Elme CommunitiesELME
Elme Communities Stock Compensation Disclosure
NOTE 12: SHARE-BASED COMPENSATION
Elme Communities maintained short-term and long-term incentive plans, each effective January 1, 2020, as amended, that allowed for cash and share-based awards to officers (“Prior Officer STIP” and “Officer LTIP”), respectively, and short-term and long-term incentive plans, that allowed for cash and share-based awards, respectively, to non-officer employees. Share-based awards were provided to officers and non-officer employees, as well as trustees, under the Elme Communities 2016 Omnibus Incentive Plan, as amended and restated effective May 30, 2024 (the “Omnibus Incentive Plan”). An amendment and restatement of the Omnibus Incentive Plan was approved by our Board in April 2024 and approved by our shareholders in May 2024 to, among other changes, increase the number of shares available to be issued by 2,900,000, from 2,400,000 shares to 5,300,000 shares (including shares issued pursuant to awards made under the Omnibus Incentive Plan prior to its amendment). The Omnibus Incentive Plan, as amended, allowed for awards in the form of restricted shares, restricted share units, options and other awards up to an aggregate of 5,300,000 shares over the ten-year period in which the plan is in effect. Restricted share units are converted into shares of our stock upon full vesting through the issuance of new shares. There were no options issued or outstanding as of December 31, 2025 and 2024.
Prior Officer STIP and Non-Officer STIP
Under the Prior Officer STIP all named executive officers had the opportunity to receive an annual cash bonus based on the achievement of certain performance measures that were established for each performance period. Each year, the Compensation Committee established the threshold, target and high performance goals for each performance measure, as well as the weighting attributable to each such performance measure, with the aggregate weighting for all such performance measures to total 100%. Such performance measures consisted of one or more financial performance measures and, if determined by the Compensation Committee, individual performance measures.
Upon or following completion of a performance period, the degree of achievement of each performance measure was determined by the Compensation Committee. The degree of achievement of any individual financial performance measures were determined by the Compensation Committee in its discretion with respect to the Chief Executive Officer, and by the Chief Executive Officer or other immediate supervisor in his or her discretion with respect to all other participants (subject to final approval by the Compensation Committee), and the Compensation Committee evaluated the degree of achievement of the individual performance measures on a scale of below 1 (below threshold), 1 (threshold), 2 (target) or 3 (high) or any fractional number between 1 and 3.
Each participant’s total award under the Prior Officer STIP with respect to a performance period was stated as a percentage of the participant’s annual base salary determined as of the first day of that performance period, which percentage depended upon the participant’s position and the degree of achievement of threshold, target, and high performance goals for the performance period. The percentages for the performance period beginning January 1, 2025 are as set forth in the table below:
| Threshold | Target | High | |||||||||
| President and Chief Executive Officer | 63% | 125% | 188% | ||||||||
Chief Operating Officer | 47% | 93% | 158% | ||||||||
| Chief Financial Officer | 41% | 75% | 133% | ||||||||
| Chief Information Officer | 35% | 65% | 115% | ||||||||
Chief Administrative Officer | 30% | 60% | 105% | ||||||||
Because the Portfolio Sale Transaction completed on November 12, 2025 met the criteria for a Change in Control event as defined in the Prior Officer STIP and under the Amended and Restated Short-Term Incentive Plans (for Non-Executive Officers
and Staff), the participants received prorated awards calculated based on the actual levels of achievement of the prorated performance goals as of the date of the Change in Control. Due to the Plan of Sale and Liquidation, the Prior Officer STIP has been terminated.
New Officer STIP
On January 21, 2026, the Board approved the Elme Communities Executive Officer Short-Term Incentive Plan, effective as of November 13, 2025 (the “New Officer STIP”), which provides for an award opportunity based on achievement of three metrics: (i) the value of the additional liquidating distributions to Elme’s shareholders, which will be 40% of the award opportunity, (ii) the timing of completion of the sales of Elme’s remaining assets, which will be 40% of the award opportunity, and (iii) performance measures in furtherance of implementing the Plan of Sale and Liquidation, consisting of efficient operation of Elme’s remaining assets, employee retention and successfully implementing the Plan of Sale and Liquidation, which will be 20% of the award opportunity. The performance period under the New Officer STIP runs from November 13, 2025 through the earlier of (i) November 13, 2026 and (ii) the date on which the actual levels of achievement of the additional liquidating distributions and timing metrics discussed above are otherwise determined by the Compensation Committee of the Board.
Each executive officer’s total award under the New Officer STIP with respect to the performance period is stated as a percentage of the executive officer’s annual base salary (subject to adjustment if the executive officer is promoted during the performance period, in which case the annual base salary shall be prorated for the portion of the performance period such executive officer had each base salary). The percentages of base salary by position are as set forth below:
| Threshold | Target | High | |||||||||
| President and Chief Executive Officer | 45% | 90% | 135% | ||||||||
| Executive Vice President | 37% | 75% | 120% | ||||||||
| Senior Vice President | 30% | 60% | 105% | ||||||||
Officer LTIP
Under the Officer LTIP all named executive officers had the opportunity to receive awards based on (i) the achievement of performance measures, which were established for each performance period, and (ii) continued employment with the Company. The aggregate weighting for the performance measures and the time-based measures, as determined by the Compensation Committee, totaled 100%. The performance measures consisted of one or more shareholder return measures and one or more strategic measures. The awards earned under the Officer LTIP, if any, were payable in our common shares of beneficial interest. Each participant’s total award under the Officer LTIP with respect to a performance period was stated as a percentage of the participant’s annual base salary determined as of the beginning of that performance period. The percentages for the performance period beginning January 1, 2025 are as set forth in the table below:
| Threshold | Target | High | |||||||||
| President and Chief Executive Officer | 198% | 275% | 440% | ||||||||
Chief Operating Officer | 133% | 190% | 280% | ||||||||
| Chief Financial Officer | 95% | 135% | 196% | ||||||||
| Chief Information Officer | 100% | 143% | 207% | ||||||||
Chief Administrative Officer | 70% | 100% | 145% | ||||||||
Any time-based awards under the Officer LTIP were subject to a three-year vesting schedule, with any award vesting in one-third increments on December 15 of each year of the applicable performance period if the participant remains employed by the Company on each of such dates. The Officer LTIP provided that following a performance period, 100% of any performance-based award will vest immediately upon grant.
Each year, the Compensation Committee established the threshold, target and high performance goals for each performance measure. Upon or following completion of a performance period, the degree of achievement of each performance measure was determined by the Compensation Committee in its discretion.
Because the Portfolio Sale Transaction completed on November 12, 2025 met the criteria for a Change in Control event as defined in the Officer LTIP, the participants received the shareholder return measure-based awards calculated based on the actual levels of achievement as of the date of the Change in Control. Due to the Plan of Sale and Liquidation, the Officer LTIP has been terminated.
We used a binomial model which employs the Monte Carlo method as of the grant date to determine the fair value of the Officer LTIP awards. For three-year performance periods commencing on or after January 1, 2025, on or after January 1, 2024, and on or after January 1, 2023, the market performance condition is based on total shareholder return relative to the FTSE Nareit Residential Index (60% weighting) and a defined population of peer companies (40% weighting).
The assumptions used to value the TSR portion of the officer LTIP awards were as follows:
2025 Awards | 2024 Awards | 2023 Awards | |||||||||||||||
Expected volatility (1) | 24.9 | % | 25.5 | % | 32.3 | % | |||||||||||
Risk-free interest rate (2) | 4.3 | % | 4.7 | % | 4.2 | % | |||||||||||
Expected term (3) | 3 years | 3 years | 3 years | ||||||||||||||
| Share price at grant date | $ | 15.23 | $ | 15.31 | $ | 19.04 | |||||||||||
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(1) Expected volatility based upon historical volatility of our daily closing share price.
(2) Risk-free interest rate based on U.S. treasury constant maturity bonds on the measurement date with a maturity equal to the market condition performance period.
(3) Expected term based on the market condition performance period.
The calculated grant date fair value as a percentage of base salary for the officers for the three-year performance period that commenced in 2025 ranged from approximately 50% to 154% for the 60% of the LTIP based on TSR relative to the FTSE Nareit Residential Index and from approximately 59% to 179% for the 40% of the LTIP based on TSR relative to a defined population of peer companies.
The calculated grant date fair value as a percentage of base salary for the officers for the three-year performance period that commenced in 2024 ranged from approximately 51% to 155% for the 60% of the LTIP based on TSR relative to the FTSE Nareit Residential Index and from approximately 64% to 195% for the 40% of the LTIP based on TSR relative to a defined population of peer companies.
The calculated grant date fair value as a percentage of base salary for the officers for the three-year performance period that commenced in 2023 ranged from approximately 27% to 137% for the 60% of the LTIP based on TSR relative to the FTSE Nareit Residential Index and from approximately 32% to 159% for the 40% of the LTIP based on TSR relative to a defined population of peer companies.
During 2022, our chief executive officer was granted a one-time equity award of 100,000 restricted shares. None of the restricted shares were scheduled to vest until the earlier of the fifth anniversary of the grant date or when our chief executive officer become retirement-eligible, at which time 100% of the restricted shares would vest, subject to Mr. McDermott's continued employment with Elme Communities until such vesting date. This share award vested as of November 12, 2025 due to the Change in Control (as defined in the Officer LTIP).
Non-Officer LTIP
Our non-executive officers and other employees earned restricted share unit awards under a long-term incentive plan for non-executive officers and staff based upon various percentages of their salaries and annual performance calculations. The restricted share unit awards vested ratably over three years beginning on the December 15 following the grant date based upon continued employment. We recognized compensation expense for these awards according to a graded vesting schedule over the three-year requisite service period. Because the Portfolio Sale Transaction completed on November 12, 2025 met the criteria for a Change in Control event as defined in the Amended and Restated Long-Term Incentive Plan (for Non-Executive Officers and Staff), participants received the share awards under such plan effective November 12, 2025.
Restricted share awards made to retirement-eligible employees fully vested on the grant date. Employees were considered retirement-eligible when they were both over the age of 55 and had been employed by Elme Communities for at least 20 years, or over the age of 65. We fully recognized compensation expense for such awards as of the grant date.
Trustee Awards
We awarded share-based compensation to our trustees in the form of restricted shares which vested immediately. The value of share-based compensation for each trustee was $100,000 for each of the three years ended December 31, 2025. While a trustee
serves on the Board, until a trustee owns an aggregate number of common shares the value of which must equal at least five times the annual cash retainer at the time of their election to the Board, the common shares received by trustees as compensation are restricted in transfer.
Total Compensation Expense
Total compensation expense recognized in the consolidated financial statements for each of the ten months ended October 31, 2025 and two years ended December 31, 2024 for all share-based awards was $5.4 million, $5.2 million and $5.5 million, respectively, net of capitalized share-based compensation expense of $0.1 million, $0.1 million and $0.1 million, respectively.
Restricted Share Awards with Performance and Service Conditions
The activity for the three years ended December 31, 2025 related to our restricted share awards, excluding those subject to market conditions and inclusive of trustee awards, was as follows:
| Shares | Weighted Average Grant Fair Value | ||||||||||
Unvested at December 31, 2022 | 242,369 | $ | 21.35 | ||||||||
| Granted | 410,928 | 18.40 | |||||||||
| Vested during year | (367,109) | 19.79 | |||||||||
| Forfeited | (28,453) | 20.85 | |||||||||
Unvested at December 31, 2023 | 257,735 | 18.89 | |||||||||
| Granted | 280,008 | 14.61 | |||||||||
| Vested during year | (237,433) | 17.13 | |||||||||
| Forfeited | (19,823) | 14.86 | |||||||||
Unvested at December 31, 2024 | 280,487 | 16.27 | |||||||||
| Granted | 1,202,847 | 16.32 | |||||||||
| Vested during year | (1,454,661) | 16.33 | |||||||||
| Forfeited | (28,673) | 16.35 | |||||||||
Unvested at December 31, 2025 | — | ||||||||||
The total fair value of share grants vested for each of the ten months ended October 31, 2025 and two years ended December 31, 2025 was $1.2 million, $4.1 million and $7.3 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.