively caps term SOFR at 5.00% per annum"
An interest rate cap is a financial contract that sets a maximum interest rate on a floating-rate loan or investment, so the borrower or investor won’t pay or receive interest above that ceiling. Think of it like an insurance policy or a roof over your monthly interest bill: if market rates rise above the cap, the cap pays the difference, protecting cash flow and budgeting. Investors care because caps limit downside from rising rates and affect borrowing costs, returns and risk management decisions.
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FAQ
What is ELME Communities' (ELME) current status under its Plan of Sale and Liquidation?
Elme Communities is in an orderly wind‑down under a shareholder‑approved Plan of Sale and Liquidation, selling remaining properties, settling liabilities and distributing net proceeds. It adopted the liquidation basis of accounting on November 1, 2025 and no longer operates as a going‑concern growth REIT.
How much are ELME Communities' (ELME) net assets in liquidation as of June 30, 2026?
As of June 30, 2026, Elme reported net assets in liquidation of $167.7 million. This represents the estimated amount available for shareholders after selling remaining assets and paying projected liquidation costs and liabilities, based on management’s current assumptions and estimates.
What liquidating distributions has ELME (ELME) paid and what remains estimated?
Elme has paid a special liquidating distribution of $14.67 per share on January 7, 2026. On July 24, 2026, it estimated remaining liquidating distributions of $1.74–$1.94 per share, implying total liquidating distributions of $16.41–$16.61 per share, subject to change.
Which properties does ELME Communities (ELME) still own and what sale agreements exist?
As of June 30, 2026, Elme owned four DC‑area multifamily assets, including Riverside Apartments. It has signed purchase and sale agreements for The Kenmore, 3801 Connecticut Avenue and Elme Bethesda (~$168.0 million total) and a separate $250.0 million contract for Riverside Apartments, all subject to conditions.
What debt and interest rate does ELME Communities (ELME) have outstanding?
Elme’s only debt is a Secured Term Loan with $251.0 million outstanding as of June 30, 2026. The loan bears interest at one‑month term SOFR plus a 2.75% margin, resulting in an effective rate of about 6.38% at quarter‑end, and is expected to be repaid from property sale proceeds.
What liquidity does ELME Communities (ELME) report while liquidating?
At June 30, 2026, Elme held about $41.3 million of cash and cash equivalents and $17.3 million of restricted cash in lender‑controlled reserves. Management expects to use cash on hand and net property‑sale proceeds to fund operating costs, debt service and liquidating distributions.
When does ELME Communities (ELME) expect to complete liquidation and NYSE delisting?
Elme expects to complete its liquidation activities within 24 months of October 30, 2025, although the exact timing is uncertain. It currently anticipates remaining listed on the NYSE until after selling Riverside Apartments and repaying the Secured Term Loan, with delisting and dissolution targeted for late 2026.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
FORM 10-Q
___________________________________________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For quarterly period ended June 30, 2026
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |||||
COMMISSION FILE NO. 1-6622
| (Exact name of registrant as specified in its charter) | ||
| (State of incorporation) | (IRS Employer Identification Number) | |||||||
(Address of principal executive office) (Zip code)
Registrant’s telephone number, including area code: (202 ) 774-3200
___________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
___________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated Filer | ☐ | |||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | |||||||||
| Emerging Growth Company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 30, 2026, 88,857,883 common shares were outstanding.
ELME COMMUNITIES
INDEX
| Page | ||||||||
Part I: Financial Information | ||||||||
| Item 1. | Consolidated Financial Statements (Unaudited) | |||||||
Consolidated Statements of Net Assets (Liquidation Basis) as of June 30, 2026 and December 31, 2025 | 5 | |||||||
Condensed Consolidated Statement of Changes in Net Assets (Liquidation Basis) for the Three and Six Months Ended June 30, 2026 | 6 | |||||||
Condensed Consolidated Statement of Operations (Going Concern Basis) for the Three and Six Months Ended June 30, 2025 | 7 | |||||||
Condensed Consolidated Statement of Comprehensive Income (Loss) (Going Concern Basis) for the Three and Six Months Ended June 30, 2025 | 8 | |||||||
Consolidated Statement of Equity (Going Concern Basis) for the Three and Six Months Ended June 30, 2025 | 9 | |||||||
Consolidated Statement of Cash Flows (Going Concern Basis) for the Six Months Ended June 30, 2025 | 10 | |||||||
Notes to Consolidated Financial Statements | 11 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 29 | ||||||
| Item 4. | Controls and Procedures | 29 | ||||||
Part II: Other Information | ||||||||
| Item 1. | Legal Proceedings | 30 | ||||||
| Item 1A. | Risk Factors | 30 | ||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 30 | ||||||
| Item 3. | Defaults upon Senior Securities | 30 | ||||||
| Item 4. | Mine Safety Disclosures | 30 | ||||||
| Item 5. | Other Information | 30 | ||||||
| Item 6. | Exhibits | 31 | ||||||
Signatures | 33 | |||||||
3
PART I
FINANCIAL INFORMATION
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)
(LIQUIDATION BASIS)
(IN THOUSANDS)
| June 30, 2026 | December 31, 2025 | ||||||||||
| (Unaudited) | |||||||||||
| Assets | |||||||||||
| Income producing property | $ | $ | |||||||||
| Cash, cash equivalents and restricted cash | |||||||||||
| Rents and other receivables | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities | |||||||||||
| Liabilities for estimated costs in excess of estimated receipts during liquidation | |||||||||||
| Debt payable | |||||||||||
| Accounts payable and accrued expenses | |||||||||||
| Liquidating distribution payable | |||||||||||
| Total liabilities | $ | $ | |||||||||
| Net assets in liquidation | $ | $ | |||||||||
See accompanying notes to the consolidated financial statements.
5
ELME COMMUNITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
(LIQUIDATION BASIS)
(LIQUIDATION BASIS)
(IN THOUSANDS)
(UNAUDITED)
| Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 | |||||||
| Net assets in liquidation, beginning of period | $ | $ | ||||||
| Changes in net assets in liquidation | ||||||||
| Liquidation value of income producing property | ( | ( | ||||||
| Remeasurement of assets and liabilities, net | ( | ( | ||||||
| Net decrease in liquidation value | ( | ( | ||||||
| Changes in net assets in liquidation | ( | ( | ||||||
| Net assets in liquidation, end of period | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
6
ELME COMMUNITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(GOING CONCERN BASIS)
(GOING CONCERN BASIS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | |||||||||||||||||||
| Revenue | ||||||||||||||||||||
| Real estate rental revenue | $ | $ | ||||||||||||||||||
| Expenses | ||||||||||||||||||||
| Property operating and maintenance | ||||||||||||||||||||
| Real estate taxes and insurance | ||||||||||||||||||||
| Property management | ||||||||||||||||||||
| General and administrative | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Real estate operating income | ||||||||||||||||||||
| Other expense | ||||||||||||||||||||
| Interest expense | ( | ( | ||||||||||||||||||
| ( | ( | |||||||||||||||||||
| Net loss | $ | ( | $ | ( | ||||||||||||||||
| Basic net loss per common share | $ | ( | $ | ( | ||||||||||||||||
| Diluted net loss per common share | $ | ( | $ | ( | ||||||||||||||||
| Weighted average shares outstanding – basic | ||||||||||||||||||||
| Weighted average shares outstanding – diluted | ||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
7
ELME COMMUNITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(GOING CONCERN BASIS)
(GOING CONCERN BASIS)
(IN THOUSANDS)
(UNAUDITED)
| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | |||||||
| Net loss | $ | ( | $ | ( | ||||
| Other comprehensive income: | ||||||||
| Unrealized gain on interest rate hedges | ||||||||
| Reclassification of unrealized loss on interest rate derivatives to earnings | ||||||||
| Comprehensive loss | $ | ( | $ | ( | ||||
See accompanying notes to the consolidated financial statements.
8
ELME COMMUNITIES AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(GOING CONCERN BASIS)
(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 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Unrealized gain on interest rate hedges | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of swap settlements | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Dividends ($ | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Share grants, net of forfeitures and tax withholdings | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| 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, March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Unrealized gain on interest rate hedges | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of swap settlements | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Dividends ($ | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Share grants, net of forfeitures and tax withholdings | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
9
| ELME COMMUNITIES AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||||||
| (GOING CONCERN BASIS) | |||||||||||
| (IN THOUSANDS) | |||||||||||
| (UNAUDITED) | |||||||||||
| Six Months Ended June 30, 2025 | |||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | ( | |||||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Credit losses on lease related receivables | |||||||||||
| Share-based compensation expense | |||||||||||
| Net amortization of debt premiums, discounts and related financing costs | |||||||||||
| Changes in operating other assets | ( | ||||||||||
| Changes in operating other liabilities | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities | |||||||||||
| Capital improvements to real estate | ( | ||||||||||
| Non-real estate capital improvements | ( | ||||||||||
| Net cash used in investing activities | ( | ||||||||||
| Cash flows from financing activities | |||||||||||
Line of credit borrowings, net | ( | ||||||||||
| Dividends paid | ( | ||||||||||
| Payment of financing costs | ( | ||||||||||
| Distributions to noncontrolling interests | ( | ||||||||||
| Payment of tax withholdings for restricted share awards | ( | ||||||||||
| Net cash used in financing activities | ( | ||||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | ||||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest, net of amounts capitalized | $ | ||||||||||
| Change in accrued capital improvements and development costs | |||||||||||
| Dividend payable | |||||||||||
| Reconciliation of cash, cash equivalents and restricted cash: | |||||||||||
| Cash and cash equivalents | $ | ||||||||||
| Restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash | $ | ||||||||||
See accompanying notes to the consolidated financial statements.
10
ELME COMMUNITIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 2026, we owned four apartment communities in the Washington, DC metro region. Within these notes to the financial statements, we refer to the three months ended June 30, 2026 and June 30, 2025 as the “2026 Quarter” and the “2025 Quarter,” respectively, and the six months ended June 30, 2026 and June 30, 2025 as the “2026 Period” and the “2025 Period,” 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 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 (the “Remaining Company Properties” or the “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 first quarter of 2026, 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. During the 2026 Quarter, we completed the sale of two of the Remaining Company Properties, Elme Germantown and Elme Watkins Mill, comprising 428 residential apartment homes, for aggregate gross proceeds of approximately $95.0 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 three separate purchase and sale agreements pursuant to which we expect to sell The Kenmore, 3801 Connecticut Avenue and Elme Bethesda. These three purchase and sale agreements, which provide for gross proceeds of approximately $168.0 million in the aggregate (subject to certain customary adjustments and prorations), are no longer subject to ongoing inspection periods, but remain subject to satisfaction of customary closing conditions including, in the case of the two DC properties, regulatory requirements related to the Tenant Opportunity to Purchase Act (“TOPA”). The closing of each DC property is expected to occur shortly after completion of its TOPA process, subject to satisfaction of other applicable closing conditions. The buyer of each DC property has commenced discussions with the property’s tenant association, and, assuming no purchase rights are exercised or assigned to a party other than the contract buyer, Elme currently anticipates the TOPA process for both properties to be completed no later than the end of 2026. The Company has obtained the certificate of compliance from the Montgomery County Department of Housing and Community
11
Affairs certifying compliance with Montgomery County’s right of first refusal requirements with respect to Elme Bethesda, and, following such receipt, the parties to the purchase and sale agreement for Elme Bethesda have agreed to close the sale no later than August 11, 2026.
As previously disclosed, in May 2026 the Company had entered into a purchase and sale agreement for Riverside Apartments (including related undeveloped land) which was subject to an ongoing inspection period and, on June 17, 2026, the buyer under that purchase and sale agreement exercised its right to terminate. On July 23, 2026, the Company entered into a purchase and sale agreement for Riverside Apartments (including related undeveloped land) with a new purchaser, which had previously submitted a proposal to acquire the property, for a contract sale price of $250.0 million, subject to certain customary adjustments and prorations. This new purchase and sale agreement is subject to an ongoing inspection period, as well as satisfaction of customary closing conditions. The new purchase and sale agreement for Riverside Apartments provides that, subject to completion of the inspection period and the satisfaction of the closing conditions, the sale of Riverside Apartments will close no later than September 14, 2026.
Because the sales of Elme’s remaining properties are subject to, as applicable, satisfactory completion of an inspection period with respect to Riverside Apartments, and satisfaction of closing conditions, including, with respect to the DC properties, regulatory requirements related to the TOPA, 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”). Prior to its dissolution during the 2026 Quarter, our TRS was subject to corporate federal and state income tax on its taxable income at regular statutory rates.
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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 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 June 30, 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
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The accompanying unaudited consolidated financial statements include the consolidated accounts of Elme and our subsidiaries and entities in which Elme 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 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 June 30, 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 June 30, 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 June 30, 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) and the statement of equity for the three and six months ended June 30, 2025 and the statement of cash flow for the six months ended June 30, 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.
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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 June 30, 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 June 30, 2026 is as follows (in thousands):
| As of December 31, 2025 | Cash Payments (Receipts) | Remeasurements of Assets and Liabilities | As of June 30, 2026 | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Estimated net inflows from income producing property | $ | $ | ( | $ | $ | ||||||||||||||||||
| Estimated net inflows from interest income | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
Liquidation transaction costs(1) | ( | ( | ( | ||||||||||||||||||||
| General and administrative expenses | ( | ( | ( | ||||||||||||||||||||
| Capital expenditures | ( | ( | ( | ||||||||||||||||||||
| Interest expense | ( | ( | ( | ||||||||||||||||||||
| Debt repayment and origination costs, net | ( | ||||||||||||||||||||||
| ( | ( | ( | |||||||||||||||||||||
| Liabilities for estimated costs in excess of estimated receipts during liquidation | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
(1) Liquidation transaction costs primarily include disposal costs and severance expenses.
NOTE 5: NET ASSETS IN LIQUIDATION
NOTE 6: REAL ESTATE
As of June 30, 2026 the Company’s portfolio was composed of four multifamily properties with a liquidation value of real estate of $418.0 million.
Properties Sold and Held for Sale
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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 classify any properties as held for sale or record an impairment during the 2026 Period or 2025 Period and did no t sell any properties during the 2025 Period.
| Properties | Number of Units (unaudited) | ||||
| Elme Germantown | |||||
| Elme Watkins Mill | |||||
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 initial spread was 2.25 % and increased to 2.75 % in May 2026, and will increase to 3.00 % in August 2026 and 3.50 % in November 2026. Thereafter, the spread will increase by 0.25 % every three months, to 3.75 % in February 2027 and a maximum of 4.00 % in May 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.
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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 first quarter of 2026, 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. During the 2026 Quarter, we completed the sale of two of the Remaining Company Properties, Elme Germantown and Elme Watkins Mill, for aggregate gross proceeds of approximately $95.0 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.
As of June 30, 2026, the remaining outstanding balance of the Secured Term Loan was $251.0 million. As of June 30, 2026, the interest rate on the Secured Term Loan is based on the one-month term SOFR plus 2.75 % applicable margin and the one-month term SOFR is 3.63%.
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 were recognized in Other comprehensive income (loss) for the three and six months ended June 30, 2025 as $0.3 million and $0.4 million, respectively.
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 and six months ended June 30, 2025 were $0.5 million and $1.0 million, respectively.
NOTE 9: SHARE-BASED COMPENSATION
Elme 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 were 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.
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During the first quarter of 2026, the Board approved the Elme Communities Executive Officer Short-Term Incentive Plan, effective as of November 13, 2025 (the “New Officer STIP”), which provides for a cash award opportunity based on achievement of three metrics: (i) the value of the additional liquidating distributions to Elme’s shareholders, which will be 40 % of the award opportunity, (ii) the timing of completion of the sales of Elme’s remaining assets, which will be 40 % of the award opportunity, and (iii) performance measures in furtherance of implementing the Plan of Sale and Liquidation, consisting of efficient operation of Elme’s remaining assets, employee retention and successfully implementing the Plan of Sale and Liquidation, which will be 20 % of the award opportunity. The performance period under the New Officer STIP runs from November 13, 2025 through the earlier of (i) November 13, 2026 and (ii) the date on which the actual levels of achievement of the additional liquidating distributions and timing metrics discussed above are otherwise determined by the Compensation Committee of the Board.
Total Compensation Expense
Total compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $1.7 million for the 2025 Quarter and $3.1 million for the 2025 Period.
Restricted Share Awards
There were no unvested restricted share awards at June 30, 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 and six months ended June 30, 2025 were as follows (in thousands, except per share data):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2025 | 2025 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | $ | ( | ||||
| Allocation of earnings to unvested restricted share awards | ( | ( | ||||||
| Adjusted net loss | $ | ( | $ | ( | ||||
| Denominator: | ||||||||
| Weighted average shares outstanding – basic and diluted | ||||||||
| Basic net loss per common share | $ | ( | $ | ( | ||||
| Diluted net loss per common share | $ | ( | $ | ( | ||||
| Dividends declared per common share | $ | $ | ||||||
NOTE 11: SEGMENT INFORMATION
For the 2025 Quarter and 2025 Period, 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 June 30, 2025, only one
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community, Riverside Apartments, comprised more than 10 % of consolidated revenues), type (all assets in the segment are residential) or geography (as of June 30, 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 and 2025 Period, 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 chief operating decision maker (the “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 and six months ended June 30, 2025 from our Residential segment as well as Other, and reconcile NOI to net loss as reported (in thousands):
| Three Months Ended June 30, 2025 | |||||||||||||||||
| Residential | Other | Consolidated | |||||||||||||||
| Real estate rental revenue | $ | $ | $ | ||||||||||||||
| Real estate expenses | |||||||||||||||||
| Net operating income | $ | $ | $ | ||||||||||||||
| Other expense: | |||||||||||||||||
| Property management expenses | ( | ||||||||||||||||
| General and administrative expenses | ( | ||||||||||||||||
| Depreciation and amortization | ( | ||||||||||||||||
| Interest expense | ( | ||||||||||||||||
| Net loss | $ | ( | |||||||||||||||
| Capital expenditures | $ | $ | $ | ||||||||||||||
| Total assets | $ | $ | $ | ||||||||||||||
| Six Months Ended June 30, 2025 | |||||||||||||||||
| Residential | Other | Consolidated | |||||||||||||||
| Real estate rental revenue | $ | $ | $ | ||||||||||||||
| Real estate expenses | |||||||||||||||||
| Net operating income | $ | $ | $ | ||||||||||||||
| Other expense: | |||||||||||||||||
| Property management expenses | ( | ||||||||||||||||
| General and administrative expenses | ( | ||||||||||||||||
| Depreciation and amortization | ( | ||||||||||||||||
| Interest expense | ( | ||||||||||||||||
| Net loss | $ | ( | |||||||||||||||
| Capital expenditures | $ | $ | $ | ||||||||||||||
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,
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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
We previously had 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 were not automatically reinvested in additional shares of our common shares of beneficial interest and participants in the dividend reinvestment program were not able to purchase shares of our common shares of beneficial interest through optional cash investments under the dividend reinvestment program. No
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing in Item 1 of this report and the more detailed information contained in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2026.
We refer to the three months ended June 30, 2026 and June 30, 2025 as the “2026 Quarter” and the “2025 Quarter,” respectively, and the six months ended June 30, 2026 and June 30, 2025 as the “2026 Period” and the “2025 Period,” respectively.
Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the meaning of federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Elme to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Additional factors which may cause the actual results, performance, or achievements of Elme to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements include, but are not limited to: Elme’s ability to remain listed on the NYSE and its expected timeline for doing so; Elme’s ability to transfer its remaining assets and liabilities to a liquidating trust and terminate its existence by voluntary dissolution on the terms and timeline anticipated; Elme’s ability to successfully complete the sales of its remaining assets, including successful completion of any remaining inspection periods and all closing conditions applicable to assets under contract, including, but not limited to, timely completion of the Tenant Opportunity to Purchase Act (“TOPA”) process for the sale of multifamily assets in DC, on the terms and timeline anticipated, or at all; changes in the amount and timing of the additional liquidating distributions, including as a result of unexpected levels of transaction, general and administrative and other liquidation costs, changes in the gross asset sales proceeds for the sale of the remaining properties from prior estimates, delayed or terminated closings, liquidation costs or unpaid or additional liabilities and obligations; Elme’s ability to repay the Secured Term Loan (as defined below) with the net proceeds from the sales of the remaining properties which secure the Secured Term Loan and to release the mortgages securing the Secured Term Loan as they are sold; the possibility, mechanics and timing of converting to a liquidating trust or other liquidating entity; the ability of Elme’s Board of Trustees (the “Board”) to terminate the Plan of Sale and Liquidation; the response of Elme’s residents, tenants and business partners to the Plan of Sale and Liquidation; potential difficulties in employee retention as a result of the on-going Plan of Sale and Liquidation; the outcome of legal proceedings that may be instituted against Elme, its trustees and others, including those related to the Portfolio Sale Transaction (as defined below), completed and future property sales and the Plan of Sale and Liquidation; the risk that disruptions caused by or relating to the Plan of Sale and Liquidation will harm Elme’s business, including current plans and operations; risks relating to the market value of Elme’s common shares; risks associated with third party contracts containing consent and/or other provisions that may be triggered by the Plan of Sale and Liquidation; general risks affecting the real estate industry and local real estate markets (including, without limitation, the market value of Elme’s properties and potential illiquidity of Elme’s remaining real estate investments); whether or not the sale of one or more of Elme’s properties may be considered a prohibited transaction under the Internal Revenue Code of 1986, as amended (the “Code”); Elme’s ability to maintain its status as a real estate investment trust for U.S. federal income tax purposes; the occurrence of any event, change or other circumstances that could give rise to the termination of the Plan of Sale and Liquidation; the risks associated with ownership of real estate in general and Elme’s real estate assets in particular; general economic and market developments and conditions; and volatility and uncertainty in the financial markets; and other risks and uncertainties detailed from time to time in Elme’s filings with the SEC, including our 2025 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.
General
We provide Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations and financial condition.
Prior to adoption of the Plan of Sale and Liquidation, for purposes of evaluating comparative operating performance, we categorized our properties as “same-store” or “non-same-store.” Same-store portfolio properties included properties that were
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owned for the entirety of the years being compared and excluded properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. Following our adoption of a liquidation basis of accounting, our properties are no longer categorized in this manner and therefore we have not provided operating metrics on a same-store/non same-store basis.
Overview
On February 13, 2025, the Company announced that its Board had initiated a formal review to evaluate strategic alternatives. On August 4, 2025, the Company announced that 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 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 (the “Remaining Company Properties”). In addition, the Secured Term Loan was secured by pledges of all equity interests in the Borrowers, along with all other personal property of the Borrowers.
During the first quarter of 2026, 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. During the 2026 Quarter, we completed the sale of two of the Remaining Company Properties, Elme Germantown and Elme Watkins Mill, comprising 428 residential apartment homes, for aggregate gross proceeds of approximately $95.0 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. As of June 30, 2026, the remaining outstanding balance of the Secured Term Loan was $251.0 million.
In addition, during the 2026 Quarter, we entered into three separate purchase and sale agreements pursuant to which we expect to sell The Kenmore, 3801 Connecticut Avenue and Elme Bethesda. These three purchase and sale agreements, which provide for gross proceeds of approximately $168.0 million in the aggregate (subject to certain customary adjustments and prorations), are no longer subject to ongoing inspection periods, but remain subject to satisfaction of customary closing conditions including, in the case of the two DC properties, regulatory requirements related to TOPA. The closing of each DC property is expected to occur shortly after completion of its TOPA process, subject to satisfaction of other applicable closing conditions. The buyer of each DC property has commenced discussions with the property’s tenant association, and, assuming no purchase rights are exercised or assigned to a party other than the contract buyer, Elme currently anticipates the TOPA process for both properties to be completed no later than the end of 2026. The Company has obtained the certificate of compliance from the Montgomery County Department of Housing and Community Affairs certifying compliance with Montgomery County’s right of first refusal requirements with respect to Elme Bethesda, and, following such receipt, the parties to the purchase and sale agreement for Elme Bethesda have agreed to close the sale no later than August 11, 2026.
As previously disclosed, in May 2026 the Company had entered into a purchase and sale agreement for Riverside Apartments (including related undeveloped land) which was subject to an ongoing inspection period and, on June 17, 2026, the buyer under that purchase and sale agreement exercised its right to terminate. On July 23, 2026, the Company entered into a purchase and sale agreement for Riverside Apartments (including related undeveloped land) with a new purchaser, which had previously submitted a proposal to acquire the property, for a contract sale price of $250.0 million, subject to certain customary adjustments and prorations. This new purchase and sale agreement is subject to an ongoing inspection period, as well as satisfaction of customary closing conditions. The new purchase and sale agreement for Riverside Apartments provides that, subject to completion of the inspection period and the satisfaction of the closing conditions, the sale of Riverside Apartments will close no later than September 14, 2026.
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Given the Plan of Sale and Liquidation, our efforts are focused on selling the remaining properties, winding down the Company’s affairs and, when appropriate and in the Board’s discretion, distributing the net proceeds to our shareholders subject to the creation of necessary reserves for, and payment or other satisfaction of, the Company’s expenses and other liabilities and obligations.
If we have not sold all of our remaining properties and paid all of our liabilities within 24 months after shareholder approval of the Plan of Sale and Liquidation, which was received on October 30, 2025, or if the Board otherwise determines that it is advantageous to do so earlier, we may transfer our remaining assets and liabilities to a liquidating trust and distribute interests in the liquidating trust to our shareholders or otherwise convert Elme to a liquidating limited liability company, partnership, or trust. We cannot predict the exact amount to be distributed or the timing of the completion of the liquidation and termination of Elme’s existence.
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 its shareholders of record as of the close of business on December 22, 2025. The special liquidating distribution was paid on January 7, 2026.
Disposition Activity
During the first quarter of 2026, 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. During the 2026 Quarter, we completed the sale of two of the Remaining Company Properties, Elme Germantown and Elme Watkins Mill, comprising 428 residential apartment homes, for aggregate gross proceeds of approximately $95.0 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.
As of June 30, 2026, our portfolio consisted of the following assets located in the Washington, DC metro region.
| Properties | Location | ||||
Riverside Apartments (1) | Alexandria, VA | ||||
| 3801 Connecticut Avenue | Washington, DC | ||||
| The Kenmore | Washington, DC | ||||
| Elme Bethesda | Bethesda, MD | ||||
(1) Includes an undeveloped land parcel held for development adjacent to the Riverside Apartments.
In addition, during the 2026 Quarter, we entered into three separate purchase and sale agreements pursuant to which we expect to sell The Kenmore, 3801 Connecticut Avenue and Elme Bethesda. These three purchase and sale agreements, which provide for gross proceeds of approximately $168.0 million in the aggregate (subject to certain customary adjustments and prorations), are no longer subject to ongoing inspection periods, but remain subject to satisfaction of customary closing conditions including, in the case of the two DC properties, regulatory requirements related to TOPA. The closing of each DC property is expected to occur shortly after completion of its TOPA process, subject to satisfaction of other applicable closing conditions. The buyer of each DC property has commenced discussions with the property’s tenant association, and, assuming no purchase rights are exercised or assigned to a party other than the contract buyer, Elme currently anticipates the TOPA process for both properties to be completed no later than the end of 2026. The Company has obtained the certificate of compliance from the Montgomery County Department of Housing and Community Affairs certifying compliance with Montgomery County’s right of first refusal requirements with respect to Elme Bethesda, and, following such receipt, the parties to the purchase and sale agreement for Elme Bethesda have agreed to close the sale no later than August 11, 2026.
As previously disclosed, in May 2026 the Company had entered into a purchase and sale agreement for Riverside Apartments (including related undeveloped land) which was subject to an ongoing inspection period and, on June 17, 2026, the buyer under that purchase and sale agreement exercised its right to terminate. On July 23, 2026, the Company entered into a purchase and sale agreement for Riverside Apartments (including related undeveloped land) with a new purchaser, which had previously submitted a proposal to acquire the property, for a contract sale price of $250.0 million, subject to certain customary adjustments and prorations. This new purchase and sale agreement is subject to an ongoing inspection period, as well as satisfaction of customary closing conditions. The new purchase and sale agreement for Riverside Apartments provides that,
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subject to completion of the inspection period and the satisfaction of the closing conditions, the sale of Riverside Apartments will close no later than September 14, 2026.
Because the sales of Elme’s remaining properties are subject to, as applicable, satisfactory completion of an inspection period with respect to Riverside Apartments, and satisfaction of closing conditions, including, with respect to the DC properties, regulatory requirements related to the TOPA, 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.
NYSE Listing
While the New York Stock Exchange (“NYSE”) has discretionary authority to delist the Company’s common shares following shareholder approval of the Plan of Sale and Liquidation, the Company intends for its common shares to continue to be listed on the NYSE, subject to continued compliance with NYSE listing requirements, until such time in the future as the Board determines to voluntarily delist its common shares from the NYSE in order to reduce operating expenses and maximize liquidating distributions. The Company does not currently expect to voluntarily delist prior to completing the sale of Riverside Apartments and repayment of the Secured Term Loan, and – assuming completion of the property sales as described above – currently expects the NYSE delisting and Company dissolution process to occur in the fourth quarter of 2026. While the Board currently intends to take the actions as outlined above, consistent with the Plan of Sale and Liquidation, the timing of these actions remains subject to change, including as a result of any changes in the timing of property sale closings. In addition, the Board may modify or delay these actions if it determines that doing so is in the best interest of the Company and its shareholders.
Financing Activity
As of June 30, 2026 and July 30, 2026, the interest rate on the Secured Term Loan is 6.38%, which is based on the one-month term SOFR plus 2.75% applicable margin. $251.0 million of the principal under the Secured Term Loan remains outstanding as of July 30, 2026.
Recent Tax Legislation
Effective July 4, 2025, certain changes to U.S. tax law were approved that may impact us and our shareholders. Among other changes, this legislation (i) permanently extended the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate taxpayers under Section 199A of the Code, (ii) increased the percentage limit under the REIT asset test applicable to taxable REIT subsidiaries (“TRSs”) from 20% to 25% for taxable years beginning after December 31, 2025, and (iii) increased the base on which the 30% interest deduction limit under Section 163(j) of the Code applies by excluding depreciation, amortization and depletion from the definition of “adjusted taxable income” (i.e., based on EBITDA rather than EBIT) for taxable years beginning after December 31, 2024.
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Results of Operations
As of June 30, 2026, we owned approximately 2,100 residential apartment homes in the Washington, DC metro region compared to 9,400 residential apartment homes in the Washington, DC and Atlanta metro regions as of June 30, 2025. We also owned and operated approximately 300,000 square feet of commercial space in the Washington, DC metro region as of June 30, 2025, which was sold during the first quarter of 2026.
Our revenues are derived primarily from the ownership and operation of income producing property. In light of the approval of the Plan of Sale and Liquidation on October 30, 2025, the adoption of the liquidation basis of accounting as of November 1, 2025, the sale of 19 assets in the Portfolio Sale Transaction in November 2025 for approximately gross proceeds of $1.6 billion, the sales during the first quarter of 2026 of 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, and the sales during the 2026 Quarter of Elme Germantown and Elme Watkins Mill, comprising approximately 400 residential apartment homes for aggregate gross proceeds of approximately $95.0 million, the results of operations for the 2026 Quarter and 2026 Period are not comparable to the 2025 Quarter or 2025 Period, respectively.
Operating Metrics
Average Occupancy is based on average daily occupied apartment homes as a percentage of total apartment homes. Ending Occupancy is calculated as occupied homes as a percentage of total homes as of the last day of that period.
Average Occupancy and Ending Occupancy for our four remaining residential properties for the 2026 Quarter was 93.3% and 93.5%, respectively, compared to 95.3% and 95.6%, respectively, for the same four properties for the 2025 Quarter.
Average Occupancy for our four remaining residential properties for the 2026 Period was 93.1% compared to 95.3% for the same four properties for the 2025 Period.
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Liquidity and Capital Resources
As described in the “Overview” section, our Board and our shareholders approved the Plan of Sale and Liquidation. In accordance with the Plan of Sale and Liquidation, our objectives are to pursue an orderly liquidation of our Company by selling or otherwise disposing of our remaining assets, paying or otherwise settling our debts and our known liabilities, providing for the payment of unknown or contingent liabilities, when appropriate and in the Board’s discretion, distributing the net proceeds to our shareholders, subject to the creation of necessary reserves for, and payment or other satisfaction of, the Company’s expenses and other liabilities and obligations and winding up our operations and dissolving our company. On November 25, 2025, we announced a special liquidating distribution of $14.67 per common share which was paid on January 7, 2026 to shareholders of record at the close of business on December 22, 2025. We may pay one or more additional liquidating distribution(s) to our shareholders during the remainder of the liquidation process. It is the Company’s current expectation that, prior to delisting from the NYSE, the Company would make an additional liquidating distribution in an amount to be determined by the Board. However, as noted above, the amount and timing of all additional liquidating distributions remain subject to the Board’s discretion.
We expect to pay the final liquidating distribution after we sell all of our assets, pay or provide for all of our known liabilities and obligations and provide for unknown liabilities and obligations. We expect to complete these activities within 24 months of October 30, 2025, the day we received shareholder approval of the Plan of Sale and Liquidation. A final liquidating distribution to our shareholders may not be paid until all of our liabilities have been satisfied.
Our expectations about the amount of liquidating distributions that we will pay and when we will pay them are based on many estimates and assumptions, one or more of which may prove to be incorrect. As a result, the actual amount of the remaining liquidating distributions we pay to our shareholders may be more or less than we estimate and the remaining liquidating distributions may be paid later than we predict. We intend to maintain adequate cash reserves for liquidity, debt repayments and other future capital needs.
We expect our principal demands for funds during the liquidation period are and will be for the payment of operating expenses, principal and interest payments on our Secured Term Loan, general and administrative expenses, including expenses in connection with the Plan of Sale and Liquidation, transaction costs related to asset sales and payments of distributions to shareholders pursuant to the Plan of Sale and Liquidation. We expect to use our cash on hand and net sales proceeds from the sale of our assets as our primary source of liquidity. We believe we will have adequate liquidity to operate our business and to meet our cash requirements, including meeting our debt obligations, through the wind-down of the Company’s business and affairs and the termination of the Company’s existence by voluntary dissolution. To the extent available, we also intend to use cash flow generated by our real estate assets; however, asset sales will further reduce cash flow from these sources.
As of June 30, 2026, our cash and cash equivalents were approximately $41.3 million and we had $17.3 million of restricted cash (funds held by the Lender in lender-controlled reserve accounts under the Secured Term Loan, including reserves for property taxes and insurance premiums, capital expenditures and certain other approved operating expenses and capital items).
Liquidating Distributions
On July 24, 2026, the Company announced that its current estimate of the total amount of remaining liquidating distributions to be funded from the net proceeds of sales of the Remaining Company Properties was estimated to be between $1.74 and $1.94 per share. Based on this updated estimate, the total amount of liquidating distributions (including the initial $14.67 per common share liquidating distribution paid in January 2026) was estimated to be between $16.41 and $16.61 per share. The Company’s estimate of the ranges of liquidating distributions were derived from a number of assumptions and estimates, including the estimated range of gross asset sales proceeds for the Remaining Company Properties, many of which are outside the Company’s control and may not prove to be accurate, which could cause actual liquidating distributions to be less or more than the estimated ranges. For more information regarding the estimates and assumptions, and various risks associated with such estimates and assumptions, see the risk factor previously disclosed in “Part I - Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025, titled “We cannot determine at this time the amount or timing of the remaining liquidating distributions, if any, to our shareholders in connection with the Plan of Sale and Liquidation because there are many factors that could affect the amount or timing of any such liquidating distributions, if any, some of which are not within our control.”
Debt Financing
Aside from the Secured Term Loan described in the “Overview” section, the Company does not have any other outstanding debt obligations as of June 30, 2026.
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Debt Covenants
As of June 30, 2026, we were in compliance with the covenants related to the Secured Term Loan, including those covenants with respect to maintenance of insurance, single-purpose bankruptcy, remote entity requirements, reporting requirements and restrictions on property and equity transfers and the granting of liens.
Common Equity
We have authorized for issuance 150.0 million common shares, of which 88.9 million shares were outstanding at June 30, 2026.
On February 20, 2024, we entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Wells Fargo Securities, LLC, BNY Mellon Capital Markets, LLC, Citigroup Global Markets Inc., Goldman Sachs & Co. 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 not issue common shares under the Equity Distribution Agreement during the 2026 Period or 2025 Period and we terminated the Equity Distribution Agreement during the first quarter of 2026.
We previously had 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 were not automatically reinvested in additional shares of our common shares of beneficial interest and participants in the dividend reinvestment program were 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 issued under the dividend reinvestment program during the 2026 Period or 2025 Period. The dividend reinvestment program was formally terminated during the 2026 Quarter.
Preferred Equity
Our Board can, at its discretion, authorize the issuance of up to 10.0 million preferred shares. The ability to issue preferred equity provides Elme an additional financing tool that may be used to raise capital for business purposes. As of June 30, 2026, no preferred shares were issued and outstanding.
Contractual Obligations
We owed $251.0 million as of June 30, 2026 on our Secured Term Loan.
We currently lease and occupy office space for our corporate headquarters. The corporate office lease has an expiration date of September 30, 2033 and we would expect to incur approximately $3.2 million in prepayment penalties if we terminate the lease during 2026. We are actively exploring alternatives to reduce the total cost of our corporate headquarters.
We have and will continue to incur severance, retention and benefit obligations in association with our Plan of Sale and Liquidation. As of June 30, 2026, we estimate that remaining payments in 2026 related to such obligations will total approximately $14.4 million.
In addition to our Secured Term Loan, office lease and severance obligations, we have various standing or renewable contracts with vendors. The majority of these contracts can be canceled with immaterial or no cancellation penalties, with the exception of our elevator maintenance agreements and our electricity and gas purchase agreements. Contract terms on leases that can be canceled are generally one year or less.
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Historical Cash Flows
Cash provided by operating activities was $46.0 million for the 2025 Period.
Cash used in investing activities was $14.5 million for the 2025 Period, primarily due to capital improvement expenditures at our residential communities.
Cash used in financing activities was $33.1 million for the 2025 Period, primarily due to the payment of quarterly dividends.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as of June 30, 2026 that are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Estimates
We base the discussion and analysis of our financial condition and results of operations upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. There were no changes made by management to the critical accounting policies in the three and six months ended June 30, 2026. We discuss the most critical estimates in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on February 27, 2026.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The principal material financial market risk to which we are exposed is interest rate risk.
The table below presents principal, interest and related weighted average interest rates by year of maturity, with respect to debt outstanding, which consists exclusively of the Secured Term Loan on June 30, 2026 (in thousands):
| 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||
| Secured variable rate debt | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principal | $ | 251,042 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 251,042 | $ | 251,042 | |||||||||||||||||||||||||||||||||||||
| Variable interest rate on debt maturities | 6.4 | % | 6.4 | % | |||||||||||||||||||||||||||||||||||||||||||||||||
The Company has purchased an interest rate cap that effectively caps term SOFR with respect to the Secured Term Loan at 5.00% per annum.
ITEM 4: CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, who also serves as our Chief Administrative Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
There have not been any changes in Elme’s internal control over financial reporting (as defined by Rule 13a-15(f)) that occurred during the period covered by the report that have materially affected, or are reasonably likely to materially affect, Elme’s internal control over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
We are involved from time to time in various legal proceedings, lawsuits, examinations by various tax authorities and claims that have arisen in the ordinary course of business. Management believes that the resolution of any such current matters will not have a material adverse effect on our financial condition or results of operations. Matters that arise out of allegations of bodily injury, property damage and employment practices are generally covered by insurance. One such matter, Madusou Cherif, et al. v. Elme Communities Inc., et al., Civ. No. 24EV006232 (State Court of Fulton County, Georgia), relates to a drowning event that occurred at one of the Company’s properties, which was sold earlier this year. Consistent with the foregoing, Management expects that this matter will be covered by insurance and does not believe the resolution of this matter will have a material adverse effect on our financial condition or results of operations. However, if the Company did incur liability and costs in excess of available insurance limits, that could have a material adverse effect on our financial condition or results of operations.
ITEM 1A: RISK FACTORS
There have been no material changes from the risk factors previously disclosed in response to “Part I - Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4: MINE SAFETY DISCLOSURES
None.
ITEM 5: OTHER INFORMATION
Trading Arrangements
During the three months ended June 30, 2026, no trustee or officer of Elme adopted terminated
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ITEM 6: EXHIBITS
| Incorporated by Reference | |||||||||||||||||||||||||||||||||||
| Exhibit Number | Exhibit Description | Form | File Number | Exhibit | Filing Date | Filed Herewith | |||||||||||||||||||||||||||||
| 2.1 | Purchase and Sale Agreement, dated August 1, 2025, by and among Elme Communities, WashREIT OP LLC, Echo Sub LLC, CEVF VI Capital Holdings, LLC and CEVF VI Co-Invest I Venture, LLC | 8-K | 001-06622 | 2.1 | 8/4/2025 | ||||||||||||||||||||||||||||||
| 2.2 | Plan of Sale and Liquidation | 8-K | 001-06622 | 2.2 | 8/4/2025 | ||||||||||||||||||||||||||||||
| 3.1 | Articles of Amendment and Restatement of Declaration of Trust of the Company, as amended | 10-K | 001-06622 | 3.1 | 2/17/2023 | ||||||||||||||||||||||||||||||
| 3.2 | Articles Supplementary of Elme Communities | 8-K | 001-06622 | 3.1 | 3/20/2025 | ||||||||||||||||||||||||||||||
| 3.3 | Amended and Restated Bylaws of Elme Communities, as amended | 8-K | 001-06622 | 3.1 | 9/20/2023 | ||||||||||||||||||||||||||||||
| 10.1*§ | Purchase and Sale Agreement, dated May 27, 2026 between Elme Bethesda Owner LLC and CAPREIT Acquisition Corporation | X | |||||||||||||||||||||||||||||||||
| 10.2 | First Amendment to Purchase and Sale Agreement, dated June 3, 2026 between Elme Bethesda Owner LLC and CAPREIT Acquisition Corporation | X | |||||||||||||||||||||||||||||||||
| 10.3 | Second Amendment to Purchase and Sale Agreement, dated June 4, 2026 between Elme Bethesda Owner LLC and CAPREIT Acquisition Corporation | X | |||||||||||||||||||||||||||||||||
| 10.4 | Third Amendment to Purchase and Sale Agreement, dated July 23, 2026 between Elme Bethesda Owner LLC and Tilden Bethesda Hill Apartments, LLC, as assignee of CAPREIT Acquisition Corporation | X | |||||||||||||||||||||||||||||||||
| 10.5*§ | Purchase and Sale, dated May 8, 2026 between Elme Riverside Apartments LLC and Riverside Apartments VA LLC | X | |||||||||||||||||||||||||||||||||
| 10.6 | First Amendment to Agreement of Purchase and Sale, dated June 1, 2026 between Elme Riverside Apartments LLC and Riverside Apartments VA LLC | X | |||||||||||||||||||||||||||||||||
| 10.7 | Second Amendment to Agreement of Purchase and Sale, dated June 12, 2026 between Elme Riverside Apartments LLC and Riverside Apartments VA LLC | X | |||||||||||||||||||||||||||||||||
| 10.8*§ | Purchase and Sale, dated July 23, 2026 between Elme Riverside Apartments LLC and FPA Multifamily, LLC | X | |||||||||||||||||||||||||||||||||
| 31.1 | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended (“the Exchange Act”) | X | |||||||||||||||||||||||||||||||||
| 31.2 | Certification of the Chief Financial Officer and Chief Administrative Officer pursuant to Rule 13a-14(a) of the Exchange Act | X | |||||||||||||||||||||||||||||||||
| 32 | Certification of the Chief Executive Officer and the Chief Financial Officer and Chief Administrative Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | |||||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | |||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | |||||||||||||||||||||||||||||||||
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| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | |||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | |||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | |||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | |||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) | ||||||||||||||||||||||||||||||||||
* Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the Securities and Exchange Commission upon request.
§ Certain portions of this exhibit (indicated by “[***]”) have been redacted pursuant to Regulation S-K Item 601(a)(6).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ELME COMMUNITIES | ||||||||
| /s/ Paul T. McDermott | ||||||||
| Paul T. McDermott | ||||||||
| President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
| /s/ W. Drew Hammond | ||||||||
| W. Drew Hammond | ||||||||
| Executive Vice President, Chief Financial Officer, Chief Administrative Officer and Treasurer (Principal Financial and Accounting Officer) | ||||||||
DATE: July 31, 2026
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