CLPR

Good day, and welcome to the Clipper Realty Earnings Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Lawrence Sava, Corporate Controller at Clipper Realty. Sir, the floor is yours.

Good afternoon, thank you for joining us for the first quarter 2026 Clipper Realty Inc. Earnings Conference Call. Participating with me on today's call are David Bistricer, Co-Chairman of the Board and Chief Executive Officer; JJ Bistricer, Chief Operating Officer; and Lawrence Kreider, Chief Financial Officer. Please be aware that statements made during the call that are not historical may be deemed forward-looking statements, and actual results may differ materially from those indicated by such forward-looking statements. These statements are subject to numerous risks and uncertainties, including those disclosed in the company's 2025 annual report on Form 10-K and 2026 first quarter report on Form 10-Q, just filed today, which is accessible at www.sec.gov and on our website.

As a reminder, the forward-looking statements speak only as of the date of this call, May 14th, 2026, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including adjusted funds from operations or AFFO, adjusted earnings before interest, taxes, depreciation, and amortization, or adjusted EBITDA, and net operating income, or NOI. Please see our press release, supplemental financial information, and Form 10-Q posted today for a reconciliation of these non-GAAP financial measures with most directly comparable GAAP financial measures. With that, I will now turn the call over to our Co-Chairman and CEO, David Bistricer.

Thank you, Lawrence Kreider. Good afternoon, and welcome to the first quarter 2026 earnings call for Clipper Realty. I will provide an update of our business performance and some new developments, after which JJ Bistricer will discuss property level activity, including leasing performance, and Lawrence Kreider will speak to our quarterly financial performance. We will take your questions. I am pleased to report that our residential properties continue to perform very well due to the continued high residential rental demand, generating excellent cash flow. Overall rents are generally at all-time highs and continue to increase, and we are nearly fully leased. In the first quarter, new free market leases exceeded prior rents by over 7%, generally consistent with last quarter across the entire portfolio, as JJ Bistricer will detail. We are also in the third quarter of the initial lease up at our Prospect House development, 953 Dean Street.

We bought the property online in August, on time and on budget, having placed a bridge loan last quarter that will provide funds through stabilization. We are presently fully leased with free market rents of about $78 per foot. This project, excuse me, was a ground-up development in Brooklyn, where we bought the land in 2021 and built a nine-story fully amenitized residential building with 160,000 residential rentable square feet, 240 units, 70% of which are free market and 30% are affordable, 31 parking spaces and 19,000 commercial rental square feet.

At 250 Livingston Street, after New York City vacated mid-August in 2025, and as more fully described in the 10-Q press release, we notified the lender that we do not intend to support the property's ongoing operations, and debt service had ceased making payments of interest in real estate taxes. In May 26, we began receiving reimbursement of expenses paid by us from the lender. We are also discussing a consent and cooperation agreement with the lender to sell the property loan, although there can be no assurance an agreement will be finalized. I will now call on JJ to take over this call.

Thank you. I'm pleased to report that residential leasing at all our stabilized properties is very strong, and they are 99% leased overall. Rents are at record levels and continuing to increase. Overall, new rental rates at residential free market properties in the first quarter exceeded previous rents by 7% and renewals by 5%. We expect demand for our residential leasing product to remain strong in the foreseeable future as the overall rental housing supply in New York City remains constrained and new development discouraged. Our residential free market rents are now at record highs. In the first quarter, Tribeca House had lease occupancy of 99%, overall rent per foot of $90 per foot, and new rents at $92 per foot.

The Clover House property had occupancy of 99%, average overall rents of $90 per foot, and new leases at $95 per foot. Our recently completed Pacific House property, consisting of a blend of free market and rent-stabilized tenants, had lease occupancy of 98% and free market rents of $66 per foot on new leases. Our Aspen property continues to perform at record levels with average occupancy of above 98% and new rents 8% higher compared to previous leases. We have nearly completed leasing at the newly completed Prospect House ground up development at 953 Dean Street with free market rents at $78 per foot. Rent collections versus billings across our portfolio remain strong. The overall collection rate in the 1st quarter for all free market residential properties was approximately 100%.

Looking ahead, we remain focused on optimizing occupancy, pricing, and expenses across the business to best position ourselves for growth. I will now turn the call over to Larry, who will discuss our financial results.

Thank you, JJ. Our results this quarter versus last year reflect the effects of four items worthy of note, namely the termination of the New York City lease at the 250 Livingston Street office property on August 23, 2025. The initial lease up of results at Prospect House placed in service, August 1, 2025, reflecting excess of expenses over limited but growing revenue. The absence of results from the 10 West 65th Street property sold in May 2025, and the settlement cost of litigation regarding historical payroll practices at all of our properties. I refer to the remaining properties as the ongoing stabilized properties. Overall, we had revenues of $38.1 million versus $39.4 million last year, a decrease of $1.3 million.

NOI of $20.1 million this quarter versus $21.7 million last year, a decrease of $1.6 million and AFFO of $2.3 million this quarter versus $8 million last year, a decrease of $5.7 million. The following details these results. For revenue, residential properties reflect a $2.7 million or 9% increase due to the excellent residential leasing, as JJ noted above. This consisted of a $2 million increase from ongoing stabilized residential properties, a $1.7 million increase from the third full quarter of initial leasing at the Prospect House property, less a $1.1 million decrease from the absence of the 10 West 65th Street property sold in May of 2025.

For office properties, re-revenues reflect a $4 million decrease, consisting of a $4.2 million decrease from the New York City lease termination at 250 Livingston Street, partially offset by a $0.2 million increase from new retail leases at the Tribeca House and Aspen properties. For NOI, the $1.6 million NOI decrease reflects a $1.8 million or 10% increase from ongoing stabilized properties, a $1.3 million increase from the inclusion of Prospect House this quarter, less a $600,000 decrease from the absence of the 10 West 65th Street property sold in May, and a $5.8 million decrease from the New York City lease termination at 250 Livingston Street.

For AFFO, the $5.8 million AFFO decrease reflects a $1.2 million or 18% increase from ongoing residential properties, a $1.2 million decrease from the inclusion of Prospect House due to full expenses as it completes lease up, and a $0.1 million increase from the absence of the 10 West 65th Street property sold in May, finally, a $5.8 million decrease from the 250 Livingston Street property, resulting from the New York City lease termination. With regard to our balance sheet, we have $26.1 million of unrestricted cash and $28.6 million of restricted cash at the end of the quarter.

As of the end of the quarter, our operating debt is 89% fixed at an average rate of 3.87% and an average duration of 3.4 years. Our debt instruments are non-recourse, subject to limited standard carve-outs and not cross-collateralized. We finance our portfolio on an asset by asset basis. Finally, today, we are announcing a dividend of $0.095 per share for the first quarter, the same amount as last quarter. The dividend will be paid on June 4, 2026 to shareholders of record on May 26, 2026. Let me now turn the call back to David for concluding remarks.

Thank you, Lawrence. We remain focused on efficiently operating the portfolio. We look forward to full stabilization of the Prospect House property, resolving the 250 Livingston Street capitalization, and all possibilities that may present themselves. I would now like to open the line for questions.

Thank you. At this time, we'll be conducting a question and answer session. I f you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if litsening on speakerphone to provide optimum quality. Once again, please press star one on your phone at this time if you wish to ask a question, and please hold while we poll for questions. The first question today is coming from Buck Horne from Raymond James. Buck, your line is live.

Hey, good afternoon, guys. Just a quick question on Flatbush Gardens, if you could speak to that property for a few minutes. Just thinking of operationally, how things are going in terms of being able to navigate the potential for the, I guess the, I don't know, the Rent Freeze Act that could be in place going forward and/or funding the CapEx for that property in the quarters ahead. I guess I'm also thinking ahead lastly to any possibility for refinancing the mortgage on Flatbush ahead of the interest rate reset in 2027. Any comments would be helpful there. Thank you.

Thank you for your question. I think the property is performing as planned. A lot of planning went into that Article XI that we have there, and it's basically doing as it's supposed to do. We will be looking at all possibilities of refinancing. It's got a ways to go yet, obviously we will look at what the possibilities are, as soon as we come to some kind of a conclusion, we'll let you know, obviously.

Yeah. Buck, I might add, you could look to our supplemental and you'll see, you know, our net operating income. That would give you a sense of how the property is doing, which is pretty well.

Okay. One quick follow-up. It appears there's still some interest in default fees owed on related to 250 Livingston, so I believe it's in the ballpark of $7.2 million. Are you planning on paying that cash out over the next quarter or two, or are there any additional fees to be aware of?

Well, no, I think we as we said, we indicated to the bank that we were no longer funding the operation, and we're not paying any interest right now, including default fees. We're as we said, we're negotiating a consent and cooperation agreement in connection with potentially selling the debt.

Okay, thank you.

Right now, there has been no cash paid out on that.

Gotcha. All right, thanks, guys.

Thank you.

Thank you. Once again, it's star one if you have any questions at this time. There were no other questions at this time. I'd now like to hand the call over to David Bistricer, CEO at Clipper Realty, for closing remarks.

Thank you for joining us today. We look forward to speaking with you again in the future.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.

Greetings, and welcome to the Clipper Realty Q4 Earnings Call. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, Lawrence Sava, Corporate Controller. Sir, the floor is yours.

Good afternoon, and thank you for joining us for the Fourth Quarter 2025 Clipper Realty Inc. Earnings Conference Call. Participating with me on today's call are David Bistricer, Co-Chairman of the Board and Chief Executive Officer; J.J. Bistricer, Chief Operating Officer; and Larry Kreider, Chief Financial Officer. Please be aware that statements made during the call that are not historical may be deemed forward-looking statements, and actual results may differ materially from those indicated by such forward-looking statements. These statements are subject to numerous risks and uncertainties, including those disclosed in the company's 2025 annual report on Form 10-K just filed today, which is accessible at www.sec.gov and our website. As a reminder, the forward-looking statements speak only as of the date of this call, February 26, 2026, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including adjusted funds from operations, or AFFO, adjusted earnings before interest, taxes, depreciation and amortization or adjusted EBITDA and net operating income or NOI. Please see our press release, supplemental financial information and Form 10-K posted today for a reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will turn the call over to our Co-Chairman and CEO, David Bistricer.

Thank you, Lawrence. Good afternoon, and welcome to the Fourth Quarter 2025 Earnings Call for Clipper Realty. I will provide an update of our business performance and some developments, after which J.J. will discuss property level activity, including leasing performance and Larry will speak to our quarterly financial performance. We will then take your questions. I'm pleased to report that our residential properties continue to perform very well due to continued high residential rental demand, generating excellent cash flow. Overall rents are generally at all-time highs and are continuing to increase, and we are nearly fully leased. In the fourth quarter, new leases exceeded prior rents by nearly 13%, generally consistent with last quarter across the entire portfolio, as J.J. will detail. We are also in the second quarter of initial lease-up at our Prospect House development at 953 Dean Street. We brought the property online in August on time and on budget and replaced the bridge loan last quarter, and it will provide funds through stabilization. We are presently approximately 78% leased with free market rents and about $85 a foot. This project was the ground-up development in Brooklyn, where we brought the land in 2021 and '22 and built a 9-story fully amenitized residential building with 160,000 residential rentable square feet, 240 units, 70% free market and 30% are affordable, 57 parking spaces and 19,000 commercial rental square feet. As to the office properties, we have settled the lender claims at 141 Livingston Street and obtained lender approval for a 5-year lease extension with the principal tenant, New York City, all as previously announced. At 250 Livingston Street, where New York City vacated mid-August, as previously disclosed, we notified the lender we did not intend to support the property's ongoing operations. And subsequent to the New York City lease termination ceased making payments of interest and real estate taxes and applied for reimbursement of expenses recurrent since then. Furthermore, we may not fund these expenses at the conclusion of the distribution discussions. We have begun to restructure the property debt, although we cannot assure that this will be the case. I will now turn over the call to J.J. to provide an update on operations.

Thank you. I am pleased to report that residential leasing at all our stabilized properties is very strong, and they are 99% leased overall. Rents are at record levels and continuing to increase over previous levels. Overall, new rental rate at residential properties in the fourth quarter exceeded previous rents by over 13% and renewals by 7%. We expect demand for our residential leasing product to remain strong in the foreseeable future and the overall rental housing supply in New York City remains constrained and new development discouraged. All our residential rents are now at record highs. In the fourth quarter, Tribeca House had leased occupancy of 99% overall, rent per foot of $89 and new rents at $95 per foot. The Clover House property had occupancy of 96%, average overall rents of $90 a foot and new leases at $95 a foot. Our fully stabilized [ Labgegards ] property had overall leased occupancy of 98%, average overall rents from all sources, including those under Article 11 agreement with New York City of $32 per foot and new leases of $54 per foot as we fulfill all our leasing commitments for assisted tenants and make required capital improvements. Our recently completed Pacific House property consisting of a blend of free market and rent-stabilized tenants had leased occupancy of 96% and free market rents of $76 per foot on new leases. Our Aspen property continues to perform at record levels with average occupancy above 98% and new rents and renewals 15% higher compared to previous leases. We have begun leasing at the newly completed Prospect House ground-up development at 953 Dean Street, which is now 78% leased with free markets at $85 a foot. Rent collections across our portfolio remains strong. The overall collection rate in the fourth quarter for all residential properties was approximately 98%, including Flatbush Gardens at 98% as we steadily work through the legal system to minimize arrears. Looking ahead, we remain focused on optimizing occupancy, pricing and expenses across the business to best position ourselves for growth. I will now turn the call over to Larry, who will discuss our financial results.

Thank you, J.J. Our results this quarter versus last year reflect 3 unusual items, namely the termination of the New York City lease at the 250 Livingston Street office property on August 23, 2025, the initial lease-up results at Prospect House placed in service in August, reflecting excess of expenses over limited but growing revenue and the absence of results from the 10 West 65th Street property, which we sold in May 2025. I refer to the remaining properties as the "ongoing properties." We had revenues of $37.1 million versus $38.0 million last year, a decrease of $0.9 million, NOI of $20.7 million this quarter versus $22.6 million last year, a decrease of $1.9 million and AFFO of $1.7 million this quarter versus $8.1 million last year, a decrease of $6.4 million. The following details these results. For revenue, revenues reflect a $2.7 million or 9% increase from residential properties due to the excellent residential leasing J.J. and David noted above. This consisted of $2.2 million increase on the ongoing stabilized residential properties, a $1.5 million increase from the second full quarter of initial lease-up at the Prospect House property, partially offset by a $1 million decrease from the absence of the 10 West 65th Street property sold in May. The residential property increase was more than offset by a $4.0 million decrease from the New York City lease termination at the 250 Livingston Street property, partially offset by a $0.3 million increase due to new retail leases at the Tribeca House and Aspen properties. For NOI, the $1.7 million NOI decrease reflects a $1.4 million or 7% increase from ongoing stabilized residential properties, a $1.2 million increase from the inclusion of Prospect House this quarter partially offset by a $0.1 million decrease from the absence of the 10 West 65th Street property sold in May. This overall residential increase was more than offset by a $3.8 million decrease from the New York City lease termination at 250 Livingston Street. And as for AFFO, the $6.4 million AFFO decrease reflects for residential properties, a $0.6 million or 10% increase from ongoing residential properties, a $1.2 million decrease from the inclusion of Prospect House due to full expenses and partial leasing and a $0.2 million increase from the absence of the 10 West 65th Street property sold in May. These residential properties results are more than offset by a $6.1 million decrease from the 250 Livingston 3 property New York City termination and with full expense accrual. With regard to our balance sheet, we have $30.8 million of unrestricted cash and $27.3 million of restricted cash at the end of the quarter. As of the end of the quarter, our operating debt is 89% fixed at an average rate of 3.87% and average duration of 3.7 years. Our debt instruments are nonrecourse, subject to limited standard carve-outs and not cross-collateralized. We finance our portfolio on an asset-by-asset basis. Today, we are announcing a dividend of $0.095 per share for the fourth quarter, the same amount as last quarter. The dividend will be paid on March 19, 2026, to shareholders of record on March 12, [ 2096 ]. Let me now turn the call back to David for concluding remarks.

Thank you. We remain focused on efficiently operating our portfolio. We look forward to full lease-up of prospect development, resolving in 250 Livingston Street and capitalizing on other possibilities that may present themselves. I would now like to open the line for questions.

[Operator Instructions]. There are currently no questions in the queue. I would like to turn the floor back to management for closing remarks.

Thank you for joining us today. We look forward to speaking with you again at the next quarterly earnings call.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.