SECURITIES AND EXCHANGE COMMISSION

1775 EYE STREET, NW, SUITE 1000, WASHINGTON, DC 20006

(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~~each class	Trading Symbol(s)	Name of each exchange on which registered
Shares of Beneficial Interest	ELME	~~New York Stock Exchange~~NYSE

~~Securities registered pursuant to Section 12(g) of the Act: None~~___________________________________________________

Indicate by check mark whether the ~~registrant~~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~~ x NO oYes ☒ No ☐

Indicate by ~~checkmark~~check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). ~~YES~~ x NO oYes ☒ 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 ~~definition~~definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~YES~~ o NO xYes ☐ No ☒

As of ~~October 26, 2017, 78,465,013~~July 27, 2023, 87,823,464 common shares were outstanding.

~~WASHINGTON REAL ESTATE INVESTMENT TRUST~~

FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

The information furnished in the accompanying unaudited Consolidated Balance Sheets, Condensed Consolidated Statements of ~~Income,~~Operations, Condensed Consolidated Statements of Comprehensive Income (Loss), Consolidated ~~Statement~~Statements of Equity and Consolidated Statements of Cash Flows 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, ~~2016~~2022 included in ~~Washington Real Estate Investment Trust’s 2016~~our 2022 Annual Report on Form ~~10-K.~~

10-K filed on February 17, 2023.

~~WASHINGTON REAL ESTATE INVESTMENT TRUST~~

ELME COMMUNITIES AND SUBSIDIARIES

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Revenue
Real estate rental revenue $ 82,819
$ 79,770
$ 243,776
$ 236,312
Expenses
Real estate expenses 29,646
29,164
86,200
86,073
Depreciation and amortization 27,941
30,905
83,271
82,104
Acquisition costs —
—
—
1,178
General and administrative 5,327
4,539
16,712
15,018
Real estate impairment 5,000
—
5,000
—
Casualty gain —
—
—
(676 )
67,914
64,608
191,183
183,697
Other operating income
Gain on sale of real estate —
77,592
—
101,704
Real estate operating income 14,905
92,754
52,593
154,319
Other (expense) income
Interest expense (12,176 ) (13,173 ) (35,634 ) (41,353 )
Other income 84
83
209
205
Income tax (expense) benefit —
(2 ) 107
691
(12,092 ) (13,092 ) (35,318 ) (40,457 )
Net income 2,813
79,662
17,275
113,862
Less: Net loss attributable to noncontrolling interests in subsidiaries 20
12
56
32
Net income attributable to the controlling interests $ 2,833
$ 79,674
$ 17,331
$ 113,894

Basic net income attributable to the controlling interests per common share $ 0.04
$ 1.07
$ 0.22
$ 1.59

Diluted net income attributable to the controlling interests per common share $ 0.04
$ 1.07
$ 0.22
$ 1.59
Weighted average shares outstanding – basic 77,291
73,994
76,292
71,348
Weighted average shares outstanding – diluted 77,423
74,133
76,415
71,520
Dividends declared per share $ 0.30
$ 0.30
$ 0.90
$ 0.90

~~See accompanying notes to the consolidated financial statements.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 2,813
$ 79,662
$ 17,275
$ 113,862
Other comprehensive income:
Unrealized (loss) gain on interest rate hedges (9 ) 739
(763 ) (4,320 )
Comprehensive income 2,804
80,401
16,512
109,542
Less: Comprehensive loss attributable to noncontrolling interests 20
12
56
32
Comprehensive income attributable to the controlling interests $ 2,824
$ 80,413
$ 16,568
$ 109,574

See accompanying notes to the consolidated financial statements.

~~WASHINGTON REAL ESTATE INVESTMENT TRUST~~

ELME COMMUNITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue
Real estate rental revenue	$	56,599	$	51,380	$	112,408	$	99,184
Expenses
Property operating and maintenance	13,364		11,747		25,763		22,312
Real estate taxes and insurance	6,894		6,837		14,016		13,424
Property management	2,178		1,796		3,947		3,546
General and administrative	6,680		7,656		13,521		14,595
Transformation costs	2,454		2,023		5,354		4,246
Depreciation and amortization	21,415		24,039		42,951		46,239


	52,985		54,098		105,552		104,362

Real estate operating gain (loss)	3,614		(2,718)		6,856		(5,178)
Other income (expense)
Interest expense	(6,794)		(6,156)		(13,625)		(11,806)

Loss on extinguishment of debt	—		—		(54)		—
Other income	569		—		569		386

	(6,225)		(6,156)		(13,110)		(11,420)







Net loss	$	(2,611)	$	(8,874)	$	(6,254)	$	(16,598)






Basic net loss per common share	$	(0.03)	$	(0.10)	$	(0.07)	$	(0.19)




Diluted net loss per common share	$	(0.03)	$	(0.10)	$	(0.07)	$	(0.19)

Weighted average shares outstanding – basic	87,741		87,392		87,695		87,303
Weighted average shares outstanding – diluted	87,741		87,392		87,695		87,303

See accompanying notes to the consolidated financial statements.

ELME COMMUNITIES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS)

(UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(2,611)	$	(8,874)	$	(6,254)	$	(16,598)
Other comprehensive income:
Unrealized gain on interest rate hedges	854		917		521		2,842
Reclassification of unrealized loss on interest rate derivatives to earnings	509		510		1,019		1,020
Comprehensive loss	$	(1,248)	$	(7,447)	$	(4,714)	$	(12,736)

See accompanying notes to the consolidated financial statements.

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF EQUITY

(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, 2022	87,534	$	875	$	1,729,854	$	(453,008)	$	(14,233)	$	1,263,488	$	298	$	1,263,786

Net loss	—	—		—		(6,254)		—		(6,254)		—		(6,254)
Unrealized gain on interest rate hedges	—	—		—		—		521		521		—		521

Amortization of swap settlements	—	—		—		—		1,019		1,019		—		1,019
Distributions to noncontrolling interests	—	—		—		—		—		—		(4)		(4)

Dividends ($0.36 per common share)	—	—		—		(31,677)		—		(31,677)		—		(31,677)

Shares issued under Dividend Reinvestment Program	28	—		497		—		—		497		—		497
Share grants, net of forfeitures and tax withholdings	247	3		3,037		—		—		3,040		—		3,040
Balance, June 30, 2023	87,809	$	878	$	1,733,388	$	(490,939)	$	(12,693)	$	1,230,634	$	294	$	1,230,928

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 Income Total Shareholders’ Equity Noncontrolling Interests in Subsidiaries Total Equity
Balance, December 31, 2016 74,606
$ 746
$ 1,368,636
$ (326,047 ) $ 7,611
$ 1,050,946
$ 1,116
$ 1,052,062
Net income attributable to the controlling interests —
—
—
17,331
—
17,331
—
17,331
Net loss attributable to the noncontrolling interests —
—
—
—
—
—
(56 ) (56 )
Unrealized loss on interest rate hedge —
—
—
—
(763 ) (763 ) —
(763 )
Distributions to noncontrolling interests —
—
—
—
—
—
(67 ) (67 )
Operating partnership units issued with acquisition —
—
—
—
—
—
376
376
Dividends —
—
—
(69,252 ) —
(69,252 ) —
(69,252 )
Equity issuances, net of issuance costs 3,587
36
113,189
—
—
113,225
—
113,225
Shares issued under dividend reinvestment program 77
1
2,481
—
—
2,482
—
2,482
Share grants, net of share grant amortization, forfeitures and tax withholdings 194
2
2,851
—
—
2,853
—
2,853
Balance, September 30, 2017 78,464
$ 785
$ 1,487,157
$ (377,968 ) $ 6,848
$ 1,116,822
$ 1,369
$ 1,118,191


	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, 2021	86,261	$	863	$	1,697,477	$	(362,494)	$	(19,091)	$	1,316,755	$	307	$	1,317,062

Net loss	—	—		—		(16,598)		—		(16,598)		—		(16,598)
Unrealized gain on interest rate hedges	—	—		—		—		2,842		2,842		—		2,842

Amortization of swap settlements	—	—		—		—		1,020		1,020		—		1,020
Distributions to noncontrolling interests	—	—		—		—		—		—		(5)		(5)
Dividends ($0.34 per common share)	—	—		—		(29,790)		—		(29,790)		—		(29,790)
Equity issuances, net of issuance costs	1,032	10		26,841		—		—		26,851		—		26,851
Shares issued under Dividend Reinvestment Program	20	—		518		—		—		518		—		518
Share grants, net of forfeitures and tax withholdings	79	1		2,195		—		—		2,196		—		2,196
Balance, June 30, 2022	87,392	$	874	$	1,727,031	$	(408,882)	$	(15,229)	$	1,303,794	$	302	$	1,304,096

See accompanying notes to the consolidated financial statements.

~~WASHINGTON REAL ESTATE INVESTMENT TRUST~~

ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~EQUITY

(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, March 31, 2023	87,709	$	877	$	1,731,701	$	(472,503)	$	(14,056)	$	1,246,019	$	296	$	1,246,315

Net loss	—	—		—		(2,611)		—		(2,611)		—		(2,611)
Unrealized gain on interest rate hedges	—	—		—		—		854		854		—		854

Amortization of swap settlements	—	—		—		—		509		509		—		509
Distributions to noncontrolling interests	—	—		—		—		—		—		(2)		(2)

Dividends ($0.18 per common share)	—	—		—		(15,825)		—		(15,825)		—		(15,825)

Shares issued under Dividend Reinvestment Program	14	—		249		—		—		249		—		249
Share grants, net of share grant amortization and forfeitures	86	1		1,438		—		—		1,439		—		1,439
Balance, June 30, 2023	87,809	$	878	$	1,733,388	$	(490,939)	$	(12,693)	$	1,230,634	$	294	$	1,230,928

Nine Months Ended September 30,
2017 2016
Cash flows from operating activities
Net income $ 17,275
$ 113,862
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 83,271
82,104
Provision for losses on accounts receivable 768
1,163
Casualty gain —
(676 )
Real estate impairment 5,000
—
Gain on sale of real estate —
(101,704 )
Share-based compensation expense 3,561
2,736
Deferred tax benefit (107 ) (741 )
Amortization of debt premiums, discounts and related financing costs 1,422
2,389
Changes in operating other assets (21,300 ) (12,864 )
Changes in operating other liabilities 4,381
(505 )
Net cash provided by operating activities 94,271
85,764
Cash flows from investing activities
Real estate acquisitions, net (138,371 ) (227,413 )
Net cash received for sale of real estate —
243,624
Capital improvements to real estate (35,186 ) (38,202 )
Development in progress (12,988 ) (19,658 )
Deposit on real estate held for sale 775
—
Cash released from replacement reserve escrows, net 4,572
1,947
Insurance proceeds —
883
Non-real estate capital improvements (3,306 ) (278 )
Net cash used in investing activities (184,504 ) (39,097 )
Cash flows from financing activities
Line of credit borrowings, net 69,000
20,000
Dividends paid (91,666 ) (85,648 )
Principal payments – mortgage notes payable (51,815 ) (167,197 )
Proceeds from term loan 50,000
—
Payment of financing costs (234 ) (1,508 )
Distributions to noncontrolling interests (67 ) (143 )
Proceeds from dividend reinvestment program 2,482
545
Net proceeds from equity issuances 113,225
172,936
Payment of tax withholdings for restricted share awards (671 ) (889 )
Net cash provided by (used in) financing activities 90,254
(61,904 )
Net increase (decrease) in cash and cash equivalents 21
(15,237 )
Cash and cash equivalents at beginning of period 11,305
23,825
Cash and cash equivalents at end of period $ 11,326
$ 8,588
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized $ 29,188
$ 34,421
Change in accrued capital improvements and development costs 3,959
2,622
Operating partnership units issued with acquisition 376
—


	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, 2022	87,414	$	874	$	1,725,828	$	(385,108)	$	(16,656)	$	1,324,938	$	305	$	1,325,243
Net income	—	—		—		(8,874)		—		(8,874)		—		(8,874)
Unrealized gain on interest rate hedges	—	—		—		—		917		917		—		917

Amortization of swap settlements	—	—		—		—		510		510		—		510
Distributions to noncontrolling interests	—	—		—		—		—		—		(3)		(3)
Dividends ($0.17 per common share)	—	—		—		(14,900)		—		(14,900)		—		(14,900)

Shares issued under Dividend Reinvestment Program	10	—		254		—		—		254		—		254
Share grants, net of forfeitures and tax withholdings	(32)	—		949		—		—		949		—		949
Balance, June 30, 2022	87,392	$	874	$	1,727,031	$	(408,882)	$	(15,229)	$	1,303,794	$	302	$	1,304,096

See accompanying notes to the consolidated financial statements.

~~WASHINGTON REAL ESTATE INVESTMENT TRUST~~


ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(6,254)	$	(16,598)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	42,951		46,239
Credit losses on lease related receivables	1,512		1,344



Share-based compensation expense	2,599		4,240

Net amortization of debt premiums, discounts and related financing costs	2,101		2,006

Loss on extinguishment of debt	54		—
Changes in operating other assets	119		(2,469)
Changes in operating other liabilities	3,168		(783)
Net cash provided by operating activities	46,250		33,979
Cash flows from investing activities
Real estate acquisitions, net	—		(204,433)


Capital improvements to real estate	(9,890)		(11,395)
Development in progress	—		(659)


Non-real estate capital improvements	(293)		(642)
Net cash used in investing activities	(10,183)		(217,129)
Cash flows from financing activities
Line of credit repayments, net	(31,000)		—
Dividends paid	(30,777)		(29,524)



Repayments of unsecured term loan debt	(100,000)		—
Proceeds from term loan	125,000		—

Payment of financing costs	(844)		(39)
Distributions to noncontrolling interests	(4)		(5)
Proceeds from dividend reinvestment program	497		518
Net proceeds from equity issuances	—		26,851
Payment of tax withholdings for restricted share awards	(1,350)		(2,100)

Net cash used in financing activities	(38,478)		(4,299)
Net decrease in cash, cash equivalents and restricted cash	(2,411)		(187,449)
Cash, cash equivalents and restricted cash at beginning of period	9,852		234,220
Cash, cash equivalents and restricted cash at end of period	$	7,441	$	46,771


ELME COMMUNITIES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

	Six Months Ended June 30,
	2023		2022

Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	10,495	$	9,597
Change in accrued capital improvements and development costs	3,395		1,209
Dividend payable	15,834		14,916
Mortgage notes payable assumed in connection with the acquisition of real estate	—		76,554

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	5,554	$	44,787
Restricted cash	1,887		1,984
Cash, cash equivalents and restricted cash	$	7,441	$	46,771

See accompanying notes to the consolidated financial statements.

ELME COMMUNITIES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~June 30, ~~2017~~2023

(UNAUDITED)

NOTE 1:NATURE OF BUSINESS

~~Washington Real Estate Investment Trust (“Washington REIT”),~~Elme Communities, a Maryland real estate investment trust, is a self-administered equity real estate investment trust (“REIT”), and successor to a trust organized in 1960. Our business primarily consists of the ownership ~~and operation~~ of ~~income producing real estate properties~~apartment communities in the greater Washington, DC metro ~~region. We own a diversified portfolio of office buildings, multifamily buildings~~ and ~~retail centers.~~Sunbelt regions. Within these notes to the financial statements, we refer to the three months ended June 30, 2023 and June 30, 2022 as the “2023 Quarter” and the “2022 Quarter,” respectively, and the six months ended June 30, 2023 and June 30, 2022 as the “2023 Period” and the “2022 Period,” respectively.

Federal Income Taxes

We believe that we qualify as a ~~Real Estate Investment Trust (“REIT”)~~REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”), and intend to continue to qualify as such. 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),~~(determined before the deduction for dividends paid and excluding ~~any~~ net capital gains ~~and any deductions for dividends paid~~ to our ~~shareholders~~shareholders) on an annual basis. When selling a property, we generally have the option of (a) reinvesting the sales proceeds of property sold in a way that allows us to defer recognition of some or all taxable gain realized on the sale, (b) distributing gains to the shareholders with no tax to us or (c) treating net long-term capital gains as having been distributed to our shareholders, paying the tax on the gain deemed distributed and allocating the tax paid as a credit to our shareholders.

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 ~~subsidiaries~~subsidiary (“~~TRSs”~~TRS”). Our ~~TRSs are~~TRS is subject to corporate federal and state income tax on ~~their~~its taxable income at regular statutory ~~rates, or as calculated under the alternative minimum tax, as appropriate.~~rates. As of ~~September~~both June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, our ~~TRSs~~TRS had ~~deferred tax assets of $0.6 million and $0.5 million, respectively, net of valuation allowances of $2.7 million and $2.9 million, respectively. During the 2017 Period (as defined below), we recognized~~ a deferred tax ~~liability~~asset of ~~$0.6~~$1.4 million in connection with the acquisition of Watergate 600 (see note 3). As of September 30, 2017 and December 31, 2016, we had net deferred tax liabilities of $1.0 million and $0.4 million, respectively. The deferred tax liabilities are primarily related to temporary differences in the timing of the recognition of revenue, amortization and depreciation.that was fully reserved.

NOTE 2: 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, ~~2016.~~2022.

Recent Accounting Pronouncements ~~Not Yet Adopted~~

In ~~August 2017,~~March 2020, the Financial Accounting Standards Board ~~(the “FASB”)~~ issued Accounting Standards Update ~~(“ASU”~~("ASU") ~~2017-12,~~ ~~Derivatives~~2020-04, Reference Rate Reform ("Topic 848"), which was amended in December 2022 by ASU 2022-06, Reference Rate Reform (Topic 848). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and ~~Hedging:Targeted Improvements~~other contracts. The guidance in Topic 848 is optional and may be elected through December 31, 2024 as reference rate reform activities occur. During the first quarter of 2023, we executed an amendment to ~~Accounting for Hedging Activities~~the $700.0 million unsecured revolving credit facility (“Revolving Credit Facility”) to convert the benchmark interest rate from LIBOR to an adjusted SOFR ("Secured Overnight Financing Rate"). We elected to apply the optional expedients in Topic 848 to (i) assert that the hedged interest payments remain probable regardless of any expected modification in terms related to reference rate reform, and (ii) continue the method of assessing effectiveness as documented in the original hedge documentation so that the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The ~~purpose~~impact of this ~~updated~~ guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the option of early adopting the new standard using a modified retrospective transition method in any interim period after issuance of the update, or alternatively requires adoption for fiscal years beginning after December 15, 2018. This adoption method will require us to recognize the cumulative effect of initially applying the ASU, if any, as an adjustment to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the update. While we continue to assess all potential impacts of the standard, we dodid not ~~expect adoption to~~ have a material impact on our consolidated financial statements.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting,~~ which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The new standard is effective for all entities for fiscal years beginning after December 15, 2017 and for interim periods therein. Early adoption is permitted. We do not expect the new standard to have a material impact on our consolidated financial statements.

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230) - Restricted Cash~~,which requires that restricted cash and cash equivalents be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows. The new standard is effective for public entities for fiscal years beginning after December 15, 2017 and for interim periods therein, with early adoption permitted. We are currently evaluating the impact the new standard may have on Washington REIT’s consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments~~,which provides specific guidance on how cash receipts and payments should be presented and classified in the statement of cash flows for eight specific issues. The new standard is effective for public entities for fiscal years beginning after December 15, 2017 and for interim periods therein, with early adoption permitted. We are currently evaluating the impact the new standard may have on Washington REIT’s consolidated financial statements.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Measurement of Credit Losses on Financial Instruments~~,which requires financial assets measured at an amortized cost basis, including trade receivables, to be presented at the net amount expected to be collected. The new standard is effective for public entities for fiscal years beginning after December 15, 2019 and for interim periods therein with adoption one year earlier permitted. We are currently evaluating the impact the new standard may have on Washington REIT’s consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ ~~(“ASU 2016-02”)~~, which amends existing accounting standards for lease accounting, including by requiring lessees to recognize most leases on the balance sheet and making certain changes to lessor accounting. The new standard is effective for public entities for fiscal years beginning after December 15, 2018 and for interim periods therein with early adoption permitted. Upon adoption, for leases in which we are the lessor, the lease contract will be separated into lease and non-lease components in accordance with the provisions outlined within ASU No. 2014-09, ~~Revenue from Contracts with Customers (Topic 606)~~ (“ASU 2014-09”). The lease component of the contract will be recognized on a straight-line basis in accordance with ASU 2016-02, while the non-lease component will be recognized under the provisions of ASU 2014-09. For lease contracts with a duration of more than one year in which we are the lessee, the present value of future lease payments will be recognized on our balance sheet as a right-of-use asset and a corresponding lease liability. Also, only direct leasing costs may be capitalized under the new standard, while current accounting standards allow for the capitalization of indirect leasing costs. We are currently evaluating the impact ASU 2016-02 may have on Washington REIT’s consolidated financial statements.

In June 2014, the FASB issued ASU 2014-09, which creates a single source of revenue guidance. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are in the scope of other U.S. generally accepted accounting principles (“GAAP”) requirements, such as the leasing literature). The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets, such as property and equipment, including real estate. The new standard is effective for public entities for fiscal years beginning after December 15, 2017 and for interim periods therein. Early adoption is permitted for public entities beginning after December 15, 2016. We intend to adopt the new standard using the modified retrospective method. Upon adoption of ASU 2016-02, the majority of our revenue will be subject to the allocation provisions outlined within the revenue standard. We are currently evaluating the specific implementation requirements for allocating the consideration within our contracts in accordance with ASU 2014-09. We do not expect the new standard to have a material impact on the measurement and recognition of gains and losses on the sale of properties.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements include the consolidated accounts of ~~Washington REIT,~~Elme Communities and our ~~majority-owned~~ subsidiaries and entities in which ~~Washington REIT~~Elme Communities has a controlling interest, including where Washington REIT has been determined to be a primary beneficiary of a variable interest entity (“VIE”). See note 3 for additional information on the property for which there is a noncontrollingfinancial interest. All intercompany balances and transactions have been eliminated in consolidation.

We have prepared the accompanying unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ~~“SEC”~~(“SEC”). Certain information and note disclosures normally included in annual financial statements

prepared in accordance with ~~GAAP~~Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information presented not misleading. In addition, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the periods presented have been included. These unaudited financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

Lessee Accounting

~~Within these notes~~

For leases where we are the lessee, primarily our corporate office operating lease, we recognize a right-of-use asset and a lease liability in accordance with Accounting Standards Codification (“ASC”) Topic 842. The right-of-use asset and associated liability is equal to the ~~financial statements, we refer~~present value of the minimum lease payments, applying our incremental borrowing rate. Our borrowing rate is computed based on observable borrowing rates taking into consideration our credit quality and adjusting to a secured borrowing rate for similar assets and term.

Lease expense for the operating lease is recognized on a straight-line basis over the expected lease term and is included in “General and administrative expense.”

Restricted Cash

Restricted cash includes funds held in escrow for tenant security deposits.

Transformation Costs

Transformation costs include costs related to the ~~three months ended September 30, 2017~~strategic shift away from the commercial sector to the residential sector, including the allocation of internal costs, consulting, advisory and September 30, 2016 as the “2017 Quarter” and the “2016 Quarter,” respectively and the nine months ended September 30, 2017 and September 30, 2016 as the "2017 Period" and "2016 Period," respectively.termination benefits.

Use of Estimates in the Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE 3: REAL ESTATE

~~Acquisition~~

Our current strategy is focused on properties inside the Washington metro region’s Beltway, near major transportation nodes and in areas with strong employment drivers and superior growth demographics. We seek to upgrade our portfolio with acquisitions as appropriate opportunities arise. We acquired the following property during the 2017 Period (the “2017 acquisition”):

Acquisition Date Property Type
Net Rentable
Square Feet
Contract Purchase Price (In thousands)
April 4, 2017 Watergate 600 Office 293,000 $ 135,000

~~The results of operations from the 2017 acquisition are included in the consolidated statements of income from the acquisition date and are as follows (in thousands):~~

Three Months Ended
September 30, 2017
Nine Months Ended
September 30, 2017
Real estate rental revenue $ 4,831
$ 9,733
Net income 356
1,320

We accounted for the acquisition of Watergate 600 as an asset acquisition. Accordingly, we capitalized $2.8 million of costs directly associated with the acquisition. We measured the value of the acquired physical assets (land and building), in-place leases (tenant origination costs, leasing commissions, absorption costs and lease intangible assets/liabilities), and any other liabilities by allocating the total cost of the acquisition on a relative fair value basis.

~~We have recorded the total cost of the 2017 acquisition as follows (in thousands):~~

Land $ 45,981
Building 66,241
Tenant origination costs 12,084
Leasing commissions/absorption costs 23,161
Lease intangible assets 498
Lease intangible liabilities (9,585 )
Deferred tax liability (560 )
Total $ 137,820

The weighted remaining average life for the 2017 acquisition components above, other than land, building and deferred tax liability, are 92 months for tenant origination costs, 85 months for leasing commissions/absorption costs, 16 months for net lease intangible assets and 105 months for net lease intangible liabilities.

The difference in the total contract purchase price of $135.0 million for the 2017 acquisition and cash paid for the acquisition per the consolidated statements of cash flows of $138.4 million is primarily due to capitalized acquisition-related costs ($2.8 million) and a net credit to the buyer for certain expenditures ($1.0 million), partially offset by the issuance of 12,124 operating partnership units (“Operating Partnership Units”) as part of the consideration ($0.4 million). The Operating Partnership Units are units in WashREIT Watergate 600 OP LP, a consolidated subsidiary of Washington REIT. These Operating Partnership Units may be

redeemed for either cash equal to the fair market value of a share of Washington REIT common stock at the time of redemption (based on a 20-day average price) or, at the option of Washington REIT, one registered or unregistered share of Washington REIT common stock. In connection with the 2017 acquisition, we granted registration rights to the two contributors of the Watergate 600 property relating to the resale of any shares issued upon exchange of Operating Partnership Units pursuant to a shelf registration statement that we have an obligation to make available to the contributors approximately one year after the issuance of the Operating Partnership Units.

Development/Redevelopment

We have properties under development/redevelopment and held for current or future ~~development as~~development. As of ~~September~~June 30, ~~2017. In the office segment,~~2023, we have invested $30.4 million, including the cost of acquired land, in a redevelopment project at the Army Navy Building, an office property in Washington, DC, to upgrade its common areas and add significant amenities in order to make the property more competitive within its sub-market. As of September 30, 2017, we had invested $4.4 million in the redevelopment and have placed $4.3 million of the project into service. We have substantially completed the additional amenities and common areas and expect to place 11th floor common areas into service by the end of 2017.

~~In the multifamily segment, we have The Trove, a multifamily development adjacent to The Wellington, and own land held for future multifamily~~residential development adjacent to Riverside Apartments. AsDuring the 2022 Quarter, we paused development activities at the aforementioned property and ceased associated capitalization of ~~September 30, 2017, we had invested $27.3 million~~interest on spending and ~~$19.0 million, including the costs of acquired land, in The Trove and the development adjacent to Riverside Apartments, respectively.~~

~~In the retail segment, we currently have a redevelopment project to add rentable space at Spring Valley Village. As of September 30, 2017, we had invested $2.5 million in the redevelopment.~~

~~Variable Interest Entity~~

~~In June 2011, we executed a joint venture operating agreement with a~~ real estate taxes. However, we continue to capitalize qualifying costs on several other projects with minor development ~~company~~activity necessary to develop The Maxwell, a mid-rise multifamily property at 650 North Glebe Road in Arlington, Virginia. Major construction activities at The Maxwell ended during December 2014, and the building became availableready each project for occupancy during the first quarter of 2015. Washington REIT was the 90% owner of the joint venture. The real estate development company owned 10% of the joint venture and was responsible for the development and construction of the property. Subsequent to the end of the 2017 Quarter, we purchased the remaining 10% of the joint venture from the real estate development company for a contract purchase price of $4.1 million. Upon the completion of this transaction, the joint venture was dissolved and Washington REIT became sole owner of The Maxwell.its intended use.

We determined that, prior to completion of this transaction, The Maxwell joint venture was a VIE primarily based on the fact that the equity investment at risk was not sufficient to permit the entity to finance its activities without additional financial support. We also determined that Washington REIT was the primary beneficiary of the VIE due to the fact that Washington REIT was determined to have a controlling financial interest in the entity. In January 2016, Washington REIT exercised its right to purchase at par The Maxwell’s construction loan from the original third-party lender. Upon the purchase, the construction loan became an intercompany loan payable from the consolidated VIE to Washington REIT that is eliminated in consolidation. Subsequent to the 2017 Quarter, the intercompany loan payable was extinguished as part of the Washington REIT’s purchase of the joint venture partner’s 10%interest.

~~As of September 30, 2017 and December 31, 2016, The Maxwell’s assets were as follows (in thousands):~~

September 30, 2017 December 31, 2016
Land $ 12,851
$ 12,851
Income producing property 37,960
37,949
Accumulated depreciation and amortization (6,255 ) (4,571 )
Other assets 1,016
456
$ 45,572
$ 46,685

~~As of September 30, 2017 and December 31, 2016, The Maxwell’s liabilities were as follows (in thousands):~~

September 30, 2017 December 31, 2016
Mortgage notes payable ⁽¹⁾
$ 31,580
$ 31,869
Accounts payable and other liabilities 395
186
Tenant security deposits 94
99
$ 32,069
$ 32,154

⁽¹⁾~~The mortgage notes payable balances as of September 30, 2017 and December 31, 2016 are eliminated in consolidation due to the purchase of the loan by Washington REIT in January 2016.~~

Properties Sold and Held for Sale

We intend to hold our properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing and owning our properties and to make occasional sales of ~~the~~ properties that no longer meet our long-term strategy or return objectives and where market conditions for sale are favorable. The proceeds from the sales may be reinvested into other properties, used to fund development operations or to support other corporate needs or distributed to our shareholders. Depreciation on these properties is discontinued ~~when~~at the time they are classified as held for sale, but operating revenues, ~~other~~ operating expenses and interest expense continue to be recognized until the date of sale.

~~During the 2017 Quarter, we entered into negotiations to~~We did not sell Braddock Metro Center, a 356,000 square foot office property in Alexandria, Virginia. Subsequent to the 2017 Quarter, we executed a letter of intent with a potential buyer for the property and are in the process of negotiating a purchase and sale agreement. Due to the negotiations to sell the property, we evaluated Braddock Metro Center for impairment. We recognized a $5.0 million impairment charge for the 2017 Quarter in order to reduce the carrying value of the property to its estimated fair value. We based this fair valuation on the expected net proceeds from a potential sale. There are few observable market transactions for similar properties. This fair valuation falls into Level 2 of the fair value hierarchy due to its reliance on a quoted price in a market that is not active. Braddock Metro Center does not meet the criteria for classificationor classify any properties as held for sale asduring the 2023 Period or in 2022.

As of ~~September~~June 30, ~~2017.~~

~~During the second quarter of 2017,~~2023, we executed a purchase and sale agreement for the sale of Walker House Apartments, a multifamily property in Gaithersburg, Maryland, for a contract sale price of $32.2 million. We determined that the property met the criteria for classification asassessed our properties, including assets held for ~~sale~~development, for impairment and did not recognize any impairment charges during the 2023 Quarter. We applied reasonable estimates and judgments in evaluating each of the properties as of June 30, ~~2017, and~~2023. Should external or internal circumstances change requiring the ~~property continues~~need to ~~meet the criteria for classification as held for sale as of September 30, 2017. We closed on the sale on October 23, 2017.~~

~~We sold the following~~shorten holding periods or adjust future estimated cash flows from our properties, ~~in 2016:~~

Disposition Date Property Name Segment Number of Units/ Rentable Square Feet Contract
Sales Price
(in thousands) Gain on Sale
(in thousands)
May 26, 2016
Dulles Station II ⁽¹⁾
Office N/A $ 12,100
$ 527
June 27, 2016
Maryland Office Portfolio Transaction I⁽²⁾
Office 692,000 111,500
23,585
September 22, 2016
Maryland Office Portfolio Transaction II ⁽³⁾
Office 491,000 128,500
77,592
Total 2016 1,183,000 $ 252,100
$ 101,704


⁽¹⁾	~~Land held for future development and an interest in a parking garage.~~


⁽²⁾	~~Maryland Office Portfolio Transaction I consists of 6110 Executive Boulevard, 600 Jefferson Plaza, Wayne Plaza and West Gude Drive.~~


⁽³⁾	~~Maryland Office Portfolio Transaction II consists of 51 Monroe Street and One Central Plaza.~~

~~While the sale of the Maryland Office Portfolio,~~we could be required to record impairment charges in the aggregate, constituted an individually significant disposition, the Maryland Office Portfolio does not qualify for presentation and disclosure as a discontinued operation as it does not represent a strategic shift in our operations. Real estate rental revenue and net income for the Maryland Office Portfolio for the three and nine months ended September 30, 2017 and 2016 are as follows:future.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Real estate rental revenue $ —
$ 3,689
$ —
$ 20,266
Net income —
2,474
—
9,376

~~We do not have significant continuing involvement in the operations of the disposed properties.~~

~~NOTE 4: MORTGAGE NOTES PAYABLE~~

~~In February 2017, we prepaid without penalty the remaining $49.6 million of the mortgage note secured by the Army Navy Building.~~

NOTE 5:4: UNSECURED ~~LINES~~LINE OF CREDIT PAYABLE

~~We have a $600.0~~During the third quarter of 2021, we entered into an amended and restated credit agreement (“Credit Agreement”) which provides for the Revolving Credit Facility and the continuation of an existing $250.0 million unsecured ~~revolving credit agreement~~term loan (“~~Revolving Credit Facility”~~2018 Term Loan”) ~~that matures in June 2019, unless extended pursuant to one or both of the two six months extension options.~~. The Revolving Credit Facility has a four-year term ending in August 2025, with two six-month extension options. The Credit Agreement has an accordion feature ~~which we utilized a portion of in September 2015, as described below,~~ that allows us to increase the aggregate facility to ~~$1.0~~$1.5 billion, subject to the ~~extent the lenders agree~~lenders’ agreement to provide additional revolving loan commitments or term loans. ~~In September 2015,~~

During the first quarter of 2023, we ~~entered into a $150.0 million unsecured term loan (“2015 Term Loan”) by executing a portion of the accordion feature under~~executed an amendment to the Revolving Credit ~~Facility. The 2015 Term Loan has a 5.5 year term and currently has an~~Facility to convert the benchmark interest rate ~~of one month~~from LIBOR ~~plus 110 basis points, based on Washington REIT’s current unsecured debt ratings. We entered into two~~to an adjusted SOFR, with no change in the applicable interest rate ~~swaps to effectively fix the interest rate at 2.7% (see note 7).~~

margins. The Revolving Credit Facility bears interest at a rate of ~~either one month LIBOR~~daily SOFR plus 0.10% plus a margin ranging from ~~0.875%~~0.70% to 1.55% or the base rate plus a margin ranging from 0.0% to 0.55% (in each case depending upon Washington REIT’s credit rating). The base rate is the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50% and the LIBOR market index rate plus 1.0%1.40%. In addition, the Revolving Credit Facility requires the payment of a facility fee ranging from ~~0.125%~~0.10% to 0.30% (depending on ~~Washington REIT’s~~Elme Communities’ credit rating) on the ~~$600.0~~$700.0 million committed revolving loan capacity, without regard to usage. As of ~~September~~June 30, ~~2017,~~2023, the interest rate on the ~~facility~~Revolving Credit Facility is ~~one month LIBOR~~adjusted SOFR (inclusive of the 0.10% credit spread adjustment) plus ~~1.00%~~0.85%, the daily SOFR is 5.09% and the facility fee is 0.20%.

All outstanding advances for the Revolving Credit Facility are due and payable upon maturity in August 2025, unless extended pursuant to one or both of the two six-month extension options. Interest only payments are due and payable generally on a monthly basis.

The amount of the Revolving Credit Facility’s unsecured line of credit unused and available at ~~September~~June 30, ~~2017 is~~2023 was as follows (in thousands):


Committed capacity	$	700,000
Borrowings outstanding	(24,000)

Unused and available	$	676,000

Committed capacity $ 600,000
Borrowings outstanding (189,000 )
Unused and available $ 411,000

We executed borrowings and repayments on the Revolving Credit Facility during the ~~2017~~2023 Period as follows (in thousands):


Balance, December 31, 2022	$	55,000
Borrowings	142,000
Repayments	(173,000)
Balance, June 30, 2023	$	24,000

Revolving Credit Facility
Balance at December 31, 2016 $ 120,000
Borrowings 259,000
Repayments (190,000 )
Balance at September 30, 2017 $ 189,000

NOTE 6:5: NOTES PAYABLE

During ~~2016,~~the first quarter of 2023, we entered into a ~~seven year, $150.0~~$125.0 million unsecured term loan ~~(“2016~~("2023 Term ~~Loan”~~Loan") ~~maturing on July 21, 2023~~ with a deferred draw period of up to six months commencing on July 22, 2016. The 2016 Term Loan bears interest at a rate of either LIBOR plus a margin ranging from 1.50% to 2.45% or the base rate plus a margin ranging from 0.5% to 1.45% (in each case depending upon Washington REIT’s credit rating). The base rate is the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50% and one-month LIBOR plus 1.0%. The 2016 Term Loan currently has an interest rate of ~~one month LIBOR~~SOFR (subject to a credit spread adjustment of 10 basis points) plus ~~165~~a margin of 95 basis points ~~based~~(subject to adjustment depending on ~~Washington REIT’s current unsecured debt ratings.~~Elme Communities’ credit rating). The 2023 Term Loan has a two-year term ending in January 2025, with two one-year extension options. We ~~borrowed~~used the proceeds to prepay the $100.0 million on the term loan in the fourth quarter of 2016, and borrowed the remaining $50.0 million during the first quarter of 2017. We have also previously entered into forward interest rate swaps commencing on March 31, 2017 to effectively fix the interest rate on the 20162018 Term Loan ~~at 2.9% (see note 7).~~in full and a portion of our borrowings under our unsecured credit facility.

NOTE 7:6: DERIVATIVE INSTRUMENTS

~~On September 15, 2015,~~We have an interest rate swap arrangement with a notional amount of $100.0 million that had effectively fixed the remaining $100.0 million portion of the 2018 Term Loan prior to the prepayment. During the first quarter of 2023, we prepaid the 2018 Term Loan using proceeds from the $125.0 million 2023 Term Loan (see note 5). Subsequent to this transaction, the interest swap arrangement effectively fixes the interest rate on a $100.0 million portion of the 2023 Term Loan through the interest rate swap arrangement’s expiration date of July 21, 2023.

During the first quarter of 2023, we entered into two interest rate swap arrangements with ~~a total~~an aggregate notional amount of ~~$150.0~~$125.0 million ~~to swap~~that will effectively fix the ~~floating~~ interest ~~rate under~~at 4.73% for the ~~2015~~2023 Term Loan (see note 5) to an all-in fixed interest rate of 2.7% starting on October 15, 2015 and extending until the maturity of the 2015 Term Loan on March 15, 2021. On July 22, 2016, we entered into two forward interest rate swap arrangements with a total notional amount of $150.0 million to swap the floating interest rate under the 2016

~~Term Loan (see note 6) to an all-in fixed interest rate of 2.9% starting on March 31, 2017 and extending until the maturity of the 2016 Term Loan~~beginning on July 21, ~~2023.~~2023 through the 2023 Term Loan’s maturity date of January 10, 2025.

The interest rate ~~swaps qualify as cash flow hedges and~~swap arrangements are recorded at fair value in accordance with GAAP, based on discounted cash flow methodologies and observable inputs. We record the effective portion of changes in fair value of the cash flow hedges in ~~other comprehensive income. The resulting unrealized gain (loss) on the effective portions of the cash flow hedges was the only activity in other~~Other comprehensive income ~~during the periods presented in our consolidated financial statements.~~(loss). We assess the effectiveness of ~~our~~a cash flow ~~hedges~~hedge both at inception and on an ongoing basis. ~~The~~If a cash flow hedge is no longer expected to be effective, hedge accounting is discontinued. Hedge ineffectiveness of our cash flow hedges were effective for the 2017 Quarter and 2017 Period and 2016 Quarter and 2016 Period, and therefore hedge ineffectiveness did not impact earnings during the 2017 Quarter and 2017 Period and 2016 Quarter and 2016 Period.is recorded in earnings.

The fair values of the interest rate swaps as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016, are~~2022, were as follows (in thousands):


					Fair Value
					Derivative Assets
Derivative Instrument	Aggregate Notional Amount		Effective Date	Maturity Date	June 30, 2023		December 31, 2022
Interest rate swap	$	100,000	March 31, 2017	July 21, 2023	$	219	$	1,998
Interest rate swap	75,000		July 21, 2023	January 10, 2025	1,383		—
Interest rate swap	50,000		July 21, 2023	January 10, 2025	922		—
					$	2,524	$	1,998

Fair Value
Asset Derivatives
Derivative Instrument Aggregate Notional Amount Effective Date Maturity Date September 30, 2017 December 31, 2016
Interest rate swaps $ 150,000
October 15, 2015 March 15, 2021 $ 747
$ 417
Interest rate swaps 150,000
March 31, 2017 July 21, 2023 6,101
7,194
$ 300,000
$ 6,848
$ 7,611

We record interest rate swaps on our consolidated balance sheets ~~with prepaid~~within Prepaid expenses and other assets when in a net asset position and ~~with accounts~~within Accounts payable and other liabilities when in a net liability position. The ~~interest rate swaps have been effective since inception. The~~ net unrealized gains ~~or losses~~ on the effective swaps ~~are~~were recognized in ~~other~~Other comprehensive income (loss), as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Unrealized gain on interest rate hedges	$	854	$	917	$	521	$	2,842

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Unrealized (loss) gain on interest rate hedges $ (9 ) $ 739
$ (763 ) $ (4,320 )

Amounts reported in ~~accumulated~~Accumulated other comprehensive ~~income (loss)~~loss related to ~~derivatives~~effective cash flow hedges will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next twelve months, we estimate that an additional ~~$0.1~~$2.0 million related to our three outstanding interest rate swap arrangements will be reclassified as a decrease to interest expense.

The losses reclassified from Accumulated other comprehensive loss into interest expense for the three and six months ended June 30, 2023 and 2022, were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Loss reclassified from accumulated other comprehensive loss into interest expense	$	509	$	510	$	1,019	$	1,020

During the next twelve months, we estimate that an additional $2.0 million related to the previously settled interest rate swap arrangements will be reclassified as an increase to interest expense.

We have agreements with each of our derivative counterparties that contain a provision whereby we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of ~~September~~June 30, ~~2017,~~2023, the fair value of derivative assets, including accrued interest, was $2.5 million and we did not have any derivatives is in a ~~net asset position of $6.8 million, which includes accrued interest but excludes any adjustment for nonperformance risk.~~liability position. As of ~~September~~June 30, ~~2017,~~2023, we have not posted any collateral related to these agreements.

Derivative instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of the interest rate hedge ~~agreement.~~agreements. We believe that we minimize our credit risk on these transactions by dealing with major, creditworthy financial institutions. We monitor the credit ratings of counterparties and our exposure to any single entity, thus minimizing our credit risk concentration.

NOTE 8:7: FAIR VALUE DISCLOSURES

Assets and Liabilities Measured at Fair Value

For assets and liabilities measured at fair value on a recurring basis, quantitative disclosures about the fair value measurements are required to be disclosed separately for each major category of assets and liabilities, as follows:

Level 1: Quoted prices in active markets for identical assets

Level 2: Significant other observable inputs

Level 3: Significant unobservable inputs

The only assets or liabilities we had at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 that are recorded at fair value on a recurring basis are the assets held in the Supplemental Executive Retirement Plan (“SERP”), which primarily consist of investments in mutual funds, and the interest rate ~~swaps~~derivatives (see note 7)6).

We base the valuations related to the SERP on assumptions derived from significant other observable inputs and accordingly these valuations fall into Level 2 in the fair value hierarchy.

The valuation of the interest rate ~~swaps~~derivatives is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each interest rate ~~swap.~~derivative. This analysis reflects the contractual terms of the interest rate ~~swaps,~~derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate ~~swaps~~derivatives are determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. To comply with the provisions of ASC 820,Fair Value Measurement, we incorporate credit valuation adjustments in the fair value measurements to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk. These credit valuation adjustments were concluded to not be significant inputs for the fair value calculations for the periods presented. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as the posting of collateral, thresholds, mutual puts and guarantees. The valuation of interest rate ~~swaps~~derivatives fall into Level 2 in the fair value hierarchy.

The fair values of these assets ~~and liabilities~~ at ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 were as follows (in thousands):


	June 30, 2023								December 31, 2022
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets:
SERP	$	2,485	$	—	$	2,485	$	—	$	2,142	$	—	$	2,142	$	—
Interest rate derivatives	2,524		—		2,524		—		1,998		—		1,998		—

September 30, 2017 December 31, 2016

Fair
Value
Level 1 Level 2 Level 3
Fair
Value
Level 1 Level 2 Level 3
Assets:
SERP $ 1,727
$ —
$ 1,727
$ —
$ 1,407
$ —
$ 1,407
$ —
Interest rate swaps 6,848
—
6,848
—
7,611
—
7,611
—

Financial Assets and Liabilities Not Measured at Fair Value

The following disclosures of estimated fair value were determined by management using available market information and established valuation methodologies, including discounted cash ~~flow.~~flow models. Many of these estimates involve significant judgment. The estimated fair value disclosed may not necessarily be indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have an effect on the estimated fair value amounts. In addition, fair value estimates are made at a point in time and thus, estimates of fair value subsequent to ~~September~~June 30, ~~2017~~2023 may differ significantly from the amounts presented.

~~Following is a summary~~ The valuations of ~~significant methodologies used in estimating fair values and a schedule of fair values at September 30, 2017 and December 31, 2016.~~

~~Cash and Cash Equivalents and Restricted Cash~~

~~Cash~~cash and cash equivalents and restricted cash include cash and commercial paper with original maturities of less than 90 days, which are valued at the carrying value, which approximates fair value due to the short maturity of these instruments (Levelfall into Level 1 ~~inputs).~~

~~Notes Receivable~~

~~We acquired a note receivable (“2445 M Street note”)~~ in ~~2008 with the purchase of 2445 M Street. We estimate~~ the fair value hierarchy and the valuations of ~~the 2445 M Street note based on a discounted cash flow methodology using market discount rates (Level~~debt instruments fall into Level 3 ~~inputs).~~

~~Mortgage notes payable consist of instruments~~ in ~~which certain of our real estate assets are used for collateral. We estimate~~ the fair value of the mortgage notes payable by discounting the contractual cash flows at a rate equal to the relevant treasury rates (with respect to the timing of each cash flow) plus credit spreads estimated through independent comparisons to real estate assets or loans with similar characteristics. Lines of credit payable consist of our bank facility which we use for various purposes including working capital, acquisition funding and capital improvements. The lines of credit advances and term loans with floating interest rates are priced at a specified rate plus a spread. We estimate the market value based on a comparison of the spreads of the advances to market given the adjustable base rate. We estimate the fair value of the notes payable by discounting the contractual cash flowshierarchy.

at a rate equal to the relevant treasury rates (with respect to the timing of each cash flow) plus credit spreads derived using the relevant securities’ market prices. We classify these fair value measurements as Level 3 as we use significant unobservable inputs and management judgment due to the absence of quoted market prices.

As of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~2022, the carrying values and estimated fair values of our financial instruments were as follows (in thousands):


	June 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	5,554	$	5,554	$	8,389	$	8,389
Restricted cash	1,887		1,887		1,463		1,463

Line of credit	24,000		24,000		55,000		55,000
Notes payable, net	521,955		471,463		497,359		454,564

September 30, 2017 December 31, 2016
Carrying Value Fair Value Carrying Value Fair Value
Cash and cash equivalents $ 11,326
$ 11,326
$ 11,305
$ 11,305
Restricted cash 1,442
1,442
6,317
6,317
2445 M Street note receivable 2,005
2,194
2,089
2,173
Mortgage notes payable, net 96,045
98,892
148,540
149,997
Lines of credit 189,000
189,000
120,000
120,000
Notes payable, net 894,103
932,766
843,084
873,516

NOTE ~~9: STOCK BASED~~8: SHARE-BASED COMPENSATION

~~Washington REIT~~Elme Communities maintains short-term (“STIP”) and long-term (“LTIP”) incentive plans that allow for ~~stock based~~stock-based awards to officers and non-officer employees. Stock based awards are provided to officers and non-officer employees, as well as trustees, under the Washington Real Estate Investment Trust 2016 Omnibus Incentive Plan which allows for awards in the form of restricted shares, restricted share units, options and other awards up to an aggregate of 2,400,000 shares over the ten-year period in which the plan will be in effect. Restricted share units are converted into shares of our stock upon full vesting through the issuance of new shares.

Total Compensation Expense

Total compensation expense recognized in the consolidated financial statements for all outstanding ~~share based~~share-based awards was ~~$1.2~~$1.4 million and ~~$0.3~~$2.1 million for the ~~2017~~2023 Quarter and ~~2016~~2022 Quarter, respectively, and ~~$3.6~~$2.6 million and ~~$2.7~~$4.2 million for the ~~2017 Period~~2023 and ~~2016~~2022 Period, respectively.

Restricted Share Awards

The total fair values of restricted share awards vested was ~~$2.0~~$4.0 million and ~~$2.5~~$4.8 million for the ~~2017~~2023 Period and ~~2016~~2022 Period, respectively.

The total unvested restricted share awards at ~~September~~June 30, ~~2017~~2023 was ~~355,120~~377,725 shares, which had a weighted average grant date fair value of ~~$30.86~~$20.07 per share. As of ~~September~~June 30, ~~2017,~~2023, the total compensation cost related to unvested restricted share awards was ~~$7.4~~$5.9 million, which we expect to recognize over a weighted average period of 3728 months.

NOTE ~~10:~~9: 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 ~~attributable to the controlling interest~~ 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 ~~diluted~~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 ~~awards with~~all market ~~conditions~~condition awards under the contingently issuable method. ~~The dilutive earnings per share calculation also considers the Operating Partnership Units issued in connection with the 2017 acquisition, which were not dilutive for any of the periods presented.~~

The computations of basic and diluted earnings per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 were as follows (in thousands, except per share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator:
Net loss	$	(2,611)	$	(8,874)	$	(6,254)	$	(16,598)

Allocation of earnings to unvested restricted share awards	(68)		(51)		(138)		(123)




Adjusted net loss	$	(2,679)	$	(8,925)	$	(6,392)	$	(16,721)
Denominator:
Weighted average shares outstanding – basic and diluted	87,741		87,392		87,695		87,303








Basic net loss per common share	$	(0.03)	$	(0.10)	$	(0.07)	$	(0.19)



Diluted net loss per common share	$	(0.03)	$	(0.10)	$	(0.07)	$	(0.19)

Dividends declared per common share	$	0.18	$	0.17	$	0.36	$	0.34

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Numerator:
Net income $ 2,813
$ 79,662
$ 17,275
$ 113,862
Net loss attributable to noncontrolling interests in subsidiaries 20
12
56
32
Allocation of earnings to unvested restricted share awards (107 ) (200 ) (291 ) (329 )
Adjusted net income attributable to the controlling interests $ 2,726
$ 79,474
$ 17,040
$ 113,565
Denominator:

Weighted average shares outstanding – basic 77,291
73,994
76,292
71,348
Effect of dilutive securities:
Operating partnership units 12
—
8
—
Employee restricted share awards 120
139
115
172
Weighted average shares outstanding – diluted 77,423
74,133
76,415
71,520

Basic net income attributable to the controlling interests per common share $ 0.04
$ 1.07
$ 0.22
$ 1.59
Diluted net income attributable to the controlling interests per common share $ 0.04
$ 1.07
$ 0.22
$ 1.59

NOTE ~~11:~~10: SEGMENT INFORMATION

We operate in a single reportable segment which includes the ownership, development, redevelopment and acquisition of apartment communities. None of our operating properties meet the criteria to be considered separate operating segments on a stand-alone basis. Within the residential segment, we do not distinguish or group our consolidated operations based on size (only one community, Riverside Apartments, comprises more than 10% of consolidated revenues), type (all assets in the segment are residential) or geography (all but five communities are within the Washington, DC metro region). Further, our apartment communities have similar long-term economic characteristics and provide similar products and services to our residents. As a result, our operating properties are aggregated into a single reportable segment: residential.

We have ~~three~~one remaining office property, Watergate 600, which does not meet the criteria for a reportable ~~segments: office, multifamily~~segment, and retail. Office properties provide office space for various types of businesses and professions. Multifamily properties provide rental housing for individuals and families throughout the greater Washington metro region. Retail properties are typically grocery store-anchored neighborhood centers that include other small shop tenants or regional power centers with several junior box tenants.has been classified within “Other” on our segment disclosure tables.

We evaluate performance based upon net operating income ~~from~~(“NOI”) of the combined properties in ~~each~~the segment. Our reportable operating ~~segments are consolidations of~~segment consolidates similar properties. GAAP requires that segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing ~~segments’~~each segment’s performance. ~~Net operating income~~NOI is a key measurement of our segment profit and ~~loss. Net operating income~~loss and is defined as ~~segment~~ real estate rental revenue less ~~segment~~ real estate expenses.

The following tables present revenues, ~~net operating income,~~NOI, capital expenditures and total assets for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 from ~~these segments,~~our Residential segment as well as Other, and reconcile ~~net operating income of reportable segments~~NOI to net ~~income attributable to the controlling interests~~loss as reported (in thousands):


	Three Months Ended June 30, 2023
	Residential		Other (1)		Consolidated
Real estate rental revenue	$	52,100	$	4,499	$	56,599
Real estate expenses	19,054		1,204		20,258
Net operating income	$	33,046	$	3,295	$	36,341
Other income (expense):
Property management expenses					(2,178)
General and administrative expenses					(6,680)
Transformation costs					(2,454)
Depreciation and amortization					(21,415)

Interest expense					(6,794)


Other income					569








Net loss					$	(2,611)


Capital expenditures	$	4,130	$	262	$	4,392
Total assets	$	1,664,947	$	173,552	$	1,838,499


	Three Months Ended September 30, 2017												Three Months Ended June 30, 2022
	Office		Retail		Multifamily		Corporate and Other		Consolidated				Residential		Other (1)		Consolidated
Real estate rental revenue	$	42,982	$	15,604	$	24,233	$	—	$	82,819		Real estate rental revenue	$	46,646	$	4,734	$	51,380
Real estate expenses	16,246		3,687		9,713		—		29,646			Real estate expenses	17,312		1,272		18,584
Net operating income	$	26,736	$	11,917	$	14,520	$	—	$	53,173		Net operating income	$	29,334	$	3,462	$	32,796
Other income (expense):												Other income (expense):
Property management expenses												Property management expenses					(1,796)
General and administrative expenses												General and administrative expenses					(7,656)
Transformation costs												Transformation costs					(2,023)
Depreciation and amortization									(27,941		)	Depreciation and amortization					(24,039)
General and administrative									(5,327		)

Interest expense									(12,176		)	Interest expense					(6,156)
Other income									84
Real estate impairment									(5,000		)
Net income									2,813
Less: Net loss attributable to noncontrolling interests in subsidiaries									20
Net income attributable to the controlling interests									$	2,833

Net loss												Net loss					$	(8,874)

Capital expenditures	$	5,934	$	305	$	5,024	$	1,356	$	12,619		Capital expenditures	$	6,429	$	1,582	$	8,011
Total assets	$	1,231,576	$	346,374	$	769,873	$	36,471	$	2,384,294		Total assets	$	1,706,088	$	228,785	$	1,934,873


	Six Months Ended June 30, 2023
	Residential		Other (1)		Consolidated
Real estate rental revenue	$	103,091	9,317		$	112,408
Real estate expenses	37,198		2,581		39,779
Net operating income	$	65,893	$	6,736	$	72,629
Other income (expense):
Property management expenses					(3,947)
General and administrative expenses					(13,521)
Transformation costs					(5,354)
Depreciation and amortization					(42,951)

Interest expense					(13,625)

Loss on extinguishment of debt					(54)
Other income					569









Net loss					$	(6,254)


Capital expenditures	$	9,547	$	636	$	10,183


	Three Months Ended September 30, 2016												Six Months Ended June 30, 2022
	Office		Retail		Multifamily		Corporate and Other		Consolidated				Residential		Other (1)		Consolidated
Real estate rental revenue	$	40,646	$	15,404	$	23,720	$	—	$	79,770		Real estate rental revenue	89,980		9,204		$	99,184
Real estate expenses	15,839		3,570		9,755		—		29,164			Real estate expenses	33,213		2,523		35,736
Net operating income	$	24,807	$	11,834	$	13,965	$	—	$	50,606		Net operating income	$	56,767	$	6,681	$	63,448
Other income (expense):												Other income (expense):
Property management expenses												Property management expenses					(3,546)
General and administrative expenses												General and administrative expenses					(14,595)
Transformation costs												Transformation costs					(4,246)
Depreciation and amortization									(30,905		)	Depreciation and amortization					(46,239)
General and administrative									(4,539		)

Interest expense									(13,173		)	Interest expense					(11,806)
Other income									83			Other income					386
Gain on sale of real estate									77,592
Income tax benefit									(2		)
Net income									79,662
Less: Net loss attributable to noncontrolling interests in subsidiaries									12
Net income attributable to the controlling interests									$	79,674

Net loss												Net loss					$	(16,598)

Capital expenditures	$	13,919	$	2,107	$	5,837	$	236	$	22,099		Capital expenditures	$	9,859	$	2,178	$	12,037
Total assets	$	1,107,687	$	354,624	$	761,388	$	26,791	$	2,250,490

(1) Other represents Watergate 600, an office property that does not meet the qualitative or quantitative criteria for a reportable segment.

Nine Months Ended September 30, 2017
Office Retail Multifamily Corporate
and Other Consolidated
Real estate rental revenue $ 125,118
$ 46,821
$ 71,837
$ —
$ 243,776
Real estate expenses 46,513
11,147
28,540
—
86,200
Net operating income $ 78,605
$ 35,674
$ 43,297
$ —
$ 157,576
Depreciation and amortization (83,271 )
General and administrative (16,712 )
Interest expense (35,634 )
Other income 209
Real estate impairment (5,000 )
Income tax benefit 107
Net income 17,275
Less: Net loss attributable to noncontrolling interests in subsidiaries 56
Net income attributable to the controlling interests $ 17,331
Capital expenditures $ 16,753
$ 551
$ 17,882
$ 3,306
$ 38,492

Nine Months Ended September 30, 2016
Office Retail Multifamily Corporate
and Other Consolidated
Real estate rental revenue $ 128,201
45,864
$ 62,247
$ —
$ 236,312
Real estate expenses 49,508
11,660
24,905
—
86,073
Net operating income 78,693
$ 34,204
$ 37,342
$ —
$ 150,239
Depreciation and amortization (82,104 )
Acquisition costs (1,178 )
General and administrative (15,018 )
Interest expense (41,353 )
Other income 205
Gain on sale of real estate 101,704
Income tax benefit 691
Casualty gain 676
Net income 113,862
Less: Net loss attributable to noncontrolling interests in subsidiaries 32
Net income attributable to the controlling interests $ 113,894
Capital expenditures $ 21,944
$ 6,238
$ 10,037
$ 278
$ 38,497

NOTE ~~12:~~11: SHAREHOLDERS' EQUITY

On ~~June 23, 2015,~~February 17, 2021, we entered into ~~four~~ separate amendments to each of our existing equity distribution agreements ~~(collectively, the “Equity~~(“Original Equity Distribution Agreements”) with each of Wells Fargo Securities, LLC, BNY Mellon Capital Markets, LLC, Capital One Securities, Inc., Citigroup Global Markets Inc. ~~and RBC~~, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, KeyBanc Capital Markets Inc. and Truist Securities, Inc. (f/k/a SunTrust Robinson Humphrey, Inc.), each dated May 4, 2018 (collectively, as amended, the “Equity Distribution Agreements”) for our at-the-market program. Also on February 17, 2021, we entered into a separate equity distribution agreement with BTIG, LLC ~~relating~~on the same terms as the Amended Equity Distribution Agreements (the “BTIG Equity Distribution Agreement”). On September 22, 2021, BTIG, LLC notified us that it was terminating the BTIG Equity Distribution Agreement, effective as of September 27, 2021. Pursuant to the ~~issuance of~~Equity Distribution Agreements, we may sell, from time to time, up to ~~$200.0~~an aggregate price of $550.0 million of our common shares ~~from time to time.~~of beneficial interest, $0.01 par value per share. Issuances of our common shares are made at market prices prevailing at the time of issuance. We may use net proceeds from the issuance of common shares under this program for general ~~corporate~~business purposes, including, without limitation, working capital, the acquisition, renovation, expansion, improvement, development or redevelopment of income producing ~~properties~~property or the repayment of debt. ~~During the 2017 Quarter, we issued 1.5 million~~We did not issue common shares under the Equity Distribution Agreements ~~at an average price of $32.89 per share, raising $49.3 million in~~during the 2023 Period and 2022 Quarter. Our issuances and net ~~proceeds. During the 2017 Period, we issued 3.6 million common shares under~~proceeds on the Equity Distribution Agreements ~~at an average price of $32.06~~for the 2022 Period were as follows ($ in thousands, except per share ~~raising $113.2 million in net proceeds.~~data):


	Six Months Ended June 30,
		2022
Issuance of common shares		1,032
Weighted average price per share		$	26.27
Net proceeds		$	26,851

We have a dividend reinvestment program whereby shareholders may use their dividends and optional cash payments to purchase common shares. The ~~common~~ shares sold under this program may either be common shares issued by us or common shares

purchased in the open market. ~~During the 2017 Quarter, we issued 20,884 common shares~~Net proceeds under this program ~~at a weighted average price of $32.79 per share, raising $0.7 million in~~are used for general corporate purposes.

Our issuances and net ~~proceeds. During the 2017 Period, we issued 0.1 million common shares under~~proceeds on the dividend reinvestment program ~~at a weighted average price of $32.24~~for the three and six months ended June 30, 2023 and 2022 were as follows ($ in thousands, except per share ~~raising $2.5 million in net proceeds.~~data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Issuance of common shares	14		10		28		20
Weighted average price per share	$	17.62	$	24.82	$	17.64	$	25.44
Net proceeds	$	249	$	254	$	497	$	518

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, ~~2016~~2022 filed with the Securities and Exchange Commission (“SEC”) on February ~~21, 2017.~~17, 2023.

We refer to the three months ended ~~September~~June 30, ~~2017~~2023 and ~~September~~June 30, ~~2016~~2022 as the ~~“2017~~“2023 Quarter” and the ~~“2016~~“2022 Quarter,” respectively, and the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~September~~June 30, ~~2016~~2022 as the ~~“2017~~“2023 Period” and ~~“2016~~“2022 Period,” respectively.

Forward-Looking Statements

This Form 10-Q contains forward-looking statements which involve risks and uncertainties. Forward-looking statements ~~include~~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 ~~in this report preceded~~ by ~~followed by~~the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or ~~that include~~“potential” or the negative of these words ~~“believe,” “expect,” “intend,” “anticipate,” “potential,” “project,” “will”~~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 ~~similar expressions. We claim~~factors which may cause the ~~protection~~actual results, performance, or achievements of Elme Communities to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Additional factors which may cause the ~~safe harbor for~~actual results, performance, or achievements of Elme Communities to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements ~~contained~~include, but are not limited to: risks associated with our ability to execute on our strategies, including new strategies with respect to our operations and our portfolio, including the acquisition of apartment homes in the ~~Private Securities Litigation Reform Act~~Sunbelt markets and our ability to realize any anticipated operational benefits from our internalization of 1995 for these statements. The following important factors, in addition to those discussed elsewhere in this Form 10-Q, could affect our future results and could cause those results to differ materially from those expressed in the forward-looking statements: (a) the effect of credit and financial market conditions; (b) the availability and cost of capital; (c) fluctuations in interest rates; (d) the economic health of our tenants; (e) the timing and pricing of lease transactions; (f) the economic health of the greater Washington metro region, or other markets we may enter; (g)community management functions; the risks associated with ownership of real estate in general and our real estate assets in particular; ~~(h)~~ the ~~effects~~economic health of the areas in which our properties are located, particularly with respect to greater Washington, DC metro region and the larger Sunbelt region; the risk of failure to enter into and/or complete contemplated acquisitions and dispositions, within the price ranges anticipated and on the terms and timing anticipated, or at all; changes in the composition of our portfolio; risks related to changes in interest rates, including the future of the reference rate used in our existing floating rate debt instruments; reductions in or actual or threatened changes to the timing of federal government spending; ~~(i)~~ the ~~supply~~risks related to use of ~~competing properties; (j)~~third-party providers; the ~~ability to maintain an effective system~~economic health of ~~internal controls; (k)~~our residents; the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts); compliance with applicable laws and corporate social responsibility goals, including those concerning the environment and access by persons with disabilities; ~~(l) governmental or regulatory actions and initiatives; (m)~~the risks related to not having adequate insurance to cover potential losses; changes in the market value of securities; terrorist attacks or ~~actions; (n) weather conditions~~actions and/or cyber-attacks; whether we will succeed in the day-to-day property management and ~~natural disasters; (o)~~leasing activities that we have previously outsourced; the availability and terms of financing and capital and the general volatility of securities markets; the risks related to our organizational structure and limitations of share ownership; failure to qualify and maintain our qualification as a ~~REIT; (p)~~REIT and the ~~availability~~risks of changes in laws affecting REITs; whether our estimated transformation costs for 2023 will be correct; and ~~our ability~~other risks and uncertainties detailed from time to ~~attract and retain qualified personnel; (q) uncertainty~~time in our ~~ability to continue to pay dividends at the current rates; and (r) other factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended~~ ~~December 31, 2016~~ ~~filed~~filings with the SEC, including our 2022 Form 10-K filed on February ~~21, 2017.~~17, 2023. 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.

Introductory Matters

We provide our 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. We organize the MD&A as follows:

•Overview. Discussion of our business outlook, operating results, investment ~~activity,~~and financing activity and capital requirements to provide context for the remainder of MD&A.

•Results of Operations. Discussion of our financial results comparing the ~~2017~~2023 Quarter to the ~~2016~~2022 Quarter and the ~~2017~~2023 Period to the ~~2016~~2022 Period.

•Liquidity and Capital Resources. Discussion of our financial condition and analysis of changes in our capital structure and cash flows.

•Funds From Operations. Calculation of NAREIT Funds From Operations (“NAREIT FFO”), a non-GAAP supplemental measure to net income.

•Critical Accounting ~~Policies and~~ Estimates. Descriptions of accounting policies that reflect significant judgments and estimates used in the preparation of our consolidated financial statements.

When evaluating our financial condition and operating performance, we focus on the following financial and non-financial indicators:

•Net operating income (“NOI”), calculated as set forth below under the caption "Results of Operations - Net Operating Income." NOI is a non-GAAP supplemental measure to net income.

•Funds From Operations (“NAREIT FFO”), calculated as set forth below under the caption “Funds from Operations.” NAREIT FFO is a non-GAAP supplemental measure to net income.

•Average occupancy, calculated as average daily occupied apartment homes as a percentage of total apartment homes.

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or “non-same-store.” Same-store portfolio properties include properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. Development properties are categorized as same-store when they have reached stabilized occupancy (90%) before the start of the prior year. We define redevelopment properties as those for which we have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared.

Overview

Our revenues are derived primarily from the ownership and operation of income producing property. As of June 30, 2023, we owned approximately 8,900 residential apartment homes in the Washington, DC metro and Sunbelt regions. We also own and operate approximately 300,000 square feet of commercial space in the Washington, DC metro region.

In connection with our strategic transformation, the shift away from the commercial sector to the residential sector, we are redesigning our operating model for purposes of more efficiently and effectively supporting residential operations. This operating model redesign includes insourcing the property-level management activities previously performed by third-party management companies. Costs related to the strategic transformation, including the allocation of internal costs, consulting, advisory and termination benefits, are included in Transformation costs on our consolidated statements of operations. We recognized transformation costs, net of amounts capitalized, on the condensed consolidated statements of operations of $2.5 million and $2.0 million during the 2023 Quarter and 2022 Quarter, respectively, and $5.4 million and $4.2 million during the 2023 Period and 2022 Period, respectively. We anticipate incurring approximately $0.6 million of additional transformation costs during 2023. We expect to realize significant operational benefits from this operating model redesign. Community onboarding began in October 2022, and we have transitioned 24 of our 27 residential communities to Elme management as of June 30, 2023, and the remaining communities were onboarded subsequent to quarter end.

Operating Results

Net loss, NOI and NAREIT FFO for the three months ended June 30, 2023 and 2022 were as follows (in thousands):


	Three Months Ended June 30,
	2023		2022		$ Change		% Change
Net loss	$	(2,611)	$	(8,874)	$	6,263	(70.6)	%
NOI (1)	$	36,341	$	32,796	$	3,545	10.8	%
NAREIT FFO (2)	$	18,804	$	15,165	$	3,639	24.0	%
______________________________
(1) See page 27 of the MD&A for a reconciliation of NOI to net income.
(2) See page 37 of the MD&A for a reconciliation of NAREIT FFO to net income.

The decrease in net loss is primarily due to higher NOI ($3.5 million), lower depreciation and amortization expenses ($2.6 million), lower general and administrative ($1.0 million) expenses and higher other income ($0.6 million). These were partially offset by higher interest expense ($0.6 million), higher transformation expenses ($0.4 million) and higher property management expenses ($0.4 million).

The higher NOI is primarily due to higher NOI from same-store properties $3.0 million, and the acquisitions of Marietta Crossing ($0.4 million), Alder Park ($0.3 million) and Carlyle of Sandy Springs ($0.1 million) in 2022, partially offset by lower NOI at Watergate 600 ($0.2 million). The higher same-store NOI was primarily due to higher rental rates. Residential same-store average occupancy for our portfolio decreased to 95.6% as of June 30, 2023 from 95.7% as of June 30, 2022.

The higher NAREIT FFO is primarily due to higher NOI ($3.5 million) and higher other income ($0.6 million), partially offset by higher interest expense ($0.6 million).

Investment Activity

There were no significant investment transactions during the 2023 Period.

Financing Activity

Significant financing transactions during the 2023 Period included the following:

•Entered into a $125.0 million unsecured term loan ("2023 Term Loan") with an interest rate of SOFR (subject to a credit spread adjustment of 10 basis points) plus a margin of 95 basis points. We used the proceeds to prepay the $100.0 million 2018 Term Loan in full and a portion of our borrowings under our unsecured credit facility. The 2023 Term Loan has a two-year term ending in January 2025, with two one-year extension options.

As of June 30, 2023, the interest rate on the Revolving Credit Facility is adjusted SOFR (inclusive of the 0.10% credit spread adjustment) plus 0.85%, the daily SOFR is 5.09% and the facility fee is 0.20%. As of July 27, 2023, our Revolving Credit Facility has a borrowing capacity of $657.0 million.

Capital Requirements

We have no debt maturities scheduled until the first quarter of 2025. We expect to have additional capital requirements as set forth on page 33 (Liquidity and Capital Resources – Capital Requirements).

Results of Operations

The discussion that follows is based on our consolidated results of operations for the 2023 Quarter and 2022 Quarter and the 2023 Period and the 2022 Period.

Net Operating Income

NOI, defined as real estate rental revenue less direct real estate operating expenses, is a non-GAAP measure. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain or loss on sale, if any), plus interest expense, depreciation and amortization, lease origination expenses, general and administrative expenses, acquisition costs, real estate impairment, casualty gain and losses and gain or loss on extinguishment of debt.

~~NAREIT FFO, calculated as set forth below under the caption “Funds from Operations.”~~

~~Ending occupancy, calculated as occupied square footage as a percentage~~ NOI does not include management expenses, which consist of ~~total square footage as of the last day of that period.~~

~~Leased percentage, calculated as the percentage of available physical net rentable area leased for our office~~corporate property management costs and ~~retail segments and percentage of apartments leased for our multifamily segment.~~

~~Rental rates.~~

~~Leasing activity, including new leases, renewals and expirations.~~

~~For purposes of evaluating comparative operating performance, we categorize our properties as “same-store”, “non-same-store” or discontinued operations.A “same-store”~~ property is one that was owned for the entirety of 2017 and the prior year, and excludes properties under redevelopment or development and properties purchased or sold at any time during 2017 or the prior year. A “non-same-store” property is one that was acquired, under redevelopment or development, or placed into service during 2017 or the prior year. We define redevelopment properties as those for which we expectmanagement fees paid to spend significant development and construction costs on existing or acquired buildings pursuant to a formal plan which has a current impact on operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. Properties under redevelopment or development are included with the non-same-store properties beginning in the period during which redevelopment or development activities commence. We consider properties to no longer be under redevelopment or development upon substantial completion of redevelopment or development activities, and the earlier of achieving 90% occupancy or two years after substantial completion.

~~Overview~~

~~Business Outlook~~

~~Our revenues are derived primarily from the ownership and operation of income producing properties in the greater Washington metro region. As of~~ ~~September 30, 2017, we owned a diversified portfolio of~~ 50 ~~properties, totaling approximately~~ ~~6.4 million~~ ~~square feet of commercial space and 4,480 multifamily units, and land held for development. These~~ 50 ~~properties consisted of~~ 20 ~~office properties,~~ 16 ~~retail centers and~~ 14 ~~multifamily properties. On October 23, 2017, we sold Walker House Apartments, a 212-unit multifamily property in Gaithersburg, Maryland, for a contract sale price of $32.2 million.~~

~~Operating Results~~

~~Net income attributable to the controlling interests, NOI and NAREIT FFO for the three months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ ~~were as follows (in thousands):~~

Three Months Ended September 30,
2017 2016 $ Change % Change
Net income attributable to the controlling interests $ 2,833
$ 79,674
$ (76,841 ) (96.4 )%
NOI ⁽¹⁾
$ 53,173
$ 50,606
$ 2,567
5.1 %
NAREIT FFO ⁽²⁾
$ 35,754
$ 32,975
$ 2,779
8.4 %

⁽¹⁾ See page 26 of the MD&A for a reconciliation of NOI to net income.
⁽²⁾ See page 35 of the MD&A for a reconciliation of NAREIT FFO to net income.

The lower net income attributable to the controlling interests is primarily due to gains on sale of real estate during the 2016 Quarter ($77.6 million), a real estate impairment charge during the 2017 Quarter ($5.0 million) and higher general and administrative expenses ($0.8 million), partially offset by lower depreciation and amortization expenses ($3.0 million), higher NOI ($2.6 million) and lower interest expense ($1.0 million).

The increase in NOI is primarily due to the Watergate 600 acquisition ($3.3 million) and higher NOI from same-store properties ($1.1 million) and Army Navy Building ($0.2 million), which substantially completed redevelopment activities during the 2017 Quarter. These were partially offset by the property sales during 2016 ($2.5 million). The higher same-store NOI is explained in further detail beginning on page 26 (Results of Operations - 2017 Quarter Compared to 2016 Quarter). Same-store ending occupancy increased to 93.8% as of September 30, 2017, from 93.6% one year ago, primarily due to higher occupancy in the office segment.

The higher NAREIT FFO is primarily attributable to the higher NOI ($2.6 million) and lower interest expense ($1.0 million), partially offset by higher general and administrative expenses ($0.8 million).

~~Investment Activity~~

~~Significant investment transactions during the 2017 Period included the following:~~

The acquisition of Watergate 600, which we refer to as the 2017 acquisition, a 293,000 net rentable square foot office building in Washington, DC, for a contract purchase price of $135.0 million in a transaction that was structured to include the issuance of 12,124 operating partnership units in WashREIT Watergate 600 OP LP, a consolidated subsidiary of Washington REIT (“Operating Partnership Units”), representing $0.4 million of the purchase price. We incurred $2.8 million of acquisition costs related to this transaction.

~~Financing Activity~~

~~Significant financing transactions during the 2017 Period included the following:~~

~~The prepayment at par of the remaining $49.6 million of the mortgage note secured by the Army Navy Building in February 2017.~~

~~The draw of the remaining $50.0 million on the seven year, $150 million unsecured term loan agreement maturing on July 21, 2023. We used the borrowing to refinance maturing secured debt.~~

~~The issuance of approximately 3.6 million common shares under our ATM program at an average price to the public of $32.06 per share, for net proceeds of approximately $113.2 million.~~

As of September 30, 2017, the interest rate on the Revolving Credit Facility was one month LIBOR plus 1.00% and the facility fee was 0.20%. As of October 26, 2017, our Revolving Credit Facility has a borrowing capacity of $431.0 million.

~~Capital Requirements~~

~~We do not have any other debt maturities during 2017. We expect to have additional capital requirements as set forth on page 32 (Liquidity and Capital Resources - Capital Requirements).~~

~~Results of Operations~~

The discussion that follows is based on our consolidated results of operations for the 2017 Quarter and 2017 Period and 2016 Quarter and 2016 Period. The ability to compare one period to another is significantly affected by acquisitions completed and dispositions made during 2016 and 2017 (see note 3 to the consolidated financial statements).

~~Net Operating Income~~

NOI is a non-GAAP measure defined as net income, less non-real estate revenue and the results of discontinued operations (including the gain on sale, if any), plus interest expense, depreciation and amortization, general and administrative expenses, acquisition costs, real estate impairment and gain or loss on extinguishment of debt.third parties. NOI is the primary performance measure we use to assess the results of our operations at the property level. We believe that NOI is a useful ~~as a~~ performance measure because, when compared across periods, ~~NOI~~it reflects the impact on operations of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from net income. NOI excludes certain components from net income in order to provide results more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. As a result of the foregoing, we provide NOI as a supplement to net income, calculated in accordance with GAAP. NOI does not represent net income or income from continuing operations ~~in either case~~ calculated in accordance with GAAP. As such, itNOI should not be considered an alternative to these measures as an indication of our operating performance. A reconciliation of net loss to NOI ~~to net income~~ follows.

~~2017~~

2023 Quarter Compared to ~~2016~~2022 Quarter

The following table reconciles net loss to NOI and provides the basis for our discussion of our consolidated results of operations and NOI in the 2023 Quarter compared to the 2022 Quarter. All amounts are in thousands, except percentage amounts.


	Three Months Ended June 30,
	2023		2022		$ Change		% Change
Net loss	$	(2,611)	$	(8,874)	6,263		(70.6)	%
Adjustments:
Property management expense	2,178		1,796		382		21.3	%
General and administrative expense	6,680		7,656		(976)		(12.7)	%
Transformation costs	2,454		2,023		431		21.3	%
Real estate depreciation and amortization	21,415		24,039		(2,624)		(10.9)	%


Interest expense	6,794		6,156		638		10.4	%


Other income	(569)		—		(569)		100.0	%



Total net operating income (NOI)	$	36,341	$	32,796	$	3,545	10.8	%

Residential revenue:
Same-store portfolio	$	46,786	$	42,691	$	4,095	9.6	%
Acquisitions (1)	5,079		3,650		1,429		39.2	%

Non-residential (2)	235		305		(70)		(23.0)	%
Total	52,100		46,646		5,454		11.7	%
Residential expenses:
Same-store portfolio	16,765		15,630		1,135		7.3	%
Acquisitions	2,203		1,593		610		38.3	%
Development	54		19		35		184.2	%
Non-residential	32		70		(38)		(54.3)	%
Total	19,054		17,312		1,742		10.1	%
Residential NOI:
Same-store portfolio	30,021		27,061		2,960		10.9	%
Acquisitions	2,876		2,057		819		39.8	%
Development	(54)		(19)		(35)		184.2	%
Non-residential	203		235		(32)		(13.6)	%
Total	33,046		29,334		3,712		12.7	%
Other NOI (3)	3,295		3,462		(167)		(4.8)	%
Total NOI	$	36,341	$	32,796	$	3,545	10.8	%

______________________________

(1)Acquisitions:

2022: Carlyle of Sandy Springs, Alder Park, Marietta Crossing

(2)Non-residential: Includes revenues and expenses from retail operations at residential properties.

(3)Other: Watergate 600

Real Estate Rental Revenue

Real estate rental revenue from our apartment communities is comprised of (a) rent from operating leases of multifamily residential apartments with terms of approximately one year or less, recognized on a straight-line basis, (b) revenue from the recovery of operating expenses from our residents, (c) credit losses on lease related receivables, (d) revenue from leases of retail space at our apartment communities and (e) parking and other tenant charges.

Real estate rental revenue from same-store residential properties increased $4.1 million, or 9.6%, to $46.8 million for the 2023 Quarter, compared to $42.7 million for the 2022 Quarter, primarily due to higher rental income ($3.0 million), higher recoveries ($0.5 million), lower credit losses ($0.3 million) and lower rent abatements ($0.2 million).

Real estate rental revenue from acquisitions increased $1.4 million due to the acquisitions of Marietta Crossing ($0.8 million) and Alder Park ($0.5 million) during the 2022 Quarter, and Carlyle of Sandy Springs ($0.1 million) during the first quarter of 2022.

Average occupancy for residential properties for the 2023 Quarter and 2022 Quarter was as follows:


June 30, 2023						June 30, 2022						% Change
Same-Store		Non-Same-Store		Total		Same-Store		Non-Same-Store		Total		Same-Store		Non-Same-Store		Total
95.6	%	94.4	%	95.4	%	95.7	%	93.8	%	95.5	%	(0.1)	%	0.6	%	(0.1)	%

The decrease in same-store average occupancy was primarily due to lower average occupancy at Elme Manassas, Bennett Park, Elme Watkins Mill, Yale West, Elme Eagles Landing and Elme Alexandria, partially offset by higher average occupancy at Roosevelt Towers, The Maxwell, Riverside Apartments and Clayborne Apartments.

Real Estate Expenses

Residential real estate expenses as a percentage of residential revenue for the 2023 Quarter and the 2022 Quarter were 36.6% and 37.1%, respectively.

Real estate expenses from same-store residential properties increased $1.1 million, or 7.3%, to $16.8 million for the 2023 Quarter, compared to $15.6 million for the 2022 Quarter, primarily due to higher repairs and maintenance ($0.6 million), higher administrative ($0.4 million) and utilities ($0.2 million) expenses.

Real estate expenses from acquisitions increased $0.6 million due to the acquisitions of Marietta Crossing ($0.4 million) and Alder Park ($0.1 million) during 2022 Quarter, and Carlyle of Sandy Springs ($0.1 million) during the first quarter of 2022.

Other NOI

Other NOI decreased due to lower revenue at Watergate 600 ($0.2 million).

Other Income and Expenses

Property management expenses: Increase of $0.4 million primarily due to higher management fee expenses at same-store properties.

General and administrative expenses: Decrease of $1.0 million primarily due to lower share-based compensation ($0.6 million) and professional services ($0.4 million) expenses.

Transformation costs: Increase of $0.4 million during the 2023 Quarter primarily due to higher signing bonuses for new community employees ($0.4 million) and higher consulting fees ($0.2 million). The increase is partially offset by lower accelerated software depreciation ($0.3 million).

Real estate depreciation and amortization: Decrease of $2.6 million primarily due to lower depreciation and amortization at Carlyle of Sandy Springs ($1.4 million), Marietta Crossing ($0.4 million) and at same-store residential properties

($0.9 million). These decreases were partially offset by higher depreciation and amortization at Watergate 600 ($0.1 million).

Interest expense: Interest expense by debt type for the three months ended June 30, 2023 and 2022 was as follows (in thousands):


	Three Months Ended June 30,
Debt Type	2023		2022		$ Change		% Change
Notes payable	$	5,545	5,055		$	490	9.7	%
Mortgage notes payable	—		490		(490)		(100.0)	%
Line of credit	1,249		701		548		78.2	%
Capitalized interest	—		(90)		90		(100.0)	%
Total	$	6,794	$	6,156	$	638	10.4	%

•Notes payable: Increase primarily due to the $125.0 million 2023 Term Loan executed in January 2023, partially offset by prepayment of a $100.0 million portion of the 2018 Term Loan in January 2023.

•Mortgage notes payable: Decrease due to assumed mortgages of $42.8 million and $33.7 million in the acquisitions of Marietta Crossing and Alder Park, respectively, during the 2022 Quarter. In September 2022, we extinguished the liabilities associated with these mortgages through defeasance arrangements.

•Line of credit: Increase primarily due to weighted average borrowings of $36.6 million and a weighted average interest rate of 5.9% in the 2023 Quarter, as compared to no borrowings during the 2022 Quarter.

•Capitalized interest: Decrease primarily due to ceasing capitalization of interest on spending related to the multifamily development adjacent to Riverside Apartments due to a pause in development activities resulting from macroeconomic uncertainty.

Other income: Income of $0.6 million during the 2023 Quarter consists of tax refunds received for office properties sold in prior years.

2023 Period Compared to 2022 Period

The following tables reconcile ~~NOI~~net loss to ~~net income (loss) attributable to the controlling interests~~NOI and provide the basis for our discussion of our consolidated results of operations and NOI in the ~~2017 Quarter~~2023 Period compared to the ~~2016 Quarter.~~2022 Period. All amounts are in thousands, except percentage amounts.


	Six Months Ended June 30,
	2023		2022		$ Change		% Change
Net loss	$	(6,254)	$	(16,598)	10,344		(62.3)	%
Adjustments:
Property management expense	3,947		3,546		401		11.3	%
General and administrative expense	13,521		14,595		(1,074)		(7.4)	%
Transformation costs	5,354		4,246		1,108		26.1	%
Real estate depreciation and amortization	42,951		46,239		(3,288)		(7.1)	%


Interest expense	13,625		11,806		1,819		15.4	%

Loss on extinguishment of debt, net	54		—		54		100.0	%
Other income	(569)		(386)		(183)		47.4	%



Total net operating income (NOI)	$	72,629	$	63,448	$	9,181	14.5	%

Residential revenue:
Same-store portfolio	$	92,572	$	84,705	$	7,867	9.3	%
Acquisitions (1)	10,036		4,725		5,311		112.4	%

Non-residential (2)	483		550		(67)		(12.2)	%
Total	103,091		89,980		13,111		14.6	%
Residential expenses:
Same-store portfolio	33,005		30,957		2,048		6.6	%
Acquisitions	4,029		2,092		1,937		92.6	%
Development	112		19		93		489.5	%
Non-residential	52		145		(93)		(64.1)	%
Total	37,198		33,213		3,985		12.0	%
Residential NOI:
Same-store portfolio	59,567		53,748		5,819		10.8	%
Acquisitions	6,007		2,633		3,374		128.1	%
Development	(112)		(19)		(93)		489.5	%
Non-residential	431		405		26		6.4	%
Total	65,893		56,767		9,126		16.1	%
Other NOI (3)	6,736		6,681		55		0.8	%
Total NOI	$	72,629	$	63,448	$	9,181	14.5	%

Non-Same-Store
Same-Store
Acquisitions ⁽¹⁾

Development/Redevelopment ⁽²⁾

Dispositions ⁽³⁾
All Properties
2017 2016
$
Change

%
Change
2017 2016 2017 2016 2017 2016 2017 2016 $
Change %
Change
Real estate rental revenue $ 68,230
$ 66,788
$ 1,442
2.2 % $ 10,463
$ 5,407
$ 4,126
$ 3,886
$ —
$ 3,689
$ 82,819
$ 79,770
$ 3,049
3.8 %
Real estate expenses 24,195
23,873
322
1.3 % 3,823
2,312
1,628
1,741
—
1,238
29,646
29,164
482
1.7 %
NOI $ 44,035
$ 42,915
$ 1,120
2.6 % $ 6,640
$ 3,095
$ 2,498
$ 2,145
$ —
$ 2,451
$ 53,173
$ 50,606
$ 2,567
5.1 %
Reconciliation to net income attributable to the controlling interests:
Depreciation and amortization (27,941 ) (30,905 ) 2,964
(9.6 )%
General and administrative expenses (5,327 ) (4,539 ) (788 ) 17.4 %
Real estate impairment (5,000 ) —
(5,000 ) —
Gain on sale of real estate —
77,592
(77,592 ) (100.0 )%
Interest expense (12,176 ) (13,173 ) 997
(7.6 )%
Other income 84
83
1
1.2 %
Income tax expense —
(2 ) 2
(100.0 )%
Net income 2,813
79,662
(76,849 ) (96.5 )%
Less: Net loss attributable to noncontrolling interests 20
12
8
66.7 %
Net income attributable to the controlling interests $ 2,833
$ 79,674
$ (76,841 ) (96.4 )%
______________________________

(1)Acquisitions:

2022: Carlyle of Sandy Springs, Alder Park, Marietta Crossing

(2)Non-residential: Includes revenues and expenses from retail operations at residential properties.

(3)Other: Watergate 600


⁽¹⁾	~~Acquisitions:~~

~~2017 Office – Watergate 600~~

~~2016 Multifamily – Riverside Apartments~~


⁽²⁾	~~Development/redevelopment properties:~~

~~Office redevelopment properties – Army Navy Building and Braddock Metro Center~~


⁽³⁾	~~Dispositions (classified as continuing operations):~~

~~2016 Office – 6110 Executive Boulevard, 600 Jefferson Plaza, Wayne Plaza, West Gude Drive, 51 Monroe Street and One Central Plaza~~

Real Estate Rental Revenue

Real estate rental revenue from our apartment communities is comprised of (a) ~~minimum base~~ rent ~~which includes rental revenues~~from operating leases of multifamily residential apartments with terms of approximately one year or less, recognized on a straight-line basis, (b) revenue from the recovery of operating expenses from our ~~tenants,~~residents, (c) ~~provisions for doubtful accounts in the same quarter that we established the receivable, which include provisions for straight-line~~credit losses on lease related receivables, (d) revenue from ~~the collection~~leases of ~~lease termination fees~~retail space at our apartment communities and (e) parking and other tenant ~~charges such as percentage rents.~~charges.

~~Real estate rental revenue for same-store properties for the three months ended September 30, 2017 and 2016 was as follows (in thousands):~~

Three Months Ended September 30,
2017 2016 $ Change % Change
Minimum base rent $ 57,940
$ 56,154
$ 1,786
3.2 %
Recoveries from tenants 7,480
7,786
(306 ) (3.9 )%
Provision for doubtful accounts (284 ) (227 ) (57 ) 25.1 %
Lease termination fees 435
638
(203 ) (31.8 )%
Parking and other tenant charges 2,659
2,437
222
9.1 %
Total same-store real estate rental revenue $ 68,230
$ 66,788
$ 1,442
2.2 %

~~Minimum base rent: Increase primarily due to higher rental income ($2.0 million), partially offset by higher rent abatements ($0.3 million).~~

~~Recoveries from tenants: Decrease primarily due to lower reimbursements for real estate taxes ($0.2 million) and operating expenses ($0.1 million).~~

~~Provision for doubtful accounts: Increase primarily due to higher provisions in the retail segment.~~

~~Lease termination fees: Decrease primarily due to lower fees in the office segment ($0.4 million), partially offset by higher fees in the retail segment ($0.2 million).~~

~~Parking and other tenant charges: Increase primarily due to higher parking income ($0.2 million), primarily in the office segment.~~

Real estate rental revenue from same-store residential properties ~~by segment was as follows (in thousands):~~

Three Months Ended September 30,
2017 2016 $ Change % Change
Office $ 34,026
$ 33,071
$ 955
2.9 %
Multifamily 18,600
18,313
287
1.6 %
Retail 15,604
15,404
200
1.3 %
Total same-store real estate rental revenue $ 68,230
$ 66,788
$ 1,442
2.2 %

~~Office: Increase primarily due~~increased $7.9 million, or 9.3%, to ~~higher rental ($1.7 million) and parking ($0.1 million) income, partially offset by higher rent abatements ($0.4 million) and lower lease termination fees ($0.4 million).~~

~~Multifamily: Increase~~$92.6 million for the 2023 Period, compared to $84.7 million for the 2022 Period, primarily due to higher rental income ($~~0.3~~6.4 million).

~~Retail: Increase primarily due to~~, lower rent abatements ($0.6 million), higher ~~lease termination fees~~recoveries ($0.6 million) and lower credit losses ($0.2 million).

Real estate rental revenue from acquisitions increased $5.3 million due to the ~~acquisition~~acquisitions of ~~Watergate 600~~Marietta Crossing ($~~4.8~~2.7 million) inand Alder Park ($1.7 million) during the ~~second~~2022 Quarter, and Carlyle of Sandy Springs ($0.9 million) during the first quarter of ~~2017 and higher rental income at Riverside Apartments ($0.2 million).~~2022.

~~Real estate rental revenue from development/redevelopment~~Average occupancy for residential properties ~~increased primarily due to higher rental income ($0.4 million) at Army Navy Building, which substantially completed redevelopment activities during the 2017 Quarter.~~

~~Ending occupancy represents occupied square footage indicated as a percentage of total square footage as of the last day of that period. Ending occupancy by segment~~ for the ~~2017 Quarter~~2023 Period and ~~2016 Quarter~~2022 Period was as follows:


June 30, 2023						June 30, 2022						% Change
Same-Store		Non-Same-Store		Total		Same-Store		Non-Same-Store		Total		Same-Store		Non-Same-Store		Total
95.6	%	94.0	%	95.4	%	95.7	%	94.0	%	95.5	%	(0.1)	%	—	%	(0.1)	%

September 30, 2017 September 30, 2016 Increase (decrease)
Segment Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total Same-Store Non-Same-Store Total
Office 93.4 % 92.5 % 93.2 % 91.0 % 86.4 % 90.5 % 2.4 % 6.1 % 2.7 %
Multifamily 94.4 % 94.6 % 94.5 % 94.8 % 92.4 % 94.2 % (0.4 )% 2.2 % 0.3 %
Retail 93.5 % N/A
93.5 % 95.6 % N/A
95.6 % (2.1 )% N/A
(2.1 )%
Total 93.8 % 93.7 % 93.8 % 93.6 % 90.5 % 93.2 % 0.2 % 3.2 % 0.6 %

~~Office~~: The increase in same-store ending occupancy was primarily due to higher ending occupancy at Silverline Center and 1776 G Street, partially offset by lower ending occupancy at Quantico Corporate Center.

~~Multifamily~~: The decrease in same-store ~~ending~~average occupancy was primarily due to lower ~~ending~~average occupancy at ~~3801 Connecticut Avenue~~Bennett Park, Elme Watkins Mill, Elme Leesburg, Elme Alexandria and ~~The Kenmore.~~

~~Retail: The decrease in same-store ending occupancy was primarily due to lower ending occupancy at Frederick Crossing and Concord Center,~~Elme Manassas, partially offset by higher ~~ending~~average occupancy at ~~Randolph Shopping Center.~~

The Maxwell and Clayborne Apartments.

~~During the 2017 Quarter, we executed new and renewal leases in our office and retail segments as follows:~~

Square Feet
(in thousands)

Average Rental Rate
(per square foot)
% Rental Rate Increase (Decrease)
Leasing Costs ⁽¹⁾
(per square foot)
Free Rent (weighted average months) Retention Rate
Office 56
$ 60.34
19.6 % $ 94.11
6.3
6.8 %
Retail 48
27.87
5.0 % 7.47
0.4
95.8 %
Total 104
45.38
15.0 % 54.18
4.5
27.1 %

⁽¹⁾ ~~Consists of tenant improvements and leasing commissions.~~

Real Estate Expenses

~~Real~~Residential real estate expenses as a percentage of residential revenue for the ~~2017 Quarter~~2023 Period and ~~2016 Quarter~~2022 Period were ~~35.8%~~36.1% and ~~36.6%~~36.9%, respectively.

Real estate expenses from same-store residential properties increased by ~~segment were as follows (in thousands):~~

Three Months Ended September 30,
2017 2016 $ Change % Change
Office $ 13,057
$ 12,860
$ 197
1.5 %
Multifamily 7,451
7,443
8
0.1 %
Retail 3,687
3,570
117
3.3 %
Total same-store real estate expenses $ 24,195
$ 23,873
$ 322
1.3 %

~~Office: Increase~~$2.0 million, or 6.6%, to $33.0 million for the 2023 Period, compared to $31.0 million for the six months ended June 30, 2022, primarily due to higher ~~real estate tax~~administrative ($~~0.1~~0.8 million), repairs and maintenance ($0.7 million) and ~~custodial~~utilities ($~~0.1~~0.7 million) expenses.

~~Multifamily: Increase primarily due to higher real estate taxes ($0.1 million),~~ The increase is partially offset by lower ~~utilities~~contract maintenance and supplies ($0.2 million) expenses.

Real estate expenses from acquisitions increased $1.9 million due to the acquisitions of Marietta Crossing ($1.0 million) and Alder Park ($0.5 million) during the 2022 Quarter, and Carlyle of Sandy Springs ($0.4 million) during the first quarter of 2022.

Other NOI

Other NOI increased due to higher revenue at Watergate 600 ($0.1 million).

~~Retail: Increase primarily due to higher real estate tax expense ($0.1 million).~~

Other Income and Expenses

~~Depreciation~~Property management expenses: Increase of $0.4 million primarily due to higher management fee expenses at same-store properties.

General and ~~Amortization~~administrative expenses: Decrease of $1.1 million primarily due to lower ~~amortization~~share-based compensation ($1.4 million) and lower professional fees ($0.2 million). The decrease was partially offset by higher computer software ($0.3 million) and moving ($0.3 million) expenses.

Transformation costs: Increase of ~~acquired lease assets at Riverside Apartments~~$1.1 million primarily due to higher signing bonuses for new employees ($~~4.6~~0.8 million), higher employee time allocations ($0.5 million) related to the strategic transformation and higher branding expenses ($0.2 million). The increase is partially offset by lower accelerated software depreciation ($0.6 million).

Depreciation and amortization: Decrease of $3.3 million primarily due to lower depreciation and amortization at same-store residential properties ($~~1.1~~3.4 million), and at Carlyle of Sandy Springs ($1.7 million). The decrease was partially offset by ~~the Watergate 600 acquisition ($2.6 million). The lower same-store~~higher depreciation and amortization ~~is primarily due to lower amortization of leasing commissions and acquired intangible lease assets.~~

~~General and administrative expenses:~~ ~~Increase primarily due to higher share-based compensation~~at Alder Park ($0.9 million) ~~primarily due to a higher volume of forfeitures during the 2016 Quarter.~~, Marietta Crossing ($0.5 million) and Watergate 600 ($0.4 million).

~~Real estate impairment:~~ ~~Impairment charge during the 2017 Quarter to write down the carrying value of Braddock Metro Center to its estimated fair value (see note 3 to the consolidated financial statements).~~

~~Gain on sale of real estate:~~ ~~Decrease due to completion of the sales of 51 Monroe Street and One Central Plaza during the 2016 Quarter.~~

Interest ~~Expense~~expense: Interest expense by debt type for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 was as follows (in thousands):


	Six Months Ended June 30,
Debt Type	2023		2022		$ Change		% Change
Notes payable	$	10,999	$	10,204	$	795	7.8	%
Mortgage notes payable	—		490		(490)		100.0	%
Line of credit	2,626		1,395		1,231		88.2	%
Capitalized interest	—		(283)		283		(100.0)	%
Total	$	13,625	$	11,806	$	1,819	15.4	%

Three Months Ended September 30,
Debt Type 2017 2016 $ Change % Change
Notes payable $ 9,446
$ 8,364
$ 1,082
12.9 %
Mortgage notes payable 1,163
3,419
(2,256 ) (66.0 )%
Lines of credit 1,798
1,578
220
13.9 %
Capitalized interest (231 ) (188 ) (43 ) 22.9 %
Total $ 12,176
$ 13,173
$ (997 ) (7.6 )%

•Notes payable: Increase primarily due to ~~executing~~ the ~~$150.0~~$125.0 million ~~term loan~~2023 Term Loan executed in ~~2016, which has~~January 2023, partially offset by prepayment of a ~~floating interest rate effectively fixed at 2.9% by interest rate swaps. We borrowed~~ $100.0 million onportion of the ~~term loan~~2018 Term Loan in ~~the fourth quarter of 2016, and borrowed the remaining $50.0 million during the first quarter of 2017.~~

January 2023.

•Mortgage notes payable: Decrease ~~primarily~~ due to the ~~repayment~~assumed mortgages of $42.8 million and $33.7 million in the ~~mortgage notes secured by John Marshall II, 3801 Connecticut Avenue, Bethesda Hill Apartments, Walker House Apartments, 2445 M Street~~acquisitions of Marietta Crossing and Alder Park, respectively, during the ~~Army Navy Building in 2017 and 2016.~~

2022 Period. In September 2022, we extinguished the liabilities associated with these mortgages though defeasance arrangements.

~~Lines~~•Line of credit: Increase primarily due to higher weighted average borrowings of $40.7 million and a weighted average interest rate of ~~2.3% during~~6.0% in the ~~2017 Quarter,~~2023 Period, as compared to ~~1.5% during~~no borrowings in the ~~2016 Quarter.~~

2022 Period.

•Capitalized interest: ~~Increase~~Decrease primarily due to ceased capitalization of interest on spending related to the ~~Trove, the~~ multifamily development adjacent to ~~The Wellington.~~

~~2017 Period Compared to 2016 Period~~

The following tables reconcile NOI to net income attributable to the controlling interests and provide the basis for our discussion of our consolidated results of operations and NOI in the 2017 Period compared to the 2016 Period. All amounts are in thousands, except percentage amounts.

Non-Same-Store
Same-Store
Acquisitions ⁽¹⁾

Development/Redevelopment ⁽²⁾

Dispositions ⁽³⁾ (continuing operations)
All Properties
2017 2016
$
Change

%
Change
2017 2016 2017 2016 2017 2016 2017 2016 $
Change %
Change
Real estate rental revenue $ 205,370
$ 195,472
$ 9,898
5.1 % $ 26,309
$ 7,892
$ 12,097
$ 12,682
$ —
$ 20,266
$ 243,776
$ 236,312
$ 7,464
3.2 %
Real estate expenses 71,313
70,402
911
1.3 % 9,967
3,181
4,920
4,994
—
7,496
86,200
86,073
127
0.1 %
NOI $ 134,057
$ 125,070
$ 8,987
7.2 % $ 16,342
$ 4,711
$ 7,177
$ 7,688
$ —
$ 12,770
$ 157,576
$ 150,239
$ 7,337
4.9 %
Reconciliation to net income attributable to the controlling interests:
Depreciation and amortization (83,271 ) (82,104 ) (1,167 ) 1.4 %
Acquisition costs —
(1,178 ) 1,178
(100.0 )%
General and administrative expenses (16,712 ) (15,018 ) (1,694 ) 11.3 %
Casualty gain —
676
(676 ) (100.0 )%
Real estate impairment (5,000 ) —
(5,000 ) —
Gain on sale of real estate —
101,704
(101,704 ) (100.0 )%
Interest expense (35,634 ) (41,353 ) 5,719
(13.8 )%
Other income 209
205
4
2.0 %
Income tax benefit 107
691
(584 ) 84.5 %
Net income 17,275
113,862
(96,587 ) (84.8 )%
Less: Net loss attributable to noncontrolling interests 56
32
24
75.0 %
Net income attributable to the controlling interests $ 17,331
$ 113,894
$ (96,563 ) (84.8 )%


⁽¹⁾	~~Acquisitions:~~

~~2017 Office – Watergate 600~~

~~2016 Multifamily –~~ Riverside Apartments due to a pause in development activities resulting from macroeconomic uncertainty.


⁽²⁾	~~Development/redevelopment properties:~~

~~Office redevelopment properties – Army Navy Building and Braddock Metro Center~~


⁽³⁾	~~Dispositions (classified as continuing operations):~~

~~2016 Office – 6110 Executive Boulevard, 600 Jefferson Plaza, Wayne Plaza, West Gude Drive, 51 Monroe Street and One Central Plaza~~

~~Real Estate Rental Revenue~~

Real estate rental revenue is comprised of (a) minimum base rent, which includes rental revenues recognized on a straight-line basis, (b) revenue from the recovery of operating expenses from our tenants, (c) provisions for doubtful accounts in the same quarter that we established the receivable, which include provisions for straight-line receivables, (d) revenue from the collection of lease termination fees and (e) parking and other tenant charges such as percentage rents.

~~Real estate rental revenue for same-store properties for the nine months ended September 30, 2017 and 2016 was as follows (in thousands):~~

Nine Months Ended September 30,
2017 2016 $ Change % Change
Minimum base rent $ 173,494
$ 165,110
$ 8,384
5.1 %
Recoveries from tenants 23,667
23,104
563
2.4 %
Provision for doubtful accounts (992 ) (679 ) (313 ) (46.1 )%
Lease termination fees 1,624
917
707
77.1 %
Parking and other tenant charges 7,577
7,020
557
7.9 %
Total same-store real estate rental revenue $ 205,370
$ 195,472
$ 9,898
5.1 %

~~Minimum base rent~~Other income: Increase ~~primarily~~of $0.2 million is due to higher ~~rental income ($9.4 million), partially offset by higher abatements ($1.0 million).~~tax refunds received for office properties sold in prior years.

~~Recoveries from tenants:~~ ~~Increase primarily due to higher periodic settlements of tenant recoveries ($0.5 million) and higher reimbursements for real estate taxes ($0.1 million).~~

~~Provision for doubtful accounts:~~ ~~Increase primarily due to higher provisions in the retail segment ($0.3 million).~~

~~Lease termination fees: Increase primarily due to higher fees in the office ($0.5 million) and retail ($0.2 million) segments.~~

~~Parking and other tenant charges: Increase primarily due to higher parking income ($0.5 million).~~

~~Real estate rental revenue from same-store properties by segment was as follows (in thousands):~~

Nine Months Ended September 30,
2017 2016 $ Change % Change
Office $ 103,289
$ 95,253
$ 8,036
8.4 %
Multifamily 55,260
54,355
905
1.7 %
Retail 46,821
45,864
957
2.1 %
Total same-store real estate rental revenue $ 205,370
$ 195,472
$ 9,898
5.1 %

~~Office~~: Increase primarily due to higher rental income ($7.9 million), lease termination fees ($0.5 million), periodic settlements of tenant recoveries ($0.5 million) and parking income ($0.4 million), partially offset by higher rent abatements ($1.3 million).

~~Multifamily: Increase primarily due to higher rental income ($0.9 million).~~

~~Retail~~: Increase primarily due to higher rental income ($0.7 million), tenant reimbursements for income taxes ($0.3 million), lease termination fees ($0.2 million) and parking income ($0.1 million), partially offset by higher provisions for bad debt ($0.3 million).

~~Real estate rental revenue from acquisitions increased due to the acquisitions of Watergate 600 ($9.7 million) in the 2017 Period and Riverside Apartments ($8.7 million) in the 2016 Period.~~

Real estate rental revenue from development/redevelopment properties decreased primarily due to lower tenant reimbursements ($0.7 million) at Army Navy Building, which substantially completed redevelopment activities during the 2017 Quarter.

~~During the 2017 Period, we executed new and renewal leases in our office and retail segments as follows:~~

Square Feet
(in thousands)

Average Rental Rate
(per square foot)
% Rental Rate Increase
Leasing Costs ⁽¹⁾
(per square foot)
Free Rent (weighted average months) Retention Rate
Office 411
$ 44.53
8.0 % $ 88.74
10.3
48.0 %
Retail 255
29.00
17.7 % 13.26
1.4
68.6 %
Total 666
38.57
10.6 % 59.77
7.7
56.2 %

⁽¹⁾ ~~Consists of tenant improvements and leasing commissions.~~

The low retention rate in the office segment is primarily due to the non-renewal of a large tenant at Braddock Metro Center. We have executed a lease with a new tenant for that space, with the lease expected to commence in 2018. Retail’s retention rate was negatively impacted by the bankruptcy of a large tenant at Frederick Crossing.

~~Real Estate Expenses~~

~~Real estate expenses as a percentage of revenue for the 2017 Period and 2016 Period were 35.4% and 36.4%, respectively.~~

~~Real estate expenses from same-store properties by segment were as follows (in thousands):~~

Nine Months Ended September 30,
2017 2016 $ Change % Change
Office $ 38,533
$ 37,017
$ 1,516
4.1 %
Multifamily 21,633
21,725
(92 ) (0.4 )%
Retail 11,147
11,660
(513 ) (4.4 )%
Total same-store real estate expenses $ 71,313
$ 70,402
$ 911
1.3 %

~~Office: Increase primarily due to higher real estate tax ($0.7 million), administrative ($0.3 million) and custodial ($0.3 million) expenses.~~

~~Multifamily: Decrease primarily due to lower utilities ($0.3 million) and snow removal ($0.1 million) expenses, partially offset by higher real estate taxes ($0.3 million).~~

~~Retail: Decrease primarily due to lower snow removal ($0.3 million) and bad debt ($0.3 million) expenses.~~

~~Other Income and Expenses~~

~~Depreciation and Amortization~~: Increase primarily due to the Watergate 600 acquisition ($4.8 million), partially offset by lower amortization of acquired intangible lease assets at Riverside Apartments ($1.9 million) and same-store properties ($1.8 million).

~~Acquisition Costs~~: The acquisition costs in 2016 are related to the acquisition of Riverside Apartments during the 2016 Period. We capitalized the costs associated with the acquisition of Watergate 600 in the 2017 Period due to accounting for the transaction as an asset acquisition in accordance with the adoption of ASU No. 2017-01, ~~Business Combinations (Topic 805) - Clarifying the Definition of a Business~~.

~~General and Administrative Expenses:~~ Increase primarily due to higher share based compensation expense ($0.9 million) due to a higher volume of forfeitures in 2016 and higher estimated STI compensation ($0.8 million) due to improved forecasted operating results.

~~Casualty gain:~~ The casualty gain in the 2016 Period represents the gain recognized upon the receipt of insurance proceeds related to damage from a fire at Bethesda Hill Towers during the first quarter of 2015 that damaged four units.

~~Real estate impairment:~~ ~~Impairment charge during the 2017 Period to write down the carrying value of Braddock Metro Center to its estimated fair value (see note 3 to the consolidated financial statements).~~

~~Gain on sale of real estate:~~ Decrease due to completion of the sales of Dulles Station II, 6110 Executive Boulevard, 51 Monroe Street, 600 Jefferson Plaza, West Gude Drive, 51 Monroe Street and One Central Plaza during the 2016 Period.

~~Interest Expense: Interest expense by debt type for the nine months ended September 30, 2017 and 2016 were as follows (in thousands):~~

Nine Months Ended September 30,
Debt Type 2017 2016 $ Change % Change
Notes payable $ 28,042
$ 24,946
$ 3,096
12.4 %
Mortgage notes payable 3,651
12,628
(8,977 ) (71.1 )%
Lines of credit 4,617
4,255
362
8.5 %
Capitalized interest (676 ) (476 ) (200 ) 42.0 %
Total $ 35,634
$ 41,353
$ (5,719 ) (13.8 )%

~~Notes payable~~: Increase primarily due to executing the $150.0 million term loan in 2016, which has a floating interest rate effectively fixed at 2.9% by interest rate swaps. We borrowed $100.0 million on the term loan in the fourth quarter of 2016, and borrowed the remaining $50.0 million during the first quarter of 2017.

~~Mortgage notes payable~~: Decrease primarily due to the repayment of the mortgage notes secured by John Marshall II, 3801 Connecticut Avenue, Bethesda Hill Apartments, Walker House Apartments, 2445 M Street and the Army Navy Building in 2017 and 2016.

~~Lines of credit: Increase primarily due to a weighted average interest rate of 2.1% during the 2017 Period, as compared to 1.5% during the 2016 Period.~~

~~Capitalized interest: Increase primarily due to capitalization of interest on spending related to the Trove, the multifamily development adjacent to The Wellington.~~

~~Income tax benefit:~~ The income tax benefit in the 2016 Period resulted from a reduction of the valuation allowance on a deferred tax asset at one of our taxable REIT subsidiaries due to a net operating loss as a result of the sale of Dulles Station II. We further reduced the valuation allowance in the 2017 Period due to an increase in anticipated income at the TRS and corresponding usage of the net operating loss. We have concluded that there is sufficient positive evidence as of September 30, 2017 that it is more likely than not that a portion of the deferred tax asset related to the net operating loss is realizable.

Liquidity and Capital Resources

We believe we will have adequate liquidity over the next twelve months to operate our business and to meet our cash requirements, including meeting our debt obligations, capital commitments, acquisitions and contractual obligations, as well as the payment of dividends, on-going transformational costs and funding possible growth opportunities. We executed strategic transactions that will allow us to continue pursuing residential expansion in Sunbelt markets, meet our debt obligations for the next twelve months, and pay a dividend on a quarterly basis.

We also believe we have adequate liquidity beyond 2023, with only $149.0 million of scheduled debt maturities prior to 2028. As of July 27, 2023, we had cash and cash equivalents totaling $4.4 million and a borrowing capacity of $657.0 million on our Revolving Credit Facility, resulting in a total liquidity position of $661.4 million.

While we currently intend to continue to pay dividends at or about current levels, we will continue to assess the payment of our dividends on a quarterly basis. Future determinations regarding the declaration and payment of dividends, if any, will be at the discretion of our board of trustees which considers, among other factors, trends in our levels of NAREIT FFO and ongoing capital requirements to achieve a targeted payout ratio.

Capital Requirements

As of the end of the ~~third quarter of 2017, we summarize~~2023 Period, our full-year ~~2017~~2023 capital requirements ~~as follows:~~are summarized below:

•Funding dividends and distributions to our shareholders;

~~$49.6 million to repay a secured note during the first quarter of 2017;~~

•Approximately ~~$75~~$42.0 - ~~$80~~$47.0 million to invest in our existing portfolio of operating assets, ~~including approximately $25~~inclusive of $27.0 - ~~$30~~$32.0 million ~~to fund tenant-related~~of major capital ~~requirements and leasing commissions;~~expenditures;

~~Approximately $20 - $25~~•Less than $1.0 million to invest in our development and redevelopment projects; and

•Funding for potential property acquisitions ~~during 2017,~~throughout 2023, offset by proceeds from potential property dispositions.

There can be no assurance that our capital requirements will not be materially higher or lower than the above expectations. We currently believe that we will generate sufficient cash flow from operations and potential property sales and have access to the capital resources necessary to fund our requirements for the remainder of 2023. However, as a result of the uncertainty of the general market conditions in the greater Washington, DC metro and Sunbelt regions, economic conditions affecting the ability to attract and retain tenants, declines in our share price, unfavorable changes in the supply of competing properties, or our properties not performing as expected, we may not generate sufficient cash flow from operations and property sales or otherwise have access to capital on favorable terms, or at all. If we are unable to obtain capital from other sources, we may need to alter capital spending to be materially different than what is stated above. If capital were not available, we may be unable to satisfy the distribution requirement applicable to REITs, make required principal and interest payments, make strategic acquisitions or make necessary and/or routine capital improvements or undertake improvement/redevelopment opportunities with respect to our existing portfolio of operating assets.

Debt Financing

~~Our total~~We generally use secured or unsecured, corporate-level debt, ~~at September~~including unsecured notes, our Revolving Credit Facility, bank term loans and mortgages to meet our borrowing needs. Long-term, we generally use fixed rate debt instruments in order to match the returns from our real estate assets. If we issue unsecured debt in the future, we will seek to “ladder” the maturities of our debt to mitigate exposure to interest rate risk in any particular future year. We also utilize variable rate debt for short-term financing purposes. At times, our mix of variable and fixed rate debt may not suit our needs. At those times, we may use derivative financial instruments including interest rate swaps and caps, forward interest rate options or interest rate options in order to assist us in managing our debt mix. We may either hedge our variable rate debt to give it an effective fixed interest rate or hedge fixed rate debt to give it an effective variable interest rate.

As of June 30, ~~2017 and December 31, 2016 was~~2023, our future debt principal payments are scheduled as follows (in thousands):

September 30, 2017 December 31, 2016
Mortgage notes payable $ 92,671
$ 144,485
Lines of credit 189,000
120,000
Notes payable 900,000
850,000
1,181,671
1,114,485
Premiums and discounts, net 1,927
2,383
Debt issuance costs, net (4,450 ) (5,244 )
Total $ 1,179,148
$ 1,111,624


	Future Maturities of Debt
Year	Unsecured Debt			Revolving Credit Facility			Total Debt		Average Interest Rate
2023	$	—		$	—		$	—	—%
2024	—			—			—		—%
2025	125,000		(1)	24,000		(2)	149,000		3.4%
2026	—			—			—		—%
2027	—			—			—		—%
Thereafter	400,000			—			400,000		4.5%
Scheduled principal payments	$	525,000		$	24,000		$	549,000	4.2%

Net premiums/discounts	(105)			—			(105)
Loan costs, net of amortization	(2,940)			—			(2,940)
Total	$	521,955		$	24,000		$	545,955	4.2%

~~Mortgage Notes Payable~~______________________________

~~At September 30, 2017, our mortgage notes payable bore~~(1) During the first quarter of 2023, we entered into the $125.0 million 2023 Term Loan with an ~~effective weighted average fair value~~ interest rate of ~~4.5%~~SOFR (subject to a credit spread adjustment of 10 basis points) plus a margin of 95 basis points (subject to adjustment depending on Elme Communities’ credit rating). The 2023 Term Loan has a two-year term ending in January 2025, with two one-year extension options. We used the proceeds to prepay the $100.0 million 2018 Term Loan in full and a portion of our borrowings under our unsecured credit facility. Elme Communities had previously entered into an ~~estimated~~interest rate swap to effectively fix the interest rate for the remaining $100.0 million portion of the 2018 Term Loan. Following the prepayment of the 2018 Term Loan, the interest rate swap effectively fixes a $100.0 million portion of the 2023 Term Loan at 2.16% through the interest rate swap's expiration date of July 21, 2023. In March 2023, we entered into two interest rate swap arrangements with an aggregate notional amount of $125.0 million that will effectively fix the 2023 Term Loan’s interest rate at 4.73% beginning on July 21, 2023 through the 2023 Term Loan’s maturity date of January 10, 2025.

(2) The credit facility's term ends in August 2025, with two six-month extension options.

The weighted average maturity for our debt is 5.9 years. If principal amounts due at maturity cannot be refinanced, extended or paid with proceeds of ~~3.7 years. We~~other capital transactions, such as new equity capital, our cash flow may ~~either initiate secured mortgage debt~~be insufficient to repay all maturing debt. Prevailing interest rates or ~~assume mortgage debt from time-to-time~~other factors at the time of a refinancing, such as possible reluctance of lenders to make commercial real estate loans, may result in ~~conjunction with property acquisitions.~~higher interest rates and increased interest expense or inhibit our ability to finance our obligations.

~~Our mortgage~~From time to time, we may seek to repurchase and cancel our outstanding unsecured notes ~~contain~~and term loans through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Debt Covenants

Pursuant to the terms of our Revolving Credit Facility, 2023 Term Loan and unsecured notes, we are subject to customary operating covenants ~~with which we must comply.~~ and maintenance of various financial ratios.

Failure to comply with any of the covenants under our mortgage notes could result in a default under one or more of our debt instruments. This could cause our debt holders to accelerate the timing of payments and would therefore have a material adverse effect on our business, operations, financial condition and liquidity. As of September 30, 2017, we were in compliance with our mortgage notes covenants.

~~Lines of Credit and Term Loan~~

~~Our primary source of liquidity is our~~ Revolving Credit Facility, ~~a $600.0 million~~2023 Term Loan, unsecured credit agreement that matures in June 2019, unless extended pursuant to one or both of the two six-month extension options. The Revolving Credit Facility has an accordion feature that allows us to increase the facility to $1.0 billion, subject to the extent the lenders agree to provide additional revolving loan commitments or term loans. In September 2015, we entered into a $150.0 million unsecured term loan by exercising a portion of the accordion feature under the Revolving Credit Facility (as discussed below). The $600.0 million committed capacity of the unsecured line of credit under the Revolving Credit Facility was not changed as a result of the incurrence of the term loan. The Revolving Credit Facility bears interest at a rate of either one month LIBOR plus a margin ranging from 0.875% to 1.55% (depending on our credit rating) or the base rate plus a margin ranging from 0.0% to 0.55% (based upon our credit rating). The base rate is the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50% and the one month LIBOR market index rate plus 1.0%. In addition, the Revolving Credit Facility requires the payment of a facility fee ranging from 0.125% to 0.30% (depending on our credit rating) on the $600.0 million committed capacity, without regard to usage. As of September 30, 2017, the interest rate on the facility is one month LIBOR plus 1.00% and the facility fee is 0.20%. We had $189.0 million in borrowings outstanding as of September 30, 2017.

~~During the third quarter of 2015, we executed a $150.0 million unsecured term loan~~ ~~by exercising a portion of the accordion feature under the Revolving Credit Facility. The term loan has a 5.5 year term scheduled to mature on~~ ~~March 15, 2021~~ ~~and currently has an interest rate of one month LIBOR plus 110 basis points, based on our current unsecured debt ratings. W~~e entered into two interest rate swap arrangements with a total notional amount of $150.0 million to swap the floating interest rate under the term loan to an all-in fixed interest rate of 2.7% starting on October 15, 2015 and extending until the maturity of the term loan on March 15, 2021.

~~The Revolving Credit Facility contains financial and other covenants with which we must comply. Failure to comply with any of the covenants under the Revolving Credit Facility~~notes or other debt instruments could result in a default under one or more of our debt instruments. This could cause our lenders to accelerate the timing of payments and could therefore have a material adverse effect on our business, operations, financial condition and liquidity. In addition, our ability to draw on ~~the~~our Revolving Credit Facility or incur other unsecured debt in the future could be restricted by the ~~loan~~debt covenants.

As of ~~September~~June 30, ~~2017,~~2023, we were in compliance with ~~our loan covenants.~~

~~Notes Payable~~

We generally issue unsecured notes to fund our real estate assets long-term. In issuing future unsecured notes, we intend to ladder the maturities of our debt to mitigate exposure to interest rate risk in future years.

During the third quarter of 2016, we entered into a seven year, $150.0 million unsecured term loan (“2016 Term Loan”) maturing on July 21, 2023 with a deferred draw period of up to six months commencing on July 22, 2016. The 2016 Term Loan bears interest at a rate of either LIBOR plus a margin ranging from 1.50% to 2.45% or the base rate plus a margin ranging from 0.5% to 1.45% (in each case depending upon our credit rating). The base rate is the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50% and one-month LIBOR plus 1.0%. The 2016 Term Loan currently has an interest rate of one month LIBOR plus 165 basis points, based on our current unsecured debt ratings. We borrowed $100.0 million on the term loan in the fourth quarter of 2016, and borrowed the remaining $50.0 million during the first quarter of 2017. We used the proceeds to refinance maturing secured debt. We also entered into forward interest rate swaps commencing on March 31, 2017 to effectively fix the interest rate on the 2016 Term Loan at 2.9% (see note 7 to the consolidated financial statements).

~~Our unsecured notes contain covenants with which we must comply. Failure to comply with any of~~ the covenants ~~under our unsecured notes could result in a default under one or more of our debt instruments. This could cause our debt holders~~related to accelerate the timing of payments and would therefore have a material adverse effect on our business, operations, financial condition and liquidity. As of September 30, 2017, we were in compliance with our unsecured notes covenants. In addition, our ability to draw on our Revolving Credit Facility, ~~or incur other~~2023 Term Loan, and unsecured ~~debt in the future could be restricted by our unsecured note covenants.~~notes.

From time to time, we may seek to repurchase and cancel our outstanding notes through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

Common Equity

We have authorized for issuance ~~100.0~~150.0 million common shares, of which ~~78.5~~87.8 million shares were outstanding at ~~September~~June 30, ~~2017.~~2023.

On ~~June 23, 2015,~~February 17, 2021, we entered into ~~four~~ separate amendments to each of our existing equity distribution agreements ~~(collectively, the “Equity~~(“Original Equity Distribution Agreements”) with each of Wells Fargo Securities, LLC, BNY Mellon Capital Markets, LLC, Capital One Securities, Inc., Citigroup Global Markets Inc. ~~and RBC~~, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, KeyBanc Capital Markets Inc. and Truist Securities, Inc. (f/k/a SunTrust Robinson Humphrey, Inc.), each dated May 4, 2018 (collectively, as amended, the “Equity Distribution Agreements”) for our at-the-market program. Also on February 17, 2021, we entered into a separate equity distribution agreement with BTIG, LLC ~~relating~~on the same terms as the Amended Equity Distribution Agreements (the “BTIG Equity Distribution Agreement”). On September 22, 2021, BTIG, LLC notified us that it was terminating the BTIG Equity Distribution Agreement, effective as of September 27, 2021. Pursuant to the ~~issuance of~~Equity Distribution Agreements, we may sell, from time to time, up to ~~$200.0~~an aggregate price of $550.0 million of our common shares ~~from time to time.~~of beneficial interest, $0.01 par value per share. Issuances of our common shares are made at market prices prevailing at the time of issuance. We may use net proceeds from the issuance of common shares under this program for general ~~corporate~~business purposes, including, without limitation, working capital, the acquisition, renovation, expansion, improvement, development or redevelopment of income producing ~~properties~~property or the repayment of debt. ~~During the 2017 Period, we issued 3.6 million~~We did not issue common shares under the Equity Distribution Agreements ~~at an average price of $32.06~~during the 2023 Period and 2022 Quarter. Our issuances and net proceeds on the Equity Distribution Agreements for the 2022 Period were as follows ($ in thousands, except per share ~~raising $113.2 million in net proceeds.~~data):


	Six Months Ended June 30,
		2022
Issuance of common shares		1,032
Weighted average price per share		$	26.27
Net proceeds		$	26,851

We have a dividend reinvestment program, whereby shareholders may use their dividends and optional cash payments to purchase common shares. The common shares sold under this program may either be common shares issued by us or common shares purchased in the open market. ~~During~~

Our issuances and net proceeds on the ~~2017 Period, we issued 77,153 common shares under this~~dividend reinvestment program ~~at a weighted average price of $32.24~~for the three and six months ended June 30, 2023 and 2022 were as follows ($ in thousands, except per share ~~raising $2.5 million in net proceeds.~~data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Issuance of common shares	14		10		28		20
Weighted average price per share	$	17.62	$	24.82	$	17.64	$	25.44
Net proceeds	$	249	$	254	$	497	$	518

Preferred Equity

~~Washington REIT’s~~Elme Communities’ board of trustees can, at its discretion, authorize the issuance of up to 10.0 million preferred shares. The ability to issue preferred equity provides ~~Washington REIT~~Elme Communities an additional financing tool that may be used to raise capital for future acquisitions or other business purposes. As of ~~September~~June 30, ~~2017,~~2023, no preferred shares ~~had been issued.~~were issued and outstanding.

~~Dividends~~

We currently declare dividends quarterly at a rate of $0.30 per share. The maintenance of our dividend level is subject to various factors reviewed by the board of trustees in its discretion. These factors include our results of operations, the availability of cash and the REIT distribution requirements, which require at least 90% of our REIT taxable income to be distributed to shareholders on an annual basis. When setting the dividend level, our board of trustees looks in particular at trends in our level of funds from operations, together with associated recurring capital improvements, tenant improvements, leasing commissions and incentives, and adjustments to straight-line rents to reflect cash rents received.

~~Our dividend and distribution payments for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):~~

Three Months Ended September 30, Change Nine Months Ended September 30, Change
2017 2016 $ % 2017 2016 $ %
Common dividends $ 23,493
$ 22,365
$ 1,128
5.0 % $ 91,666
$ 85,648
$ 6,018
7.0 %
Distributions to noncontrolling interests 8
33
(25 ) (75.8 )% 67
143
(76 ) (53.1 )%
$ 23,501
$ 22,398
$ 1,103
4.9 % $ 91,733
$ 85,791
$ 5,942
6.9 %

~~Dividends paid during the 2017 Quarter and 2017 Period increased primarily due to the issuance of 6.2 million common shares during 2016 and 3.6 million common shares during 2017.~~

Historical Cash Flows

Cash flows from operations are an important factor in our ability to sustain our dividend at its current rate. If our cash flows from operations were to decline significantly from current levels, we may have to reduce our dividend. Consolidated cash flow information is summarized as follows (in thousands):


	Six Months Ended June 30,				Change
	2023		2022		$		%
Net cash provided by operating activities	$	46,250	$	33,979	$	12,271	36.1	%
Net cash used in investing activities	(10,183)		(217,129)		206,946		(95.3)	%
Net cash used in financing activities	(38,478)		(4,299)		(34,179)		795.0	%

Nine Months Ended September 30, Change
2017 2016 $ %
Net cash provided by operating activities $ 94,271
$ 85,764
$ 8,507
9.9 %
Net cash used in investing activities (184,504 ) (39,097 ) (145,407 ) (371.9 )%
Net cash provided by (used in) financing activities 90,254
(61,904 ) 152,158
245.8 %

~~Cash~~Net cash provided by operating activities increased primarily due to higher rental revenue from same-store communities and the acquisitions of ~~Riverside Apartments~~Carlyle of Sandy Springs, Marietta Crossing and ~~Watergate 600 and lower interest payments, partially offset by property sales~~Alder Park during the ~~2016~~2022 Period.

~~Cash~~Net cash used in investing activities ~~increased~~decreased primarily due to ~~proceeds from properties sold in~~ the ~~2016 Period, partially offset by lower expenditures on acquisitions in~~acquisition of Carlyle of Sandy Springs, Marietta Crossing and Alder Park during the ~~2017~~2022 Period.

~~Cash provided by~~Net cash used in financing activities increased primarily due to ~~paying off a larger volume~~the repayment of ~~mortgage notes in~~ the ~~2016 Period, higher~~$100.0 million 2018 Term Loan, net ~~borrowing~~repayments on ~~our~~the Revolving Credit Facility, during the ~~2017~~2023 Period and ~~drawing the remaining $50.0 million on a term loan during the 2017 Period, partially offset by lower~~ proceeds from equity issuances during the ~~2017~~2022 Period. These were partially offset by executing the $125.0 million 2023 Term Loan during the 2023 Period.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of ~~September~~June 30, ~~2017~~2023 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.

Funds From Operations

NAREIT FFO is a widely used measure of operating performance for real estate companies. We provide NAREIT FFO as a supplemental measure to net income calculated in accordance with GAAP. Although NAREIT FFO is a widely used measure of operating performance for REITs, NAREIT FFO does not represent net income calculated in accordance with GAAP. As such, it should not be considered an alternative to net income as an indication of our operating performance. In addition, NAREIT FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity. In its April, 2002 White Paper,defined by the 2018 National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) ~~defines NAREIT~~ FFO White Paper Restatement, as net income (computed in accordance with GAAP) excluding gains (or losses) associated with sales of ~~properties,~~properties; impairments of depreciable real estate, and real estate depreciation and amortization. We consider NAREIT FFO to be a standard supplemental measure for REITs because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. Our NAREIT FFO may not be comparable to FFO reported by other REITs. These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. NAREIT FFO is a non-GAAP measure.

The following table provides the calculation of our NAREIT FFO and a reconciliation of net loss to NAREIT FFO ~~to net income~~ for the three and six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(2,611)	$	(8,874)	$	(6,254)	$	(16,598)
Adjustments:
Depreciation and amortization	21,415		24,039		42,951		46,239








NAREIT FFO	$	18,804	$	15,165	$	36,697	$	29,641

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 2,813
$ 79,662
$ 17,275
$ 113,862
Adjustments:
Depreciation and amortization 27,941
30,905
83,271
82,104
Real estate impairment 5,000
—
5,000
—
Net gain on sale of depreciable real estate —
(77,592 ) —
(101,704 )
NAREIT FFO $ 35,754
$ 32,975
$ 105,546
$ 94,262

Critical Accounting ~~Policies and~~ 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, 2023. We discuss the most critical estimates in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 filed with the SEC on February ~~21, 2017.~~17, 2023.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal material financial market risk to which we are exposed is interest rate risk. Our exposure to market risk for changes in interest rates relates primarily to refinancing long-term fixed rate obligations, the opportunity cost of fixed rate obligations in a falling interest rate environment and our variable rate ~~lines~~line of credit.

The table below presents principal, interest and related weighted average ~~fair value~~ interest rates by year of maturity, with respect to debt outstanding on ~~September~~June 30, ~~2017.~~2023 (in thousands):


	2023			2024			2025				2026			2027			Thereafter			Total			Fair Value
Unsecured fixed rate debt
Principal	$	—		$	—		$	125,000		(1)	$	—		—			$	400,000		$	525,000		$	471,463
Interest payments	$	11,954		$	23,908		$	17,995			$	17,995		$	17,995		$	44,216		$	134,063
Interest rate on debt maturities	—		%	—		%	2.9		%		—		%	—		%	4.5		%	4.2		%




Unsecured variable rate debt
Principal	$	—		$	—		$	24,000			$	—		$	—		$	—		$	24,000		$	24,000
Variable interest rate on debt maturities							6.0		%											6.0		%

2017 2018 2019 2020 2021 Thereafter Total Fair Value
(In thousands)
Unsecured fixed rate debt ⁽¹⁾

Principal $ —
$ —
$ —
$ 250,000
$ 150,000
$ 500,000
$ 900,000
$ 932,766
Interest payments $ 14,206
$ 36,224
$ 36,224
$ 36,224
$ 20,786
$ 42,204
$ 185,868

Interest rate on debt maturities — % — % — % 5.1 % 2.7 % 4.0 % 4.1 %
Unsecured variable rate debt
Principal $ —
$ —
$ 189,000
$ —
$ —
$ —
$ 189,000
$ 189,000
Variable interest rate on debt maturities — % — % 2.2 % — % — % — % 2.2 %
Mortgages
Principal amortization ⁽²⁾
(30 year schedule)
$ 756
$ 3,135
$ 33,909
$ 2,659
$ 2,829
$ 49,382
$ 92,670
$ 98,892
Interest payments $ 1,300
$ 5,089
$ 3,627
$ 3,046
$ 2,876
$ 727
$ 16,665

Weighted average interest rate on principal amortization 4.9 % 4.9 % 5.3 % 4.7 % 4.7 % 3.9 % 4.5 %

⁽¹⁾~~Includes two separate $150.0 million term loans with floating interest rates that are effectively fixed at 2.7% and 2.9% by interest rate swap arrangements.~~

⁽²⁾~~Excludes net discounts of $3.6 million and net unamortized debt issuance costs of $0.2 million at September 30, 2017.~~

~~On September 15, 2015, we entered into two interest rate swap arrangements with~~Represents a ~~total notional amount of $150.0 million to swap the floating interest rate under our new $150.0~~$125.0 million term loan ~~to an all-in fixed~~with a floating interest ~~rate of 2.7% starting on October 15, 2015 and extending until the maturity~~rate. A $100.0 million portion of the term loan ~~on March 15, 2021. On July 22, 2016, we entered into two forward~~is effectively fixed by an interest rate swap ~~arrangements with a total notional~~that expires on July 21, 2023. The full amount of ~~$150.0 million to swap~~ the ~~floating~~term loan will be effectively fixed by two interest rate under the 2016 Term Loan (see note 6 to the consolidated financial statements) to an all-in fixed interest rate of 2.9%, starting on March 31, 2017 and extending until the maturity of the 2016 Term Loanswaps that become effective on July 21, 2023 ~~(see note 7 to~~and expire on the ~~consolidated financial statements).~~loan’s maturity date of January 10, 2025.

We ~~entered~~enter into ~~the~~ interest rate swap arrangements designated and qualifying as cash flow hedges to reduce our exposure to the variability in future cash flows attributable to changes in interest rates. Derivative instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of the interest rate hedge agreement. We believe that we minimize our credit risk on these transactions by dealing with major, creditworthy financial institutions. As part of our ongoing control procedures, we monitor the credit ratings of counterparties and our exposure to any single entity, thus minimizing our credit risk concentration.

The following table sets forth information pertaining to interest rate swap contracts in place as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022 and their respective fair values ~~(dollars in~~(in thousands):


Notional Amount			Floating Index Rate			Fair Value as of:
		Fixed Rate		Effective Date	Expiration Date	June 30, 2023		December 31, 2022
$	100,000	1.205%	USD-SOFR	3/31/2017	7/21/2023	$	219	$	1,998
75,000		3.670%	USD-SOFR	7/21/2023	1/10/2025	1,383		—
50,000		3.670%	USD-SOFR	7/21/2023	1/10/2025	922		—
						$	2,524	$	1,998

Notional Amount Floating Index Rate Fair Value as of:
Fixed Rate Effective Date Expiration Date September 30, 2017 December 31, 2016
$ 75,000
1.6190% One-Month LIBOR 10/15/2015 3/15/2021 $ 386
$ 224
75,000
1.6260% One-Month LIBOR 10/15/2015 3/15/2021 361
193
100,000
1.2050% One-Month LIBOR 3/31/2017 7/21/2023 4,053
4,775
50,000
1.2075% One-Month LIBOR 3/31/2017 7/21/2023 2,048
2,419
$ 300,000
$ 6,848
$ 7,611

We enter into debt obligations primarily to support general corporate purposes including acquisition of real estate properties, capital improvements and working capital needs.

As the majority of our outstanding debt is long-term, fixed rate debt, our interest rate risk has not changed significantly from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 filed with the SEC on February ~~21, 2017.~~17, 2023. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Debt Financing.”

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, Chief Financial Officer and Chief Accounting Officer, ~~and Controller,~~ 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, Chief Financial Officer and Chief Accounting Officer, ~~and Controller,~~ 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, Chief Financial Officer and Chief Accounting Officer ~~and Controller~~ concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

During the third quarter of 2017, we implemented upgrades to our accounting information systems. The implementation of our upgraded systems was not made in response to any identified deficiency or weakness in our internal controls over financial reporting. The implementation was subject to various testing and review procedures prior to and after execution. We have updated our internal controls over financial reporting, as necessary, to accommodate any modifications to our business processes or accounting procedures due to the implementation. Management does not believe that the implementation of the upgraded systems has had an adverse effect on our internal controls over financial reporting and will continue to monitor, test and evaluate the systems during the post-implementation period to ensure that adequate controls over financial reporting continue to be maintained.

There have not been any ~~other~~ changes in ~~Washington REIT’s~~Elme Communities’ 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, ~~Washington REIT’s~~Elme Communities’ internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

None.

ITEM 1A: RISK FACTORS

~~None.~~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, 2022 filed on February 17, 2023.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~A summary of our repurchases of shares of our common stock for the three months ended September 30, 2017 was as follows:~~None.

Period
Total Number of Shares Purchased ⁽¹⁾
Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased
July 1 - July 31, 2017 —
$ —
N/A N/A
August 1 - August 31, 2017 —
—
N/A N/A
September 1 - September 30, 2017 147
32.62
N/A N/A
Total 147
32.62
N/A N/A

⁽¹⁾ Represents restricted shares surrendered by employees to Washington REIT to satisfy such employees’ applicable statutory minimum tax withholding obligations in connection with the vesting of restricted shares.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: MINE SAFETY DISCLOSURES

None.

ITEM 5: OTHER INFORMATION

~~None.~~During the three months ended June 30, 2023, no trustee or officer of Elme Communities adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 6: EXHIBITS

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

File
Number

Exhibit

Filing Date

Filed
Herewith

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

Amended and Restated Bylaws of Elme Communities, as amended

8-K

001-06622

3.2

10/17/2022

10.1

Offer letter to Tiffany Butcher

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”)

31.2

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act

31.3

Certification of the Chief Accounting Officer pursuant to Rule 13a-14(a) of the Exchange Act

Certification of the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)



		~~Incorporated by Reference~~
~~Exhibit~~ ~~Number~~	~~Exhibit Description~~	~~Form~~	~~File~~ ~~Number~~	~~Exhibit~~	~~Filing Date~~	~~Filed~~ ~~Herewith~~
12	~~Computation of Ratios~~					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 pursuant to Rule 13a-14(a) of the Exchange Act~~					X
~~31.3~~	~~Certification of the Chief Accounting Officer pursuant to Rule 13a-14(a) of the Exchange Act~~					X
32	Certification of the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
~~101~~	The following materials from our Quarterly Report on Form 10–Q for the quarter ended September 30, 2017 formatted in eXtensible Business Reporting Language (“XBRL”): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statement of Equity, (v) the Consolidated Statements of Cash Flows, and (vi) notes to these consolidated financial statements					X

* Management contracts or compensation plans or arrangements in which trustees or executive officers are eligible to participate.

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

~~WASHINGTON REAL ESTATE INVESTMENT TRUST~~

	/s/ Paul T. McDermott
		Paul T. McDermott
		President and Chief Executive Officer

		/s/ ~~Stephen E. Riffee~~Steven M. Freishtat
		~~Stephen E. Riffee~~Steven M. Freishtat
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

		/s/ W. Drew Hammond
		W. Drew Hammond
		Senior Vice President, Chief Accounting Officer and ~~Controller~~ Treasurer (Principal Accounting Officer)

DATE: ~~October 30, 2017~~

August 1, 2023


Maryland						53-0261100
(State of incorporation)						(IRS Employer Identification Number)



Large ~~accelerated filer~~Accelerated Filer	x☒	Accelerated ~~filer~~Filer	o☐
Non-accelerated ~~filer~~Filer	o☐	Smaller ~~reporting company~~Reporting Company	o☐
		Emerging ~~growth company~~Growth Company	o☐


				Page
Part I: Financial Information

			~~Page~~
~~Part I: Financial Information~~

Item 1.	Consolidated Financial Statements (Unaudited)
		Consolidated Balance Sheets		5
		Condensed Consolidated Statements of ~~Income~~Operations		6
		Condensed Consolidated Statements of Comprehensive Income (Loss)		7
		Consolidated ~~Statement~~Statements of Equity		8
		Consolidated Statements of Cash Flows		910
		Notes to Consolidated Financial Statements		1012

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		23

Item 3.		Quantitative and Qualitative Disclosures about Market Risk		3638

Item 4.		Controls and Procedures		3739

Part II: Other Information

Item 1.		Legal Proceedings		3840

Item 1A.		Risk Factors		3840

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		3840

Item 3.		Defaults upon Senior Securities		3840

Item 4.		Mine Safety Disclosures		3840

Item 5.		Other Information		3840

Item 6.		Exhibits		3941

		Signatures		4042



x☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.



~~MARYLAND~~				~~53-0261100~~ELME COMMUNITIES
(Exact name of registrant as specified in its charter)



	September 30, 2017			December 31, 2016
	(Unaudited)			December 31, 2016
Assets
Land	$	615,280		$	573,315
Income producing property	2,214,864			2,112,088
	2,830,144			2,685,403
Accumulated depreciation and amortization	(715,228		)	(657,425		)
Net income producing property	2,114,916			2,027,978
Properties under development or held for future development	49,065			40,232
Total real estate held for investment, net	2,163,981			2,068,210
Investment in real estate sold or held for sale, net	7,011			—
Cash and cash equivalents	11,326			11,305
Restricted cash	1,442			6,317
Rents and other receivables, net of allowance for doubtful accounts of $2,494 and $2,377, respectively	73,545			64,319
Prepaid expenses and other assets	126,589			103,468
Other assets related to properties sold or held for sale	400			—
Total assets	$	2,384,294		$	2,253,619
Liabilities
Notes payable, net	$	894,103		$	843,084
Mortgage notes payable, net	96,045			148,540
Lines of credit	189,000			120,000
Accounts payable and other liabilities	66,393			46,967
Dividend payable	—			22,414
Advance rents	10,723			11,750
Tenant security deposits	9,528			8,802
Liabilities related to properties sold or held for sale	311			—
Total liabilities	1,266,103			1,201,557
Equity
Shareholders’ equity
Preferred shares; $0.01 par value; 10,000 shares authorized; no shares issued or outstanding	—			—
Shares of beneficial interest, $0.01 par value; 100,000 shares authorized; 78,464 and 74,606 shares issued and outstanding, respectively	785			746
Additional paid in capital	1,487,157			1,368,636
Distributions in excess of net income	(377,968		)	(326,047		)
Accumulated other comprehensive income	6,848			7,611
Total shareholders’ equity	1,116,822			1,050,946
Noncontrolling interests in subsidiaries	1,369			1,116
Total equity	1,118,191			1,052,062
Total liabilities and equity	$	2,384,294		$	2,253,619



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue
Real estate rental revenue	$	82,819		$	79,770		$	243,776		$	236,312
Expenses
Real estate expenses	29,646			29,164			86,200			86,073
Depreciation and amortization	27,941			30,905			83,271			82,104
Acquisition costs	—			—			—			1,178
General and administrative	5,327			4,539			16,712			15,018
Real estate impairment	5,000			—			5,000			—
Casualty gain	—			—			—			(676		)
	67,914			64,608			191,183			183,697
Other operating income
Gain on sale of real estate	—			77,592			—			101,704
Real estate operating income	14,905			92,754			52,593			154,319
Other (expense) income
Interest expense	(12,176		)	(13,173		)	(35,634		)	(41,353		)
Other income	84			83			209			205
Income tax (expense) benefit	—			(2		)	107			691
	(12,092		)	(13,092		)	(35,318		)	(40,457		)
Net income	2,813			79,662			17,275			113,862
Less: Net loss attributable to noncontrolling interests in subsidiaries	20			12			56			32
Net income attributable to the controlling interests	$	2,833		$	79,674		$	17,331		$	113,894

Basic net income attributable to the controlling interests per common share	$	0.04		$	1.07		$	0.22		$	1.59

Diluted net income attributable to the controlling interests per common share	$	0.04		$	1.07		$	0.22		$	1.59
Weighted average shares outstanding – basic	77,291			73,994			76,292			71,348
Weighted average shares outstanding – diluted	77,423			74,133			76,415			71,520
Dividends declared per share	$	0.30		$	0.30		$	0.90		$	0.90



Acquisition Date	Property	Type	Net Rentable Square Feet	Contract Purchase Price (In thousands)
April 4, 2017	Watergate 600	Office	293,000	$	135,000



	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Real estate rental revenue	$	4,831	$	9,733
Net income	356		1,320



Land	$	45,981
Building	66,241
Tenant origination costs	12,084
Leasing commissions/absorption costs	23,161
Lease intangible assets	498
Lease intangible liabilities	(9,585		)
Deferred tax liability	(560		)
Total	$	137,820



	September 30, 2017		December 31, 2016
Mortgage notes payable ⁽¹⁾	$	31,580	$	31,869
Accounts payable and other liabilities	395		186
Tenant security deposits	94		99
	$	32,069	$	32,154



Disposition Date	Property Name	Segment	Number of Units/ Rentable Square Feet	Contract Sales Price (in thousands)		Gain on Sale (in thousands)
May 26, 2016	Dulles Station II ⁽¹⁾	Office	N/A	$	12,100	$	527
June 27, 2016	Maryland Office Portfolio Transaction I⁽²⁾	Office	692,000	111,500		23,585
September 22, 2016	Maryland Office Portfolio Transaction II ⁽³⁾	Office	491,000	128,500		77,592
	Total 2016		1,183,000	$	252,100	$	101,704



Committed capacity	$	600,000
Borrowings outstanding	(189,000		)
Unused and available	$	411,000



	Revolving Credit Facility
Balance at December 31, 2016	$	120,000
Borrowings	259,000
Repayments	(190,000		)
Balance at September 30, 2017	$	189,000



					Fair Value
					Asset Derivatives
Derivative Instrument	Aggregate Notional Amount		Effective Date	Maturity Date	September 30, 2017		December 31, 2016
Interest rate swaps	$	150,000	October 15, 2015	March 15, 2021	$	747	$	417
Interest rate swaps	150,000		March 31, 2017	July 21, 2023	6,101		7,194
	$	300,000			$	6,848	$	7,611



	Nine Months Ended September 30, 2017
	Office		Retail		Multifamily		Corporate and Other		Consolidated
Real estate rental revenue	$	125,118	$	46,821	$	71,837	$	—	$	243,776
Real estate expenses	46,513		11,147		28,540		—		86,200
Net operating income	$	78,605	$	35,674	$	43,297	$	—	$	157,576
Depreciation and amortization									(83,271		)
General and administrative									(16,712		)
Interest expense									(35,634		)
Other income									209
Real estate impairment									(5,000		)
Income tax benefit									107
Net income									17,275
Less: Net loss attributable to noncontrolling interests in subsidiaries									56
Net income attributable to the controlling interests									$	17,331
Capital expenditures	$	16,753	$	551	$	17,882	$	3,306	$	38,492



	Nine Months Ended September 30, 2016
	Office		Retail		Multifamily		Corporate and Other		Consolidated
Real estate rental revenue	$	128,201	45,864		$	62,247	$	—	$	236,312
Real estate expenses	49,508		11,660		24,905		—		86,073
Net operating income	78,693		$	34,204	$	37,342	$	—	$	150,239
Depreciation and amortization									(82,104		)
Acquisition costs									(1,178		)
General and administrative									(15,018		)
Interest expense									(41,353		)
Other income									205
Gain on sale of real estate									101,704
Income tax benefit									691
Casualty gain									676
Net income									113,862
Less: Net loss attributable to noncontrolling interests in subsidiaries									32
Net income attributable to the controlling interests									$	113,894
Capital expenditures	$	21,944	$	6,238	$	10,037	$	278	$	38,497



									Non-Same-Store
	Same-Store								Acquisitions ⁽¹⁾				Development/Redevelopment ⁽²⁾				Dispositions ⁽³⁾				All Properties
	2017		2016		$ Change		% Change		2017		2016		2017		2016		2017		2016		2017			2016			$ Change			% Change
Real estate rental revenue	$	68,230	$	66,788	$	1,442	2.2	%	$	10,463	$	5,407	$	4,126	$	3,886	$	—	$	3,689	$	82,819		$	79,770		$	3,049		3.8	%
Real estate expenses	24,195		23,873		322		1.3	%	3,823		2,312		1,628		1,741		—		1,238		29,646			29,164			482			1.7	%
NOI	$	44,035	$	42,915	$	1,120	2.6	%	$	6,640	$	3,095	$	2,498	$	2,145	$	—	$	2,451	$	53,173		$	50,606		$	2,567		5.1	%
Reconciliation to net income attributable to the controlling interests:
Depreciation and amortization																					(27,941		)	(30,905		)	2,964			(9.6	)%
General and administrative expenses																					(5,327		)	(4,539		)	(788		)	17.4	%
Real estate impairment																					(5,000		)	—			(5,000		)	—
Gain on sale of real estate																					—			77,592			(77,592		)	(100.0	)%
Interest expense																					(12,176		)	(13,173		)	997			(7.6	)%
Other income																					84			83			1			1.2	%
Income tax expense																					—			(2		)	2			(100.0	)%
Net income																					2,813			79,662			(76,849		)	(96.5	)%
Less: Net loss attributable to noncontrolling interests																					20			12			8			66.7	%
Net income attributable to the controlling interests																					$	2,833		$	79,674		$	(76,841	)	(96.4	)%



	September 30, 2017						September 30, 2016						Increase (decrease)
Segment	Same-Store		Non-Same-Store		Total		Same-Store		Non-Same-Store		Total		Same-Store		Non-Same-Store		Total
Office	93.4	%	92.5	%	93.2	%	91.0	%	86.4	%	90.5	%	2.4	%	6.1	%	2.7	%
Multifamily	94.4	%	94.6	%	94.5	%	94.8	%	92.4	%	94.2	%	(0.4	)%	2.2	%	0.3	%
Retail	93.5	%	N/A		93.5	%	95.6	%	N/A		95.6	%	(2.1	)%	N/A		(2.1	)%
Total	93.8	%	93.7	%	93.8	%	93.6	%	90.5	%	93.2	%	0.2	%	3.2	%	0.6	%



	Square Feet (in thousands)	Average Rental Rate (per square foot)		% Rental Rate Increase (Decrease)		Leasing Costs ⁽¹⁾ (per square foot)		Free Rent (weighted average months)	Retention Rate
Office	56	$	60.34	19.6	%	$	94.11	6.3	6.8	%
Retail	48	27.87		5.0	%	7.47		0.4	95.8	%
Total	104	45.38		15.0	%	54.18		4.5	27.1	%



	Square Feet (in thousands)	Average Rental Rate (per square foot)		% Rental Rate Increase		Leasing Costs ⁽¹⁾ (per square foot)		Free Rent (weighted average months)	Retention Rate
Office	411	$	44.53	8.0	%	$	88.74	10.3	48.0	%
Retail	255	29.00		17.7	%	13.26		1.4	68.6	%
Total	666	38.57		10.6	%	59.77		7.7	56.2	%



	2017			2018			2019			2020			2021			Thereafter			Total			Fair Value
(In thousands)
Unsecured fixed rate debt ⁽¹⁾
Principal	$	—		$	—		$	—		$	250,000		$	150,000		$	500,000		$	900,000		$	932,766
Interest payments	$	14,206		$	36,224		$	36,224		$	36,224		$	20,786		$	42,204		$	185,868
Interest rate on debt maturities	—		%	—		%	—		%	5.1		%	2.7		%	4.0		%	4.1		%
Unsecured variable rate debt
Principal	$	—		$	—		$	189,000		$	—		$	—		$	—		$	189,000		$	189,000
Variable interest rate on debt maturities	—		%	—		%	2.2		%	—		%	—		%	—		%	2.2		%
Mortgages
Principal amortization ⁽²⁾ (30 year schedule)	$	756		$	3,135		$	33,909		$	2,659		$	2,829		$	49,382		$	92,670		$	98,892
Interest payments	$	1,300		$	5,089		$	3,627		$	3,046		$	2,876		$	727		$	16,665
Weighted average interest rate on principal amortization	4.9		%	4.9		%	5.3		%	4.7		%	4.7		%	3.9		%	4.5		%



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased
July 1 - July 31, 2017	—	$	—	N/A	N/A
August 1 - August 31, 2017	—	—		N/A	N/A
September 1 - September 30, 2017	147	32.62		N/A	N/A
Total	147	32.62		N/A	N/A