Q1 2025 Clipper Realty Inc Earnings Call

Speaker Change: Thank you for holding. We sincerely appreciate your patience. We stay on the line and we'll be back in a moment.

Speaker Change: Good afternoon, and welcome to today's Clipper Realty Q1 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Lauren Sava, Lawrence The Floor's

Speaker Change: Good afternoon and thank you for joining us for the first quarter 2025 Clipper Realty Inc and Earnings Conference Club.

Lawrence Saba: Participating with me on today's call are David Bistricer, Co-chairman of the Board and Chief Executive Officer

Speaker Change: J.J. Bistricer, Chief Operating Officer, and Larry Kreider, Chief Financial Officer.

Speaker Change: Please be aware that statements made during the call that are not historical may be being forward looking statements and actual results may differ materially from those indicated by such forward looking statements.

Speaker Change: I'm pleased to report we are reporting excellent operating results once again.

Speaker Change: <unk> record.

Speaker Change: Revenue record residential rents are seasonally adjusted new record net operating income.

Speaker Change: In the first quarter, which always has lower income levels due to higher wood cost.

Speaker Change: Driver was high rental demand overall rents are generally at all time highs and continuing to increase.

Speaker Change: Fully fully leased in the first quarter, new leasing has exceeded the prior rose by over 15% across the entire portfolio.

Cool.

In detail.

Speaker Change: Construction on 19th Street.

Speaker Change: Roundup development in Brooklyn is substantially complete on time and on budget.

Speaker Change: These names will come as June 1st.

Speaker Change: The summer season.

Speaker Change: It was purchased in 2021 and 'twenty two.

Speaker Change: A nice story.

Speaker Change: It's building on it.

Speaker Change: Of the 60000.

Speaker Change: Rentable square feet to 140.

Speaker Change: Units, 70% of free market and 30% affordable. This is a parking spaces at 19000 commercial rental square feet.

Speaker Change: Last week the company roofing is a construction loan at this property with a new loan of $160 million when fully funded.

Speaker Change: Oh provided $18 2 million of those excess proceeds to be used for interest.

Speaker Change: Expenses and working capital.

Speaker Change: Our other ground up development project specific house.

Speaker Change: Smedes in Brooklyn to stabilize.

Speaker Change: Tribute into cash flow after a year of full operation.

Speaker Change: We have also entered into definitive contract to sell at 10, West 60, <unk> Street in Manhattan.

Speaker Change: $45 5 million.

Speaker Change: We expect to generate approximately $12 million after the payment of debt.

Speaker Change: And of course, we expected transactions to close in the second quarter, we had sought to sell the property because of our 2000 and subsequent purchase acquisition plan. The government is unit three market wasn't restricted by the 2019 housing stability and protection.

Speaker Change: At 121, Louis industries leased to the city, we have received a five year renewal with the company's processing.

Speaker Change: Our first quarter results, we are reporting record quarterly revenue of $39 4 million.

Speaker Change: A 10.2% increase over last year excellent NOI of $21 8 million, an 8% increase.

Hey.

Speaker Change: 36% increase as a result of the strong leasing I just mentioned these results represent improvements over the first quarter this year.

Speaker Change: Further detail.

JJ Hooper: Now I'll turn the call over to JJ Hooper.

Speaker Change: An update on operations.

JJ Hooper: Thank you.

JJ Hooper: I am pleased to report that our residential leasing and oil properties is very strong and they are 99% occupied rents are at record levels and recording increases over previous levels overall, new lease rental rate that residential properties in the first quarter exceeded previous rents over 15% and renewals by 8%.

JJ Hooper: We expect the residential leasing to remain strong in the foreseeable future as demand remained high and the overall rental housing supply remains constrained.

JJ Hooper: As of the end of December Tribeca House had occupancy of 99%, although overall rent per foot over $83 per foot and new rent at $90 per foot.

JJ Hooper: Clover House property, you had occupancy of 99% average rents.

JJ Hooper: Rents of $87 per foot and new leases of $94 per foot, a recently completed Pacific as property consisting of the blend of free market rent stabilized tenants had occupancy of 98% and free market rents of $70 per foot on new leases.

JJ Hooper: The residents are properties that were 65th Street Aspen until 50 Livingston Street continues to perform at record levels with average occupancy above, 98% and new rents and renewals, 4% higher compared to previous leases.

JJ Hooper: We also look forward to beginning leasing at the newly completed 950 <unk> Street ground up development described earlier.

JJ Hooper: Lastly, at the largest Flatbush gardens property, we had good performance operating under the agreement made with the housing Preservation Department of New York City at the end of June 2023, using the full abatement of real estate taxes, beginning last July another rent supplements, we are aggressively dealing with the maintenance issues and capital improvements overall average rent at the property.

JJ Hooper: <unk> from all sources for the property have risen have risen 50% to $3 80 per foot at the end of the quarter.

JJ Hooper: Collections across our portfolio remained strong with overall collection rates in the first quarter in all residential properties at nearly 98% collections as life has gone through over 95% as we responsibly and steadily worked through the system to minimize amuse.

JJ Hooper: 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.

Larry: Thank you J J.

Larry: For a for the first quarter, we achieved record revenues, which increased to $39 $4 million from $35.8 million last year, an increase of $3 $6 million or 10% NOI increased to $21.8 million from 22.

Larry: Millions of dollars last year, an increase of $1.6 million or 8% and a S. F O increased to $8 million from $5 $9 million, an increase of $2 $1 million or 36%.

Larry: For the first quarter residential revenue increase to residential revenue increased to $29 $2 million by $3 $1 million. This increase was due to strong leasing for all properties as previously discussed.

Larry: Occupancy and rental rates were at all time highs in the quarter.

Larry: Commercial revenue was higher by $6 million in the quarter compared to last year as we continue to fill smaller retail vacancies at Tribeca House, and asking properties all at favorable rates.

Larry: On the expense side.

Larry: Year over year changes in the quarter were as follows property operating expenses increased by $1.5 million a year on year substantially all at Flatbush Gardens and.

Larry: The increase is due to higher payroll costs for newly hired repairs and maintenance workers.

Larry: Essentially offset by lower third party repairs and maintenance expense.

Larry: Higher legal costs for tenant collections and higher utility costs.

Larry: Real estate taxes, and insurance increased by $293000 in the first quarter year on year due to routine increases in real estate taxes and insurance at properties other than Flatbush gardens for property taxes, which were fully abated under our agreement with New York City in July 2023.

Larry: General and administrative expenses were higher by $274000 due to higher noncash amortization of executive long term incentive securities, partially offset by lower legal costs.

Larry: Interest expenses decreased by $216000 in the first quarter year on year due to slightly lower rates on our limited amount of variable rate debt.

Larry: $33 8 million dollar charge of impairment of long lived assets results from the assessment that the high likelihood of selling the 10 West 65th Street property that David described earlier based on the contract signed in early April expected to close in the second quarter.

Larry: Transaction should generate $12 million after paying existing debt and closing costs.

Speaker Change: As a result of the 2019, New York City Rent Act. He mentioned, we were not able to raise rents as expected. Following the two set 2017 the acquisition despite investing in the property.

Speaker Change: With regards to our balance sheet, we have $21.3 million of unrestricted cash.

Speaker Change: $17 $8 million of restricted cash in the first quarter, we had no new debt activity other than the last draws under the Dean Street property construction alone. We entered in the first quarter of 2023, However, as David mentioned in April we closed the two year bridge loan for the Dean Street property It bears a lower.

Speaker Change: Interest rate and should provide funds to cover carrying costs through stabilization and put working capital on the balance sheet.

Speaker Change: The continued high interest rate environment, we believe the higher rates made for higher tenant demand for our rental product. We're also buttressed by the relatively long duration of debt our operating properties.

Speaker Change: Our operating debt is 89% fixed at an average rate of 3.87% and average duration of 4.1 years is <unk>.

Speaker Change: Non recourse subject to limited standard carve outs carve outs that is not cross collateralized refinance our property on an asset by asset basis.

Speaker Change: Today, we are announcing a dividend of nine five cents per share for the first quarter. The same amount as last quarter. The dividend will be paid on July 11, 2025 to shareholders of record on May 27 2025.

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

Speaker Change: Let me just correct the statement the dividend will be paid on June 11 2025.

David Bistricer: Yeah.

David Bistricer: We remain focused on effectively operating our portfolio. We look for our current operating improvements to continue through 2025, we look forward to the opening of this redevelopment and finalizing the 10 West 60, <unk> history. So finalizing the 141 limousine suites leased resolving the two facilities.

David Bistricer: Sweet.

David Bistricer: Upcoming vacancy of capitalizing and the other possibility that may present themselves.

Speaker Change: I would now like to open the line for questions.

Speaker Change: Thank you the floor is now open for questions. If you wish to join the queue to ask a question at this time. Please press star one on your telephone keypad, we do ask if listening on speaker phone today that you pick up your handset while asking your question to provide optimal sound quality once again.

Speaker Change: Please press star one on your telephone keypad at this time, if you wish to join the queue to ask a question. Please hold a moment, while we poll for questions.

Speaker Change: And we have a question from Buck Horne from Raymond James Your line is live. Please go ahead.

Buck Horne: Hey, Thanks, good afternoon, guys and congratulations.

Buck Horne: Just wondering if you'd like to comment on the 141 Livingston lease in just terms of add any additional color or details.

Buck Horne: On the renewal.

Buck Horne: And.

Buck Horne: Potential new lease rates and or additional tenant improvements that may be required for the building.

Buck Horne: The current proposal, there's no ti that's going to be necessary.

Buck Horne: We hope to get that finalized in the next couple of weeks.

Speaker Change: Okay. Thank you guys.

Buck Horne: You're welcome.

Buck Horne: Thank you.

Speaker Change: And once again it'll be star one at this time, if you wish to join the queue to ask a question.

Buck Horne: Yeah.

Buck Horne: And there are no further questions in queue I would now like to turn the floor back to management for closing remarks.

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

Buck Horne: Okay.

Buck Horne: 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.

Buck Horne: Okay.