Q1 2021 Clipper Realty Inc Earnings Call

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Good afternoon, ladies and gentlemen, and welcome to the Clipper Realty first quarter 2021 earnings call.

At this time all participants are placed in a listen only mode and the floor will be open for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host Michael Friends, Chief Financial Officer, Sir the floor is yours.

Good afternoon, and thank you for joining us for the first quarter of 2021 Clipper Realty, Inc Earnings Conference call.

Participating with me on today's call are David <unk> co chairman of the Board and Chief Executive Officer, and JJ <unk> Chief operating officer.

Please be aware that statements made during the call that are not historical maybe 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 2020 annual report on form 10-K, which is accessible at www Dot FCC dot Gov and our website.

As a reminder, the forward looking statements speak only as of the date of this call may 10th 2021, 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 <unk> adjusted earnings before interest taxes, depreciation and amortization core adjusted EBITDA and net operating income core 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 the most directly comparable GAAP financial measures.

With that I will now turn the call over to our co chairman and CEO, David Brewster Sir.

Thank you Michael and good afternoon, and welcome to the core.

Morning.

So anyone who's calling from Clipper Realty.

I'll provide an update on our business performance, including recent highlights and milestones as well as our company continues to respond to the COVID-19 pandemic.

J J will discuss property level activity, including leasing those loans finally, Michael will speak about our core quarterly financial performance. We will then take you.

Two questions.

I will begin by once again, extending our thanks to the entire clipper Realty team for their ongoing Agua aggressive it is during these unprecedented times.

Grateful to the efforts over the past 14 months.

Very challenging circumstances are proud of their continued dedication to the residents communities and our business.

Properties have remained open and operational throughout the pandemic increase in New York City residential leasing activity.

To close in the fourth quarter of last year continues today at both the city and the economy in general.

Further strengthening from the depths of the pandemic, we expect rental demands remained elevated and pricing to improve in New York City continue to be open vaccinations proliferate at the end of the total score at our properties with 95% leased.

I'll jump back in house.

The first week of May.

The increase over 20% over the similar period in <unk>.

April.

We continue to take the necessary steps to keep out the tenant sales in compliance with state and local orders.

I'll provide an typical services to our residents we remain confident in the resiliency of New York City, We expect our properties in the system to stay as desirable from a broad range of tenants in operations to continue to return to a more normal day overtime.

She continues to be well positioned from a liquidity exposed sectors and then to manage through the pandemic.

We have approximately $106 million of cash consisting of 88 million of unrestricted cash and $80 million of restricted cash we financed we finance our portfolio on an asset by asset basis.

Non recourse subject to limits standard cover and is non cross collateralized, we have no debt maturities in any of our operating properties until 2027.

Turning to some more recent developments we continue to proceed with the development of 10 10 specific streets acquisition located in prospect guys Brooklyn from about one mile from Atlantic Terminal Barclays Center hub construction is well underway as previously discussed we estimate that the project will cost $85 million.

It will take two years to complete and develop to a $6 has stabilized capitalization rate.

Jeff will provide further update on the project.

Shortly and that project today has a commitment from them.

Insurance is going to be to finance the construction loans.

Our office portfolio in the city runs at one point about Livingston Street increased two two and a half 25% at the end of December 2020, which will add $2 $1 million in profit annual NOI together with the expected additional $5 million.

NOI, resulting from New York city's new lease up from 50 limit from St.

Property that commenced in August of 2020. These roles metros are expected to add an incremental $7.1 million of annual NOI to our portfolio, representing an approximate 10% increase in our normalized run rate.

I'd like to comment on the quarterly results.

Reported quarterly revenue of $30.7 million NOI of $14 8 million.

And they ebb and flow of $3 $1 million.

Michael will depart as Chief financial Officer.

But I repeat our former CFO.

Since the formation of the company in 2015 will return as CFO on behalf of the entire company we thank Matt.

Michael for his many contributions to realty.

I am excited to welcome back Larry.

CFO, Larry initially joined the business in 2014 and love the company.

Rule 144, 144 offering in August of 2015, and initial public offering in February 2017, as intimate knowledge of operations management expertise and extensive financial experience will help drive our strategic vision for the future Michael.

He was an executive management finance and accounting teams to ensure a smooth transition.

I will now turn the call over to J J will provide an update on operations.

Thank you I begin again.

Thanks to the company's employees for their inspiring efforts throughout this unprecedented period.

We are grateful for their ongoing commitment to our tenants and communities.

The increase in residential leasing activity that began towards the end of last year and continues today at.

At the end of the first quarter all of our residential properties were leased in the mid to high 90% range building on year end trends and a marked improvement versus the approximate 90% levels seen six months ago.

We anticipate net rental demand will remain strong as New York City further reopens and vaccines continue to become more widespread.

Occupancy in Tribeca House continues to strengthen.

At the end of the first quarter. The property was 96, 5% occupied versus 90% at year end, an 80% six months ago.

Net effect new leases in the second quarter on average, 20% higher than new leases in the first quarter.

We continue to work diligently to manage revenue at the property. We believe the rental rates at Tribeca House will return to pre COVID-19 levels overtime, given the assets quality and attractiveness from a pricing standpoint compared to other luxury buildings in the surrounding neighborhood.

This lab has gone to complex in Brooklyn held up well in the first quarter from a revenue standpoint.

As it has throughout the pandemic the property maintain high occupancy ending the quarter, 94% leased rent per square foot was $25 and cents at the end of the quarter and near record level.

As noted previously we have reorganized certain operations at the property as part of ongoing efforts to manage our expense base, which is expected to result in annual cost savings in excess of 800000 notes so that as long as it remains a key element of our portfolio and growth story.

Rent collections remained strong despite the challenges of the pandemic our collection rate in the first quarter was over 96% an uptick versus 95% at year end we.

We continue to work with tenants on a case by case basis, if they notify us that they cannot meet their rent obligations due to the net due to the pandemic.

On the development side, we have commenced construction at 10 10 Pacific Street on a nine story 119000 rentable square foot.

Fully a monetized multifamily rental buildings with underground indoor parking.

The property is expected to have 175 total units, 70% of which will be free market and 30% affordable and is eligible for 75 years, what 'twenty. One day tax abatement. We are currently negotiating a construction loan from the project.

Looking ahead, we remain focused on optimizing occupancy pricing and expenses across the business to best position ourselves in New York City continues its emergence from the pandemic I will now turn the call over to Michael who will discuss our financial results.

Thank you J J for the first quarter, we achieved revenues of $30 7 million compared to $31 $3 million for the first quarter of 2020.

We achieved NOI of $14 $8 million and <unk> of $3 1 million.

The year over year revenue change was primarily attributable to declines in leased occupancy in residential rental rate at the Tribeca House property and the termination of certain commercial leases at the property.

Partially offset by the commencement of the new office lease at the 250 Livingston Street property during the third quarter of 2020.

On the expense side key year over year changes, whereas force.

Property operating expenses increased by $1 $5 million from the first quarter year on year, primarily driven by an increase in net provision for bad debt due to the impact of COVID-19, and an approximate $600000 ketchup for previously Unbilled utility expenses.

Real estate taxes, and insurance increased by zero point $4 million from the first quarter year on year due to property tax increases across the portfolio and general insurance industry cost increases.

Interest expense increased by zero point $4 million in the first quarter year on year, primarily due to the refinancing of the Flatbush Gardens property in May 2020, and the 141 Livingston Street property in February this year.

As David mentioned earlier, we are well positioned from a liquidity perspective, we have $106 million of cash consisting of $88 million of unrestricted cash and $18 million of restricted cash we finance our portfolio on an asset by asset basis, our debt is nonrecourse subject to limited standard carve outs.

And it does not cross collateralized, we have no debt maturities on any operating properties until 2027.

Today, we are announcing a dividend of $9.05 per share for the first quarter. The same amount as last quarter the day.

Dividend will be paid on may 27th to shareholders of record on may 20th.

Lastly, as mentioned earlier I will be departing the company. It has been a privilege to work with David J J, The board and the entire Clipper Realty team.

The organization is well positioned to take advantage of opportunities to grow shareholder value and I'm excited to watch their success in the years to come.

Wish everyone in the company all the best.

Larry Kreider, the team and I will work closely together to ensure a smooth transition.

Let me now turn the call back over to David for concluding remarks.

Thank you Michael we remain focused on efficiently operating our portfolio with the safety of our tenants.

And employees, our highest priority we continue to take the necessary steps to navigate through the current challenges buttressed by a long strong balance sheet, we expecting sales recovering from the pandemic to continue to accelerate from 2021 and beyond.

Look forward to capitalizing on a myriad of growth opportunities include center specific Street development. Another possibly that may present themselves. We hope everyone remains safe and healthy I would like now to open up the line for questions.

Ladies and gentlemen, the floor is now open for questions.

If you have any questions or comments. Please press star one on your phone now yeah.

Yes that will posing your question. Please pickup your handset with NAND speaker phone to provide off to him sound quality.

Once again, if you have any questions or comments. Please press star one on your phone now.

Please hold them on the line for questions.

We have no questions from the phone lines at this time.

Thank you very much.

Yeah.

Thank you for joining us today, and we look forward to speaking with you again soon.

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

Yeah.