• Revenue: Record quarterly revenue of $37.6 million, up from $35.1 million last year, a 7.1% increase.
• Net Operating Income (NOI): Increased to $21.8 million from $20 million last year, a 9% increase.
• Adjusted Funds From Operations (AFFO): Increased to $7.8 million from $6.3 million, a 24% increase.
• Residential Revenue: Increased to $27.8 million, up by $2.3 million due to strong leasing.
• Occupancy Rate: Residential properties were 99% leased.
• New Lease Rates: New leases exceeded prior rents by over 9.5%.
• Interest Expense: Increased by $313,000 year-over-year due to additional borrowings.
• Cash Position: $18.6 million of unrestricted cash and $17.5 million of restricted cash.
• Dividend: Announced a dividend of 9.5 per share for the third quarter.

• Warning! GuruFocus has detected 6 Warning Signs with CLPR.

Release Date: October 31, 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 revenue, net operating income, and adjusted funds from operations (AFFO) for the third quarter of 2024.
• Residential leasing activity is strong, with properties nearly fully leased and new lease rates exceeding previous rents by over 9.5%.
• The Pacific House development project is fully stabilized, 100% leased, and achieving the projected 7% cap rate.
• The company is effectively managing its debt, with 91% of operating debt fixed at an average rate of 3.87% and an average duration of 4.9 years.
• Clipper Realty Inc (NYSE:CLPR) announced a dividend of 9.5 cents per share for the third quarter, maintaining the same level as the previous quarter.

Negative Points

• Flatbush Gardens experienced a drop in rent collection rates to 90%, attributed to procedural negotiations with New York City.
• The company is facing potential challenges with the 250 Livingston Street property as New York City intends to vacate in August 2025.
• There are ongoing negotiations for a lease extension at 141 Livingston Street, with no assurance of completion.
• Clipper Realty Inc (NYSE:CLPR) is marketing some properties, including 10 West 65th Street, which may result in losses compared to book value.
• Interest expenses increased due to additional borrowings, and there are higher property operating expenses at Flatbush Gardens due to prevailing wage requirements.

Q & A Highlights

Q: Can we start with the bad debt issue at Flatbush? Is there an event causing the collection rate to drop to 90%? Have you seen this before? A: No, not particularly. It seems to be a temporary issue as we negotiate procedures with New York City. We believe it should reverse shortly. - Lawrence Kreider, CFO

Q: Regarding the Livingston buildings, when do you plan to establish a cash management account for 250 Livingston? A: We plan to establish it in the fourth quarter. - Lawrence Kreider, CFO

Q: Will establishing the cash management account affect the accounting for revenue and NOI of 250 Livingston? A: No, it will not change the accounting on the income statement. It will affect cash flow, as funds will move to restricted cash accounts. - Lawrence Kreider, CFO

Q: Can you update us on the situation with the special servicer for 141 Livingston? A: We are disputing their interpretation of the agreement, which would require us to establish an escrow account. We believe the escrow is not required. - Lawrence Kreider, CFO

Q: Will you make the payment as demanded by the special servicer, or is there an arbitration process? A: We are unsure of the next steps but believe we can negotiate a proper solution with the special servicer. - Lawrence Kreider, CFO

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