Clipper Realty Inc . (NYSE: NYSE:) has introduced document working outcomes for the second quarter of 2024, reaching all-time excessive income, web working revenue (NOI), and adjusted funds from operations (AFFO). The corporate attributed these outcomes to strong residential exercise and robust rental demand, with occupancy charges hovering over 99%. The Pacific Home property in Brooklyn is now absolutely stabilized and leased at a promising 7% cap charge. Whereas normal and administrative bills noticed a slight enhance attributable to authorized charges, and curiosity bills rose with further borrowings, the corporate reported a lower in bills year-on-year and declared a dividend of $0.095 per share to be paid in August 2024.

Key Takeaways

• Clipper Realty studies document income, NOI, and AFFO for Q2 2024.
• Rental demand stays excessive with occupancy charges over 99%.
• The Pacific Home property in Brooklyn is absolutely leased at a 7% cap charge.
• Bills decreased by $1.3 million year-on-year, primarily because of the elimination of actual property taxes at Flatbush Gardens.
• The corporate introduced a dividend of $0.095 per share payable on August twenty second, 2024.
• Clipper Realty is exploring the sale of 10 West sixty fifth and refinancing choices for 1010 Pacific.

Firm Outlook

• Clipper Realty is targeted on working its portfolio and seizing progress alternatives.
• The corporate is contemplating the sale of properties to enhance money circulation and maximize portfolio efficiency.

Bearish Highlights

• There’s uncertainty concerning the longer term income circulation from 250 Livingston because it goes into an escrow account for the lender’s profit.
• Common and administrative bills have elevated barely attributable to greater authorized charges.
• Curiosity bills have risen due to further borrowings.

Bullish Highlights

• Sturdy residential exercise and excessive rental demand have led to document working outcomes.
• New leases are being signed at charges over 7% greater than prior rents.
• The corporate is actively growing new properties and has almost absolutely leased its present portfolio.

Misses

• The corporate is navigating potential dangers with the 250 Livingston Road property as town plans to vacate in August 2025.

Q&A Highlights

• Clipper Realty is negotiating a lease extension at 141 Livingston Road, with no formal discover from town of any intention to depart.
• Town is definitely in search of an extension for 141 Livingston Road, which might not require vital capital expenditures if granted.
• Refinancing choices for 1010 Pacific might be thought-about nearer to the mortgage’s maturity, with discussions to incorporate present lenders or Freddie Mac.

Clipper Realty Inc. stays dedicated to sustaining robust occupancy charges and exploring strategic choices to boost its portfolio and shareholder worth. The corporate expressed gratitude to name members and appears ahead to future discussions.

InvestingPro Insights

Clipper Realty Inc. (NYSE: CLPR) has demonstrated resilience with its document working outcomes, buoyed by robust residential exercise and a sturdy rental market. Listed here are some InvestingPro Insights that present a deeper understanding of the corporate’s monetary well being and market efficiency:

• Clipper Realty’s market capitalization stands at $182.72 million, reflecting the corporate’s dimension and market worth as of the second quarter of 2024. This metric is important for buyers to gauge the corporate’s scale within the aggressive actual property market.

• Regardless of not being worthwhile during the last twelve months, the corporate has a promising outlook with web revenue anticipated to develop this yr, in keeping with an InvestingPro Tip. This potential turnaround may very well be a major driver for future monetary stability and investor confidence.

• The corporate’s dividend yield is notably excessive at 8.74%, which is especially enticing to income-focused buyers. That is in keeping with the InvestingPro Tip highlighting that Clipper Realty pays a major dividend to shareholders, reinforcing the corporate’s dedication to returning worth to its buyers.

InvestingPro provides further insights and ideas for buyers seeking to delve deeper into Clipper Realty’s financials and market positioning. As an illustration, there are at the moment 7 extra InvestingPro Ideas obtainable that might present additional readability on the corporate’s efficiency and outlook, accessible via the devoted InvestingPro product web page for Clipper Realty at https://www.investing.com/professional/CLPR.

Full transcript – Clipper Realty Inc (CLPR) Q2 2024:

Operator: Good day, and welcome to the Clipper Realty Quarterly Earnings Name. Right now, all members have been positioned on a listen-only mode and the ground might be open for questions and remark after the presentation. It’s now my pleasure to show the ground over to your host, Larry Kreider. Sir, the ground is yours.

Larry Kreider: Thanks, John. Good afternoon and thanks for becoming a member of us for the second quarter 2024 Clipper Realty Inc., earnings convention name. Taking part with me on in the present day’s name are David Bistricer, Co-Chairman of the Board and Chief Govt Officer; and JJ Bistricer, Chief Working Officer. Please bear in mind the statements made throughout the name that aren’t historic could also be deemed forward-looking statements and precise outcomes could differ materially from these indicated by such forward-looking statements. These statements are topic to quite a few dangers and uncertainties, together with these disclosed within the firm’s 2023 Annual Report on Kind 10-Okay, which is accessible at www.sec.gov and our web site. As a reminder, the forward-looking statements communicate solely as of the date of this name, August 1, 2024, and the corporate undertakes no obligation to replace them. Throughout this name, administration could seek advice from sure non-GAAP monetary measures together with adjusted funds from operations or AFFO; adjusted earnings earlier than curiosity, taxes, depreciation and amortization or adjusted EBITDA; and web working revenue or NOI. Please see our press release supplemental monetary info in Kind 10-Q posted in the present day for a reconciliation of those non-GAAP monetary measures with probably the most immediately comparable GAAP monetary measures. With that, I’ll now flip the decision over to our Co-Chairman and CEO, David Bistricer.

David Bistricer: Thanks, Larry. Good afternoon and welcome to the second quarter of 2024 earnings name for Clipper Realty. I’ll present an replace on our enterprise efficiency and a few new developments, after which JJ will talk about property-level exercise, together with leasing efficiency, and Larry will communicate to our quarterly monetary efficiency. We’ll then take your questions. I am happy to report that we’re reporting document working outcomes, together with document income, web working revenue, and AFFO, based mostly on wonderful residential exercise. Rental demand continues to be robust in any respect our properties. Total rents are typically at all-time highs and proceed to extend and we’re almost absolutely leased. Within the second quarter, new leases exceeded prior rents by over 7% and crossed your entire market-based portfolio led by the Tribeca home property in Manhattan and the Clover Home property in Brooklyn. There have been new leases had been over $84 and $90 per sq. foot, and total hire ranges had been $81 and $84 per sq. foot, all in comparison with the $63 per sq. foot on the finish of December 2021. The outcomes of stabilized hire property at Flatbush Gardens, are additionally robust. Since final July, we’ve operated beneath the 40-year working in keeping with the Article 11 of the Non-public Housing Finance Regulation for New York Metropolis Housing Preservation Improvement, which eradicated actual property taxes on the property and supplied for enhanced rental revenues, rental restoration use for assisted tenants, that are starting to obtain significant quantities. Consequently, we’re aggressively fulfilling our commitments for property enhancements and help in greater wages. Operationally, we’re more than happy with our new ground-up improvement at Pacific Home, at 1010 Pacific’s in Brooklyn, after a yr of full operation, it is absolutely stabilized and is contributing to money circulation. It’s now 100% leased and yielding the projected 7% cap charge as projected. On the close by 953 Dean Road ground-up development is continuing forward of schedule. We accomplished the superstructure forward of schedule. Anticipate to finish development in time for 2025 leasing season, using the $123 million development mortgage we entered into final yr. We purchased the land in 2021-’22 on which to construct a pleasant story, absolutely amenitized residential complicated with 160,000 residential sq. ft, 240 whole items, 77 free market and 30% inexpensive, 8500 business rental sq. ft. At 250 Livingston Road, the place as we acquired the circulation of New York Metropolis notified us of their intention to vacate in August of 2025, we’re in search of options and pursuing up to alternatives supported by money flows from different properties. After all, we are going to preserve knowledgeable as of our progress recurrently. At our different New York Metropolis workplace property, 141 Livingston Road, we’re actively negotiating a five-year extension to our present lease that expires in December 25, however we can’t guarantee that this might be accomplished favorably. Additionally, we’ve begun occupied with recycling properties at our portfolio to maximise efficiency and enhance money circulation. As such, we’ve begun preliminary advertising actions for a few of our different properties, together with 10 West 62 Road, whereas probably leading to some loss in comparison with guide worth will enable us to attain higher total returns going ahead. We’ll announce any definitive preparations promptly as they come up. As for the persevering with excessive rate of interest atmosphere, we imagine the upper charges make for greater tenant demand for our rental product versus the acquisition possibility. We’re additionally butchered by the comparatively lengthy period of debt at our working properties. Our working debt is 91% fastened and common charge of three.87% and common period of 4.9 years is non-recourse, topic to restricted requirements of automotive quantities, and isn’t cross-collarized. We finance our properties on an asset-based foundation and never cross-collarized. With regard to our second quarter outcomes, we’re reporting document quarterly income of $37.3 million NOI of $21.1 million. At this time, we’ve a vote of $7.1 million because of a powerful leasing and value reductions I simply talked about. These outcomes characterize enhancements over the second quarter final yr as JJ and I’ll additional element. I’ll now flip the decision over to JJ who supplied an replace on operation.

JJ Bistricer: Thanks. I am happy to report that our residential leasing in any respect our properties may be very robust and continues to enhance. On the finish of the second quarter, our residential properties had been over 99% leased and rents had been at document ranges and nonetheless recording will increase over earlier ranges. Total, new lease and renewal rental charges within the second quarter exceeded earlier hire by over 7% at our residential properties. We anticipate leasing to stay robust within the foreseeable future as demand stays excessive and the general rental housing provide stays constrained as extensively publicized. As of the tip of June, Tribeca Home had leased occupancy of almost 100% hire per sq. foot of $81 and new hire of $84 per sq. foot. The Clover Home property had leased occupancy of 97% common charges of $84 a foot and new leases of $90 a foot. Our lately accomplished Pacific Home property consisting of a mix of free market rent-stabilized tenants had leased occupancy of 97%, free market rents of $76 per sq. foot, and new free market rents of $76 per sq. foot. This property is now absolutely stabilized with working money flows reaching the projected 7% cap charge within the authentic underwriting. Our different residential properties at 10 West sixty fifth Road, Aspen, and 250 Livingston Road proceed to carry out at document ranges with common lease occupancy above 98% and new rents and renewals 11% greater in comparison with earlier leases. Lastly, on the giant Flatbush Gardens property, we proceed to be happy with our efficiency working beneath the brand new Article 11 settlement made with the Housing Preservation Division of New York Metropolis in June of final yr. Utilizing the total abatement of actual property taxes starting final July, we’re finishing the capital tasks we dedicated, aggressively coping with upkeep points and putting previously homeless residents. We now have begun to meaningfully get hold of the improved reimbursement beneath Part 610 of the Non-public Housing Finance Regulation for tenants receiving help as we fill vacancies with previously homeless residents and renewal leases with assisted tenants. These advantages have amounted to just about $500,000 to date this yr and may steadily enhance over the subsequent couple of years and facilitate worthwhile enhancements to the property. We’re additionally getting will increase for non-assisted tenants the place will increase have been permitted beneath the Lease Pointers Board for the final couple of years at a 3% degree every year. Consequently, along with the Part 610 advantages for assisted tenants, total common rents for the property have risen to $28.10 per sq. foot on the finish of the quarter versus $26.38 on the finish of the second quarter final yr. Lease collections throughout our portfolio stay robust. The general assortment charge within the second quarter on all residential properties was 98%. Collections at Flatbush Gardens have been at traditionally excessive 97% ranges for the final two quarters with out the good thing about the ERAP funds as in prior years. We’re responsibly and steadily working via the courtroom system to attenuate arrears. Trying forward, we stay centered on optimizing occupancy, pricing, and expense throughout the enterprise, expeditiously finishing our improvement tasks and absolutely implementing the Article 11 transaction to greatest place ourselves for progress. I’ll now flip the decision over to Larry who will talk about our monetary outcomes.

Larry Kreider: Thanks, JJ. For the second quarter, we achieved document outcomes on three measures necessary to us. Revenues elevated to $37.3 million from $34.5 million final yr, a rise of $2.8 million or 8.1%. NOI elevated to $21.1 million from $19.2 million final yr, a rise of $1.9 million or 9.9% and AFFO elevated to $7.1 million from $5.5 million, a rise of $1.6 million or 29%. For the second quarter, residential income elevated to $27.7 million by $2.1 million. This enhance was because of the robust leasing for all properties as beforehand mentioned. Occupancy and rental charges had been at all-time highs within the quarter. We additional benefited within the quarter from $400,000 of Part 610 rents, which are actually starting to meaningfully contribute. We anticipate this income supply to extend steadily over the subsequent few years. Industrial income was flat within the quarter in comparison with final yr. On the expense facet, key year-over-year modifications quarter-on-quarter had been as follows: property working bills elevated by $2.2 million year-on-year, $1.8 million at Flatbush Gardens working inside the Article 11 settlement to satisfy so-called prevailing wage necessities to refurbish items for our new previously homeless residents and to give attention to normal repairs and upkeep. Our utility fuel expense additionally elevated considerably within the quarter from an underestimate within the first quarter. We anticipate bills for refurbishment and repairs and upkeep bills to lower over time as we obtain the advantages of our capital spending. Actual property taxes and insurance coverage decreased by $1.3 million within the second quarter year-on-year attributable to $1.8 million from the elimination of actual property taxes at Flatbush Gardens, partially off of a $400,000 for the routine will increase in actual property taxes on the different properties and $100,000 for insurance coverage value will increase. Common and administrative bills elevated barely by $63,000 within the second quarter year-on-year primarily attributable to greater authorized charges. Curiosity bills elevated by $407,000 within the second quarter yr on yr because of the further $20 million of borrowings at 1010 Pacific Road within the third quarter final yr. With regard to our steadiness sheet, we’ve $20.3 million of unrestricted money and $16.5 million of restricted money. Within the second quarter, we had no new debt exercise aside from attracts beneath the Dean Road property development mortgage, which closed within the third quarter of 2023. At this time we’re asserting a dividend of $0.095 per share for the second quarter the identical quantity as final quarter. The dividend might be paid on August twenty second, 2024 to shareholders of document on August fifteenth, 2024. Let me now flip the decision again to David for concluding remarks.

David Bistricer: Thanks, Larry. We stay centered on formally working our portfolio. We stay up for the present working enhancements to proceed to 2024 and ’25. We stay up for optimizing Flatbush Gardens’ Article 11 transaction on 953 Road developments and different progress alternatives. Managing the New York Metropolis leasing points at Livingston Road properties and to capitalizing on different potentialities that will current themselves. I might now wish to open the road for questions.

Operator: Thanks. The ground is now open for questions. [Operator Instructions]. And the primary query comes from Buck Horne with Raymond James. Please proceed.

Buck Horne: Hello, good afternoon, guys. Simply sort of need to begin with the workplace properties and sort of the scenario there with the leasing association or I assume with the notices supplied by the Metropolis of New York there that there. Possibly, begin with 250 Livingston, is my understanding that the — appropriate me if I am mistaken, if the income and the money flows from 250 Livingston are these going immediately into an escrow account for the lender’s profit at this?

David Bistricer: No, no, not on the closing plan.

Buck Horne: Not on the closing time. Okay. I am sorry, I could not hear that. Is there a degree at which if that leases, I imply — nicely, is there a threat on the revenues from that constructing east to circulation to the corporate?

A – David Bistrice: Sure.

Buck Horne: Okay. All proper. And is there any discover of — and I do know you are within the technique of negotiating or negotiating that at the very least at 141 Livingston, however that cities already given discover at 250 that they are leaving? Have they supplied any formal discover of their intention to depart 141 at this level?

David Bistricer: Larry?

Larry Kreider: Effectively, no, town — nicely, possibly JJ, I will take this one.

JJ Bistricer: Sure, I will tackle this. Quite the opposite, they’re really on the lookout for an extension. So when the midst of negotiating an extension with them, that is what we talked about within the name that there is a dialog across the five-year extension.

Buck Horne: Okay. If there may be an extension, my understanding is that constructing could require some vital upgrades or CapEx to refurbish it for any potential new leasing or extension or a brand new tenant. What sort of CapEx necessities do you suppose can be wanted to increase that lease?

JJ Bistricer: The extension that town is on the lookout for just isn’t a CapEx sort of extension. It is just about as is.

Buck Horne: Okay. And by way of the thought course of round advertising, 10 West sixty fifth at this level, I assume, what’s the must promote that property at this level? Are you seeking to increase liquidity for every other explicit causes?

David Bistricer: There could be some higher alternatives for the worth in that property that we may obtain by promoting it. So one thing we’re taking a look at proper now. So we’re testing the market to see what sort of a price we’d be capable to obtain. And so a number of approaches. As soon as that factor is crystallized, clearly, we’ll come again and invite the market at that. Proper now, it is simply within the preliminary levels of testing the market.

Buck Horne: Okay. And is there any progress or ideas on phrases of extending or refinancing the mortgage on 1010 Pacific? I imagine my notes are appropriate, that the mortgage is coming due in a couple of yr’s time. Any ideas on refinancing 1010 Pacific?

David Bistricer: 1010 Pacific, I imply, when the mortgage is getting a bit bit nearer to maturity, clearly we might take into consideration refinancing it and seeing what ranges of curiosity can be found at the moment however I might say Freddie Mac or Freddie could mortgage or with present lenders is one thing that we are going to take a look at a bit afterward. As we do anticipate that the general rental markets will repair because the fixed-term mortgages are about to lower as is famous by the Fed.

Buck Horne: All proper. Thanks, guys. Good luck.

David Bistricer: Thanks.

Larry Kreider: Thanks.

Operator: Okay. We now have no additional questions in queue. I might like to show the ground again to administration for any closing remarks.

David Bistricer: Thanks for becoming a member of us in the present day and we stay up for talking with you once more quickly. Good evening.

Operator: Thanks, girls and gents. This does conclude in the present day’s convention name. It’s possible you’ll disconnect your telephone traces at the moment and have a beautiful day. Thanks to your participation.

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