Elme Communities (ELME) Risk Analysis

The Company has set aside cash for operations during the wind-down of the Company's business and affairs and sales of our remaining properties. However, there can be no assurance this amount, together with funds from operations of our remaining properties until they are sold, and proceeds from the sales of the Remaining Company Properties will be sufficient for all required purposes. If such funds are insufficient, we may require additional capital to fund our other capital needs, including funds that will be needed to implement the Plan of Sale and Liquidation effectively. For example, we have been and may in the future be required to invest capital to correct defects or to make improvements before a property can be sold. We cannot assure you that we will have funds available to correct these defects or to make these improvements or be able to raise such additional capital, if needed. Reductions in the amounts that we receive when we sell our assets, or our failure to comply with the covenants in the Secured Term Loan, our failure to meet our capital needs with the cash on hand, or other financing that is on favorable terms, could reduce, eliminate or delay the liquidating distributions we make to our shareholders, or otherwise adversely affect our financial condition.

Following the sales of the Remaining Company Properties, we will retain liabilities that must be satisfied prior to any final distribution to our shareholders, and some of those liabilities are uncertain or unknown at this time. Significant time could be required to resolve some of these liabilities, including as a result of factors beyond our control, which could impact both the timing and the amount of any final distribution to our shareholders. Also, some liabilities may involve third party disputes. If we have underestimated our existing obligations and liabilities, such as future litigation, or if unanticipated or contingent liabilities arise, the amount of distributions to our shareholders could be less than the amounts we have estimated or the timing could be delayed. For the foregoing reasons, among others, there can be no assurance as to the timing and amount of any final distributions to our shareholders.

Although we provided an updated estimated range of remaining liquidating distributions to shareholders of between $2.35 and $2.80 per share on January 23, 2026 (after giving effect to the initial liquidating distribution of $14.67 per share paid in January 2026), there can be no assurances regarding the amounts of the remaining liquidating distributions, if any, or the timing thereof. The remaining amounts, if any, that may ultimately be available for distribution to our shareholders are not yet fully known, and there are many factors that may affect the amounts available for distribution to our shareholders, including, among other things, our results of operations, the operating costs and amounts to be set aside for claims, liabilities and other obligations prior to and during the liquidation and winding-up process, and the time required to complete our liquidation and winding up. The estimated range of remaining liquidating distributions disclosed in our January 23, 2026 press release was estimated as of January 23, 2026 and did not take into account, among other things, 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, which reflected actual contract pricing for the Remaining Company Properties then under contract and other gross asset value estimate adjustments discussed in the press release issued by the Company on January 23, 2026, less estimates for transaction costs, (including updates to reflect actual transaction costs associated with closing the Portfolio Sale Transaction and finalizing the Secured Term Loan), debt service costs, debt repayment amounts for the Secured Term Loan and establishment of reserves to satisfy known liabilities and estimated, unascertained or contingent liabilities and expenses, estimated operating costs to run the Company until completion of the wind-down of the Company's business and affairs and dissolution of the Company, capital expenditure requirements and REIT compliance costs, but adjusted upwards for estimated cash flow/net working capital to be generated from the Company's property operations prior to completing sales of the Remaining Company Properties. These estimates may overstate the proceeds from asset sales or understate the actual expenses, which means actual remaining liquidating distributions may be significantly less or more than the estimated range. Other uncertainties that could cause the aggregate amount of remaining 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, include the following: - the price that potential buyers of our properties may be willing to pay for our remaining company properties may change due to a number of factors beyond our control, including changes in general economic or local conditions, changes in interest rates, availability of mortgage funds, supply and demand dynamics, changes in tax, real estate, environmental and zoning laws and regulations, occupancy percentages, lease rates, competition, operating performance and the perceived quality and dependability of income flows from tenancies, potential major repairs or other contingent liabilities associated with the properties, and a number of other factors, both local and national;- delays in our ability to find suitable buyers, complete the asset sales on the terms we currently expect and the wind-down of our business and affairs and termination of our existence could require us to incur expenses for a longer period than anticipated;- our ability to comply with the covenants and other terms of the Secured Term Loan which could impact our ability to make, or the timing of, additional liquidating distributions;- the costs and expenses of executing the Plan of Sale and Liquidation may differ from our estimates;- the current market conditions in the DC area, which have continued to soften throughout our marketing and sale process for the Remaining Company Properties, could continue to soften;- the estimated amount of cash flow/net working capital to be generated from our property operations prior to completing the wind-down of our business and affairs and termination of our existence pursuant to the Plan of Sale and Liquidation may be lower than we anticipate;- 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;- 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;- 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;- costs incurred to maintain our REIT status may be higher than estimated;- the number of issued and outstanding shares used to calculate the estimated range of the additional liquidating distributions could change; and - the reserve amounts we may establish to satisfy known liabilities and liquidating expenses and estimated, unascertained or contingent liabilities and expenses may be insufficient. Any of these uncertainties could impact the amount and timing of the estimated remaining liquidating distributions. For further information regarding the uncertainties and assumptions used in the estimated range of remaining liquidating distributions, please see the Company's Form 8-K filed on January 23, 2026. Additionally, there can be no assurances regarding the amount of your potential total return from receiving all liquidating 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.

We have incurred indebtedness that bears interest at a variable rate. As a result, high interest rates will increase our interest expense, which could adversely affect our cash flow and our ability to service debt. As a protection against high interest rates, we are required under the Secured Term Loan to enter, and have entered, into agreements such as interest rate caps. These agreements, however, increase our risks, including other parties to the agreements not performing or that the agreements may be unenforceable. Also, if prevailing interest rates or other factors, such as the reluctance of lenders to make commercial real estate loans or the loss of the benefits of hedging arrangements, result in higher interest rates on our indebtedness, the increased interest expenses would adversely affect our cash flow, financial condition, results of operation and amount of liquidating distributions.

The Secured Term Loan contains customary restrictions, requirements and other limitations on our ability to incur indebtedness, encumber properties, transfer properties and other customary restrictions and covenants. Failure to comply with any of the covenants under the Secured Term Loan could permit the lender to declare a default and, since the debt is secured, take possession of the property securing the defaulted loan, which would have a material adverse effect on our business, operations, financial condition and liquidity, including the ability to complete the Plan of Sale and Liquidation.