Elme Communities (WRI) Risk Analysis

Since we have approved the Plan of Sale and Liquidation, the governing documents of certain of our institutional investors may prohibit them from holding our common shares and they may be forced to divest their ownership for our common shares. If our common shares are dropped from certain indexes, as they were from the Russell 2000 or the SmallCap 600 in January 2026, investors who invest in stocks included on such indexes may be forced to divest their ownership for our common shares. If either or both of these were to be the case, it would create downward pressure on the trading price of our common shares. If this were to occur, shareholders who sell common shares prior to our completion of the liquidation may receive less than shareholders who receive all liquidating distributions ultimately made.

Historically, extraordinary corporate actions such as the Portfolio Sale Transaction and Plan of Sale and Liquidation, and the actions and transactions contemplated thereby, sometimes lead to securities class action lawsuits being filed against the company taking such actions, which can delay or prevent altogether the completion of such actions. We may become involved in this type of litigation as a result of the shareholder votes on the Portfolio Sale Transaction and/or the Plan of Sale and Liquidation. In October 2025, two purported holders of the Company's common shares filed substantially similar complaints against the Company and its members of the Board in the Supreme Court of the State of New York, County of New York,alleging that the proxy statement negligently misrepresented or omitted material information in violation of New York common law and seeking, among other things, to enjoin or rescind the Portfolio Sale Transaction and the Plan of Sale and Liquidation, an award of damages if the Portfolio Sale Transaction and the Plan of Sale and Liquidation were consummated and an award of expenses and attorneys' fees. With respect to any lawsuits filed against us, the litigation costs may be expensive, and, even if we ultimately prevail, the process will divert our attention from the wind-down of the Company's business and affairs and termination of the Company's existence. If we were not to prevail in such a lawsuit, we cannot predict the amount of any damages for which we may be obligated and if any plaintiffs are successful in obtaining an injunction, it may prohibit us from conducting the wind-down and termination of the Company's existence under the Plan of Sale and Liquidation. If applicable, any such damages may be significant, may have a material adverse effect on our financial condition and may reduce, eliminate or delay the amounts available for distribution to our shareholders.

We intend to dispose of our assets, discharge, pay or set aside reserves for our liabilities, including contingent liabilities, and distribute to our shareholders any remaining assets pursuant to the Plan of Sale and Liquidation as soon as practicable. In the event that it should not be feasible, in the opinion of the Board, for the Company to pay, or adequately provide for, all of our debts and liabilities, or if the Board shall determine it is advisable, the Board may establish a liquidating entity to which the Company could distribute in kind its unsold assets. Any reserve fund or assets transferred to a liquidating entity established by us may not be adequate to cover any contingent expenses and liabilities. Under Maryland law, if we make distributions and fail to maintain an adequate reserve fund or fail to transfer adequate assets in a liquidating entity for payment of our contingent expenses and liabilities, each shareholder could be held liable for payment to our creditors of such amounts owed to creditors which we fail to pay. The liability of any shareholder would be limited to the amount of such liquidating distributions previously received by such shareholder from us or the liquidating entity. Accordingly, in such event, a shareholder could be required to return all such distributions received from the Company or the liquidating entity. If a shareholder has paid taxes on liquidating distributions previously received, a repayment of all or a portion of such amount could result in a shareholder incurring a net tax cost if the shareholder's repayment of an amount previously distributed does not cause a commensurate reduction in taxes payable. If we decide to establish a reserve fund or transfer assets to a liquidating entity to provide for any unknown or outstanding liabilities and expenses, it may delay or reduce distributions our shareholders would otherwise receive.

Our share price and trading volume have experienced significant volatility in the past, particularly following the payment of the initial special liquidating distribution, which was paid on January 7, 2026 to shareholders of record at the close of business on December 22, 2025, and may continue to do so in the future. A variety of factors may cause significant price and volume variations, including the factors discussed in this "Risk Factors" section of this Annual Report on Form 10-K. Additionally, broader fluctuations in equity markets or loss of investor confidence in a particular sector or geographic area could also affect the market for our securities, regardless of our actual operating performance. As a result of these fluctuations, investors in our shares may experience a decrease in the value of their shares. In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management's attention and resources.