• Revenue: Record quarterly revenue of $37.3 million, up from $34.5 million last year, an increase of 8.1%.
• Net Operating Income (NOI): Increased to $21.1 million from $19.2 million last year, an increase of 9.9%.
• Adjusted Funds From Operations (AFFO): Increased to $7.1 million from $5.5 million, an increase of 29%.
• Residential Revenue: Increased to $27.7 million, up by $2.1 million due to strong leasing.
• Occupancy Rate: Over 99% leased across residential properties.
• Rent Increases: New leases exceeded prior rents by over 7%.
• Section 610 Rents: Contributed $400,000, expected to increase steadily.
• Property Operating Expenses: Increased by $2.2 million year-on-year.
• Real Estate Taxes and Insurance: Decreased by $1.3 million due to tax elimination at Flatbush Gardens.
• Interest Expenses: Increased by $407,000 due to additional borrowings.
• Dividend: $0.095 per share for the second quarter.

• Warning! GuruFocus has detected 8 Warning Signs with CLPR.

Release Date: August 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Clipper Realty Inc (NYSE:CLPR) reported record operating results, including record revenue, net operating income, and adjusted funds from operations (AFFO).
• Rental demand remains strong across all properties, with overall rents at all-time highs and nearly full occupancy.
• New leases exceeded prior rents by over 7%, with significant contributions from properties like Tribeca House and Clover House.
• The Pacific House development is fully stabilized, 100% leased, and yielding the projected 7% cap rate.
• The company benefits from a long duration of fixed-rate debt, with 91% of operating debt fixed at an average rate of 3.87% and an average duration of 4.9 years.

Negative Points

• Clipper Realty Inc (NYSE:CLPR) faces potential risks with the City of New York's intention to vacate 250 Livingston Street in August 2025, which could impact revenue.
• The company is actively negotiating a lease extension at 141 Livingston Street, but there is no assurance of a favorable outcome.
• Marketing activities for properties like 10 West 62 Street could result in losses compared to book value.
• Interest expenses increased due to additional borrowings, impacting financial performance.
• The company faces challenges in managing high interest rates, which could affect tenant demand and refinancing options.

Q & A Highlights

Q: Can you clarify the situation with the leasing arrangement at 250 Livingston Street? Are the revenues and cash flows from this property going into an escrow account for the lender's benefit? A: David Bistricer, Co-Chairman and CEO, stated that currently, the revenues are not going into an escrow account.

Q: Has the City of New York provided any formal notice of their intention to vacate 141 Livingston Street? A: JJ Bistricer, Chief Operating Officer, mentioned that the city is actually looking for an extension, and they are in the midst of negotiating a five-year extension.

Q: What kind of CapEx requirements might be needed for the lease extension at 141 Livingston Street? A: David Bistricer explained that the extension the city is seeking does not require significant capital expenditures and is pretty much as is.

Q: Why is Clipper Realty considering selling 10 West 65 Street? Are there specific liquidity needs? A: David Bistricer noted that there might be better opportunities for the value of the property, and they are testing the market to see what price they might achieve. It is currently in the preliminary stages.

Q: Are there any plans to refinance the mortgage on 1010 Pacific, which is due in about a year? A: David Bistricer indicated that they will consider refinancing options closer to the maturity date, potentially with Freddie Mac or existing lenders, as they expect rental markets to stabilize and interest rates to decrease.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.