$ELME provided a liquidation update yesterday and it was ugly. The largest remaining risk - namely that their largest assets, Riverside in Northern Virginia, falls out of contract - was crystallized. The company is re-marketing the property but given the uncertainty around timing and proceeds of a sale, they pulled their estimated liquidation range. In response, the shares plummeted, down ~25% in after hours trading.

Management’s handling of this is frustrating to say the least. They extended the inspection period for two weeks from June 4th to the 18th without notifying shareholders. This allowed the buyer - the Beitel Group - to terminate the contract without penalty on June 17th.

The positives coming out of their release are that Watkins Mills sold on June 10th and after a small price chip to $58m (from $59m), Bethesda along with the two DC properties remain under contract and are out of their inspection periods.

This leaves two big remaining variables to determine liquidation value from here: what Riverside will sell for (and when) and what the impact on net liquidation costs will be from this delay and mismanagement of the process (shareholder litigation).

We’ll see where the share price opens today but the last after hours print of $1.55 per share implies a valuation of ~$215m for Riverside (A ~25% discount to the previous $280m contract price, $175k per unit and a mid 9% cap rate). This keeps the net liquidation costs unchanged from the 2026 Q1 management.

It’s hard to judge where Riverside will end up. If the bid-ask spread following the inspection period had been just a couple of million, one has to imagine they would have agreed a price chip and proceeded. I don’t have a sense of where the underbidder(s) were on price. Thus it feels like the reduction in price required will be material. On the plus side, this is a stabilized, operating multifamily property and very financeable.

Thinking through a floor on pricing - ELME’s DC properties, which are older and in a worse market (DC vs. NoVa) are trading for a mid 8% cap (based on estimated trailing NOI). Applying this cap rate would be a price of ~$240m and ~$195k per unit. If I had to guess, I think a mid 7% cap rate / $220k per unit, which is ~$265m would be an attractive price to a buyer.

Thinking through net liquidation costs, Riverside NOI is ~$20m per annum and G&A expense in 2026 Q1 was $5m, which assuming no expense reductions, broadly cancel each other out. Assuming the properties under contract close as anticipated, the remaining debt balance would be ~$85m, which at current SOFR and spread of +275 bps (increased in May 2026) results in quarterly interest expense of ~$1.5m. Very finger in the air but assuming an additional quarter of interest expense and another $3.5m / +10% on other expenses gets to a $5m increase.

Putting this all together, my (low conviction) liquidation value range is $1.90 - $2.10 per share. As a result, while one part of me wants to blow out of this position and wash my hands of it, I think it’s worth holding on for at least another quarter to see if they’re able to find a buyer for Riverside.