Elme Communities

Current report

None.

Previous report

ITEM 1A: RISK FACTORS

Previous report

The announcement and pendency of the proposed Portfolio Sale Transaction and Plan of Sale and Liquidation present certain risks to our ongoing business and operations.

Previous report

On August 1, 2025, we entered into the Purchase Agreement. The transactions under the Purchase Agreement are expected to close in the fourth quarter of 2025 (currently expected to be in early November), subject to customary closing conditions, including the receipt of approval from our shareholders. In connection with approving the Purchase Agreement, the board of trustees approved the Plan of Sale and Liquidation. Effectiveness of the Plan of Sale and Liquidation is also subject to the receipt of approval from our shareholders.

Previous report

The Company is aiming to complete the sales of the assets remaining in the Company following the Portfolio Sale Transaction (the “Remaining Company Assets”) by June 30, 2026. Because the Portfolio Sale Transaction is subject to a number of conditions, including some that are outside our control, and the sales of the Remaining Company Assets are subject to, among other things, completion of the marketing and sale process, negotiation of sale terms and completion of the sales, the exact timing of completing the Proposed Transactions cannot be determined at this time.

Previous report

Prior to the closing of the Portfolio Sale Transaction and completion of the sales of all the Remaining Company Assets, as well as the wind-down of the Company’s business and affairs, and termination of the Company’s existence in accordance with the Plan of Sale and Liquidation, the Proposed Transactions present certain risks to our business and operations, which could materially and adversely affect our business, financial results and share price, including, among other things, that:

Previous report

•we may fail to complete the Portfolio Sale Transaction, including due to the failure of our shareholders to approve the proposal to approve the Portfolio Sale Transaction or the failure of us or Buyer to satisfy other closing conditions;

Previous report

•we may have difficulty completing, or fail to complete, the Remaining Company Asset sales;

Previous report

•we expect to incur substantial expenses related to the Proposed Transactions, whether or not the Portfolio Sale Transaction is completed and the Plan of Sale and Liquidation is approved by our shareholders; and

Previous report

•our business and operations could be adversely affected, including by diverting significant focus of management, employees and other resources, by impacting our ability to retain our employees and our relationships with residents, tenants, vendors and other third parties, as a result of limitations on our conduct under purchase agreements (including the Purchase Agreement) during the pendency of sales under such agreements.

Previous report

Additionally, prior to the closing of the Portfolio Sale Transaction and completing the sales of all of the Remaining Company Assets, we will remain subject to all of the risks of operating our properties, including those described in the “Risk Factors” sections included in our annual and quarterly reports filed with the SEC, the risk that the cash flow and net working capital generated from the Company’s operations prior to completing the wind-down of the Company’s business and affairs and termination of the Company’s existence may be lower than we anticipate, and the risks and the costs associated with remaining a public company. In addition, such risks may result in our incurring additional obligations and liabilities which may be retained by us following the closing of the Portfolio Sale Transaction and the sales of the Remaining Company Assets and, in such event, could reduce the amounts ultimately available for distribution to our shareholders.

Previous report

We cannot determine at this time the amount or timing of distributions to our shareholders in connection with the Portfolio Sale Transaction and the Plan of Sale and Liquidation because there are many factors, some of which are not within our control, that could affect the amount or timing of any such distributions.

Previous report

There can be no assurances regarding the amounts of any shareholder distributions or the timing thereof. Our estimated range of distributions in connection with the Proposed Transactions was estimated as of a specific date and does not take into account interest rate, market volatility or other changes since that time or in the future and was derived, in part, from the estimated range of gross asset sales for the properties, less estimates for transaction costs, service costs and debt repayment amounts for the

Previous report

Loan, general and administrative costs, including employee retention costs, capital expenditure requirements and REIT compliance costs, but adjusted upwards for estimated cash flow/net working capital to be generated from the Company’s operations prior to completing the sale of all of our properties. These estimates may overstate the proceeds from asset sales or understate the actual expenses, which means actual distributions may be significantly less than the estimated range.

Previous report

Other uncertainties that could cause the aggregate amount of liquidating distributions to be less than our estimate, or the timing of distributions to be delayed, in addition to other risks described elsewhere in this section, our Annual Report on Form 10-K for the year ended December 31, 2024 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, include the following:

Previous report

•failure to close the Portfolio Sale Transaction;

Previous report

•the estimated net proceeds from the Loan may be lower than we estimate due to, among other things, the results of lender real estate diligence, including property appraisals for lending purposes, establishment of customary reserves for property maintenance costs or special reserves for issues identified during lender real estate diligence and/or higher than estimated third party expenses associated with consummating the Loan;

Previous report

•the costs and expenses of the Portfolio Sale Transaction and the Plan of Sale and Liquidation may be higher than our estimates;

Previous report

•the estimated amount of cash flow/net working capital to be generated from the Company’s operations prior to competing the wind-down of the Company’s business and affairs and termination of the Company’s existence pursuant to the Plan of Sale and Liquidation may be lower than we anticipate;

Previous report

•costs and expenses of continuing to operate the Company, including as a public company, such as the need for additional retention costs, particularly if the liquidation takes longer than expected, may be higher than estimated;

Previous report

•unanticipated or emergency capital expenditures may result in the need to incur additional debt financing or other costs and expenses that are not included in our estimates and which we cannot reasonably estimate at this time;

Previous report

•unknown or additional costs or liabilities that arise in the future, including future litigation, which we cannot reasonably estimate at this time, could delay completion of our liquidation and cause us to incur additional costs and expenses;

Previous report

•costs incurred to maintain our REIT status may be higher than estimated;

Previous report

•the number of issued and outstanding shares we used to calculate the estimated ranges of the distributions could change; and

Previous report

•the reserve amounts we may establish to satisfy known liabilities and liquidating expenses and estimated, unascertained or contingent liabilities and expenses may be higher than estimated.

Previous report

Any of these uncertainties could impact the amount and timing of the estimated distributions.

Previous report

Additionally, there can be no assurances regarding the amounts of your potential total return from receiving such distributions. Your total return will depend on the amount you paid for your common shares and the date on which you purchased such common shares. Please consult with your financial advisor for more information about your potential total return.

Previous report

There can be no assurance that the sale of all of our assets as contemplated in the Proposed Transactions will result in greater returns to you on your investment, within a reasonable period of time, than you would receive through other alternatives reasonably available to us.

Previous report

If our shareholders approve each of the Proposed Transactions, we will generally be focused on winding-down our operations, subject to the board of trustees’ determination to amend or terminate the Plan of Sale and Liquidation if it determines that doing so is in the best interest of shareholders. This, among other factors, may adversely affect the value that a potential acquirer might place on us or our ability to sell the Sale Portfolio if the Portfolio Sale Transaction does not occur, or any remaining assets if the Portfolio Sale Transaction occurs. Once our assets are sold, you will no longer participate in any future earnings or growth of such assets or benefit from any increases in the value of such assets. It is possible that continuing with the status quo or pursuing one or more other strategic alternatives could result in greater returns on your investment over time. If the Plan of Sale and Liquidation becomes effective, we will be foregoing those alternative opportunities.

Previous report

If shareholders do not approve both the proposal to approve the Portfolio Sale Transaction and the proposal to approve the Plan of Sale and Liquidation at the special meeting, we would be subject to a number of additional material risks.

Previous report

If shareholders approve the proposal to approve the Portfolio Sale Transaction, but not the proposal to approve the Plan of Sale and Liquidation, in addition to the other risks described in this “Risk Factors” section and in our other filings with the SEC, we would be subject to a number of additional material risks, including the following:

Previous report

•under the terms of the Purchase Agreement, we would remain obligated to complete the Portfolio Sale Transaction in accordance with its terms;

Previous report

•we would not move forward with an orderly wind-down of the Company’s business and affairs and termination of the Company’s existence by voluntary dissolution;

Previous report

•we would not be obligated to cease, and we intend to move forward with, the marketing and potential sale of certain of the Remaining Company Assets, regardless of the outcome of the shareholder vote on the proposal to approve the Plan of Sale and Liquidation (or the proposal to approve the Portfolio Sale Transaction);

Previous report

•if we complete the Portfolio Sale Transaction, the Company would have a significantly reduced number of assets with which to generate operating revenue and support ongoing operating activity, and operating expenses may not proportionally decrease, which will result in our ongoing operating expenses potentially exceeding revenue generated by our Remaining Company Assets, and we therefore may experience difficulty continuing as a going concern;

Previous report

•we may be required to continue to comply with the full reporting requirements of the Exchange Act, and other requirements under law and of regulatory bodies applicable to public companies and incur costs associated with such compliance, as well as the costs of certain insurance coverage;

Previous report

•assuming we continue to desire to remain a REIT, our estimated REIT compliance costs may increase; and

Previous report

•any distributions will generally be treated first as taxable dividends to the extent of the Company’s earnings and profits rather than tax-free liquidating distributions to the extent of a shareholder’s basis in their shares.

Previous report

If shareholders approve the proposal to approve the Plan of Sale and Liquidation, but not the proposal to approve the Portfolio Sale Transaction, in addition to the other risks described this “Risk Factors” section and in our other filings with the SEC, we would be subject to a number of additional material risks, including that our board of trustees may decide to review strategic alternatives again, and could determine not to move forward with the liquidation of the Company under the Plan of Sale and Liquidation and instead pursue another option or continue the Company’s operations in its current form.

Previous report

The occurrence of any of these events may impair our ability to conduct our business, including continuing as a going concern, may adversely affect our share price, may increase our costs or may reduce or delay the amounts otherwise available for distribution to our shareholders.

Previous report

Even if our shareholders approve the Portfolio Sale Transaction and the Plan of Sale and Liquidation, they may not be completed.