Clipper Realty Inc. Announces Third Quarter 2024 Results

NEW YORK--(BUSINESS WIRE)--Clipper Realty Inc. (NYSE: CLPR) (the "Company"), a leading owner and operator of multifamily residential and commercial properties in the New York metropolitan area, today announced financial and operating results for the three months ended September 30, 2024.

Highlights for the Three Months Ended September 30, 2024

• Record quarterly revenues of $37.6 million for the third quarter of 2024
• Quarterly income from operations of $10.8 million for the third quarter of 2024
• Record net operating income ("NOI")1 of $21.8 million for the third quarter of 2024
• Quarterly net loss of $1.1 million for the third quarter of 2024
• Record adjusted funds from operations ("AFFO")1 of $7.8 million for the third quarter of 2024
• Declared a dividend of $0.095 per share for the third quarter of 2024

David Bistricer, Co-Chairman, and Chief Executive Officer, commented,

"The Company continued to grow its revenue, NOI and AFFO in the third quarter of 2024, producing record results for all these metrics on the basis of our very strong residential leasing. We continue to have high occupancy and good renter demand in our buildings. For all our properties, new leases exceeded previous rents by nearly 10% and renewals by nearly 6%. At Flatbush Gardens, as a result of the Article 11 agreement with New York City, we are continuing to increase enhanced rental recoveries under Section 610 as we continue to make the committed capital improvements and other improvements in the property. At our 250 Livingston Street property, where we previously disclosed New York City's notification of its intention to vacate in late August 2025, we continue to actively seek solutions and pursue opportunities. At our nearby 141 Livingston Street property, we are in active discussions for a lease renewal. Our Dean Street new development continues to progress ahead of schedule, and we are confident of an on-time completion next year to capture the 2025 leasing season. Lastly, we have begun thinking about recycling properties in our portfolio to maximize performance and improve cash flow. As such, we are continuing marketing activities for some of our properties, including our 10W 65^th Street property, which, while potentially resulting in some loss compared to book value, would allow us to achieve better overall returns going forward. We will announce any definitive arrangements promptly as they arise."

Financial Results for the Three Months Ended September 30, 2024

For the third quarter of 2024, revenues increased by $2.4 million, or 6.8%, to $37.6 million as compared to revenue of $35.2 million during the third quarter of 2023. Residential revenue increased by $2.3 million, or 9.2%, driven by higher rental rates at all our residential properties and higher occupancy partially offset increased bad debt expense at the Flatbush Gardens property. Commercial income increased by $0.1 million, or 0.9%, in the third quarter of 2024 due to higher escalation income at our office properties.

For the third quarter of 2024, net loss was $1.1 million, or $0.05 per share compared to net loss of $2.3 million, or $0.09 per share, for the third quarter of 2023. The lower net loss as compared to last year was primarily due to increased rental revenue discussed above, partially offset by higher property taxes at properties other than Flatbush Gardens and, higher payroll costs from "prevailing wage" requirements at the Flatbush Gardens property under the Article 11 transaction, and higher depreciation expense from capital spending.

For the third quarter of 2024, AFFO was $7.8 million, or $0.18 per share, compared to $6.3 million, or $0.15 per share, for the third quarter of 2023. As discussed above, the increase was primarily due to increased rental revenue partially offset by higher property taxes and higher payroll costs.

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¹ NOI and AFFO are non-GAAP financial measures. For a definition of these financial measures and a reconciliation of such measures to the most comparable GAAP measures, see "Reconciliation of Non-GAAP Measures" at the end of this release.

Balance Sheet

At September 30, 2024, notes payable (excluding unamortized loan costs) was $1,267.8 million, compared to $1,219.0 million at December 31, 2023. The increase was primarily due to draws made on Dean Street development construction loan.

Dividend

The Company today declared a third quarter dividend of $0.095 per share, the same amount as last quarter, to shareholders of record on November 13, 2024, payable November 27, 2024.

Conference Call and Supplemental Material

The Company will host a conference call on October 31, 2024, at 5:00 PM Eastern Time to discuss the third quarter 2024 results and provide a business update. The conference call can be accessed by dialing [phone] or [phone], conference entry code 308211. A replay of the call will be available from October 31, 2024, following the call, through November 14, 2024, by dialing [phone] or [phone], replay conference ID 308211. Supplemental data to this press release can be found under the "Quarterly Earnings" navigation tab on the "Investors" page of our website at www.clipperrealty.com. The Company's filings with the Securities and Exchange Commission (the "SEC") are filed at www.sec.gov under Clipper Realty Inc.

About Clipper Realty Inc.

Clipper Realty Inc. (NYSE: CLPR) is a self-administered and self-managed real estate company that acquires, owns, manages, operates, and repositions multifamily residential and commercial properties in the New York metropolitan area, with a portfolio in Manhattan and Brooklyn. For more information on the Company, please visit www.clipperrealty.com.

Forward-Looking Statements

Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include estimates concerning capital projects and the success of specific properties. Our forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "intend," "anticipate," "potential," "plan" or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this press release speak only as of the date of this press release.

We disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties), most of which are difficult to predict and many of which are beyond our control and which may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. For a discussion of these and other important factors that could affect our actual results, please refer to our filings with the SEC, including the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2023, and other reports filed from time to time with the SEC.

Clipper Realty Inc. Consolidated Balance Sheets (In thousands, except for share and per share data)
		September 30, 2024				December 31, 2023
		(unaudited)
ASSETS
Investment in real estate
Land and improvements		$	571,988			$	571,988
Building and improvements			735,208				726,273
Tenant improvements			3,366				3,366
Furniture, fixtures and equipment			13,758				13,278
Real estate under development			137,685				87,285
Total investment in real estate			1,462,005				1,402,190
Accumulated depreciation			(235,817	)			(213,606	)
Investment in real estate, net			1,226,188				1,188,584
Cash and cash equivalents			18,622				22,163
Restricted cash			17,472				14,062
Tenant and other receivables, net of allowance for doubtful accounts of $252 and $234, respectively			6,317				5,181
Deferred rent			2,191				2,359
Deferred costs and intangible assets, net			5,783				6,127
Prepaid expenses and other assets			10,444				10,854
TOTAL ASSETS		$	1,287,017			$	1,249,330
LIABILITIES AND EQUITY (DEFICIT)
Liabilities:
Notes payable, net of unamortized loan costs of $10,115 and $13,405, respectively		$	1,257,731			$	1,205,624
Accounts payable and accrued liabilities			21,768				20,994
Security deposits			9,044				8,765
Other liabilities			7,937				6,712
TOTAL LIABILITIES			1,296,480				1,242,095
Equity:
Preferred stock, $0.01 par value; 100,000 shares authorized (including 140 shares of 12.5% Series A cumulative non-voting preferred stock), zero shares issued and outstanding			-				-
Common stock, $0.01 par value; 500,000,000 shares authorized, 16,077,290 shares issued and outstanding			160				160
Additional paid-in-capital			89,818				89,483
Accumulated deficit			(93,562	)			(86,899	)
Total stockholders' equity			(3,584	)			2,744
Non-controlling interests			(5,879	)			4,491
TOTAL EQUITY (DEFICIT)			(9,463	)			7,235
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$	1,287,017			$	1,249,330

Clipper Realty Inc. Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
REVENUES
Residential rental income		$	27,846			$	25,501			$	81,700			$	74,481
Commercial rental income			9,776				9,627				29,028				28,857
TOTAL REVENUES			37,622				35,128				110,728				103,338
OPERATING EXPENSES
Property operating expenses			8,482				7,930				26,098				22,811
Real estate taxes and insurance			7,562				7,374				22,137				24,610
General and administrative			3,370				3,340				10,380				10,029
Transaction pursuit costs			-				-				-				357
Depreciation and amortization			7,456				7,282				22,289				21,376
TOTAL OPERATING EXPENSES			26,870				25,926				80,904				79,183
INCOME FROM OPERATIONS			10,752				9,202				29,824				24,155
Interest expense, net			(11,840	)			(11,527	)			(35,320	)			(32,996	)
Loss on extinguishment of debt			-				-				-				(3,868	)
Net loss			(1,088	)			(2,325	)			(5,496	)			(12,709	)
Net loss attributable to non-controlling interests			676				1,444				3,414				7,892
Net loss attributable to common stockholders		$	(412	)		$	(881	)		$	(2,082	)		$	(4,817	)
Basic and diluted net loss per share		$	(0.05	)		$	(0.09	)		$	(0.20	)		$	(0.36	)
Weighted average common shares / OP units
Common shares outstanding			16,077				16,063				16,072				16,063
OP units outstanding			26,317				26,317				26,317				26,317
Diluted shares outstanding			42,394				42,380				42,389				42,380

Clipper Realty Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Nine Months Ended September 30,
		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(5,496	)		$	(12,709	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation			22,211				21,296
Amortization of deferred financing costs			1,591				1,098
Amortization of deferred costs and intangible assets			440				441
Amortization of above- and below-market leases			-				(18	)
Loss on extinguishment of debt			-				3,868
Deferred rent			168				66
Stock-based compensation			1,987				2,214
Bad debt expense			24				(120	)
Changes in operating assets and liabilities:
Tenant and other receivables			(1,160	)			(103	)
Prepaid expenses, other assets and deferred costs			315				3,328
Accounts payable and accrued liabilities			(247	)			(4,366	)
Security deposits			279				713
Other liabilities			1,225				1,422
Net cash provided by operating activities			21,337				17,130
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and improvements			(57,097	)			(27,783	)
Net cash used in investing activities			(57,097	)			(27,783	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of mortgage notes			(1,483	)			(84,241	)
Proceeds from mortgage notes			50,300				124,858
Dividends and distributions			(13,188	)			(13,044	)
Loan issuance and extinguishment costs			-				(10,232	)
Net cash provided by financing activities			35,629				17,341
Net (decrease) increase in cash and cash equivalents and restricted cash			(131	)			6,688
Cash and cash equivalents and restricted cash - beginning of period			36,225				30,666
Cash and cash equivalents and restricted cash - end of period		$	36,094			$	37,354
Cash and cash equivalents and restricted cash - beginning of period:
Cash and cash equivalents		$	22,163			$	18,152
Restricted cash			14,062				12,514
Total cash and cash equivalents and restricted cash - beginning of period		$	36,225			$	30,666
Cash and cash equivalents and restricted cash - end of period:
Cash and cash equivalents		$	18,622			$	22,450
Restricted cash			17,472				14,904
Total cash and cash equivalents and restricted cash - end of period		$	36,094			$	37,354
Supplemental cash flow information:
Cash paid for interest, net of capitalized interest of $2,343 and $2,382 in 2024 and 2023, respectively		$	32,672			$	32,924
Non-cash interest capitalized to real estate under development			1,698				339
Additions to investment in real estate included in accounts payable and accrued liabilities			10,504				5,102

Clipper Realty Inc.
Reconciliation of Non-GAAP Measures
(In thousands, except per share data)

Non-GAAP Financial Measures

We disclose and discuss funds from operations ("FFO"), adjusted funds from operations ("AFFO"), adjusted earnings before interest, income taxes, depreciation and amortization ("Adjusted EBITDA") and net operating income ("NOI"), all of which meet the definition of "non-GAAP financial measures" set forth in Item 10(e) of Regulation S-K promulgated by the SEC.

While management and the investment community in general believe that presentation of these measures provides useful information to investors, neither FFO, AFFO, Adjusted EBITDA, nor NOI should be considered as an alternative to net income (loss) or income from operations as an indication of our performance. We believe that to understand our performance further, FFO, AFFO, Adjusted EBITDA, and NOI should be compared with our reported net income (loss) or income from operations and considered in addition to cash flows computed in accordance with GAAP, as presented in our consolidated financial statements.

Funds From Operations and Adjusted Funds From Operations

FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and impairment adjustments, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT.

AFFO is defined by us as FFO excluding amortization of identifiable intangibles incurred in property acquisitions, straight-line rent adjustments to revenue from long-term leases, amortization costs incurred in originating debt, interest rate cap mark-to-market adjustments, amortization of non-cash equity compensation, acquisition and other costs, transaction pursuit costs, loss on modification/extinguishment of debt, gain on involuntary conversion, gain on termination of lease and non-recurring litigation-related expenses, less recurring capital spending.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values have historically risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO useful in evaluating potential property acquisitions and measuring operating performance. We further consider AFFO useful in determining funds available for payment of distributions. Neither FFO nor AFFO represent net income or cash flows from operations computed in accordance with GAAP. You should not consider FFO and AFFO to be alternatives to net income (loss) as reliable measures of our operating performance; nor should you consider FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (computed in accordance with GAAP) as measures of liquidity.

Neither FFO nor AFFO measure whether cash flow is sufficient to fund all of our cash needs, including loan principal amortization, capital improvements and distributions to stockholders. FFO and AFFO do not represent cash flows from operating, investing or financing activities computed in accordance with GAAP. Further, FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO and AFFO.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
FFO
Net loss		$	(1,088	)		$	(2,325	)		$	(5,496	)		$	(12,709	)
Real estate depreciation and amortization			7,456				7,282				22,289				21,376
FFO		$	6,368			$	4,957			$	16,793			$	8,667
AFFO
FFO		$	6,368			$	4,957			$	16,793			$	8,667
Amortization of real estate tax intangible			120				120				361				361
Amortization of above- and below-market leases			-				(1	)			-				(18	)
Straight-line rent adjustments			81				39				168				66
Amortization of debt origination costs			530				423				1,591				1,098
Amortization of LTIP awards			713				783				1,987				2,214
Transaction pursuit costs			-				-				-				357
Loss on extinguishment of debt			-				-				-				3,868
Certain litigation-related expenses							(10	)			-				(10	)
Recurring capital spending			(50	)			(51	)			(184	)			(375	)
AFFO		$	7,762			$	6,260			$	20,716			$	16,228
AFFO Per Share/Unit		$	0.18			$	0.15			$	0.49			$	0.38

Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization

We believe that Adjusted EBITDA is a useful measure of our operating performance. We define Adjusted EBITDA as net income (loss) before allocation to non-controlling interests, plus real estate depreciation and amortization, amortization of identifiable intangibles, straight-line rent adjustments to revenue from long-term leases, amortization of non-cash equity compensation, interest expense (net), acquisition and other costs, transaction pursuit costs, loss on modification/extinguishment of debt and non-recurring litigation-related expenses, less gain on involuntary conversion and gain on termination of lease.

We believe that this measure provides an operating perspective not immediately apparent from GAAP income from operations or net income (loss). We consider Adjusted EBITDA to be a meaningful financial measure of our core operating performance.

However, Adjusted EBITDA should only be used as an alternative measure of our financial performance. Further, other REITs may use different methodologies for calculating Adjusted EBITDA, and accordingly, our Adjusted EBITDA may not be comparable to that of other REITs.

The following table sets forth a reconciliation of Adjusted EBITDA for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
Adjusted EBITDA
Net loss		$	(1,088	)		$	(2,325	)		$	(5,496	)		$	(12,709	)
Real estate depreciation and amortization			7,456				7,282				22,289				21,376
Amortization of real estate tax intangible			120				120				361				361
Amortization of above- and below-market leases			-				(1	)			-				(18	)
Straight-line rent adjustments			81				39				168				66
Amortization of LTIP awards			713				783				1,987				2,214
Interest expense, net			11,840				11,527				35,320				32,996
Transaction pursuit costs			-				-				-				357
Loss on extinguishment of debt/modification of debt			-				-				-				3,868
Certain litigation-related expenses			-				(10	)			-				(10	)
Adjusted EBITDA		$	19,122			$	17,415			$	54,629			$	48,501

Net Operating Income

We believe that NOI is a useful measure of our operating performance. We define NOI as income from operations plus real estate depreciation and amortization, general and administrative expenses, acquisition and other costs, transaction pursuit costs, amortization of identifiable intangibles and straight-line rent adjustments to revenue from long-term leases, less gain on termination of lease. We believe that this measure is widely recognized and provides an operating perspective not immediately apparent from GAAP income from operations or net income (loss). We use NOI to evaluate our performance because NOI allows us to evaluate the operating performance of our company by measuring the core operations of property performance and capturing trends in rental housing and property operating expenses. NOI is also a widely used metric in valuation of properties.

However, NOI should only be used as an alternative measure of our financial performance. Further, other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to that of other REITs.

The following table sets forth a reconciliation of NOI for the periods presented to income from operations, computed in accordance with GAAP (amounts in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2024				2023				2024				2023
NOI
Income from operations		$	10,752			$	9,202			$	29,824			$	24,155
Real estate depreciation and amortization			7,456				7,282				22,289				21,376
General and administrative expenses			3,370				3,340				10,380				10,029
Transaction pursuit costs			-				-				-				357
Amortization of real estate tax intangible			121				120				361				361
Amortization of above- and below-market leases			-				(1	)			-				(18	)
Straight-line rent adjustments			81				39				168				66
NOI		$	21,780			$	19,982			$	63,022			$	56,326

Contacts

Lawrence Kreider
Chief Financial Officer
[phone] x2231
[e-mail]