Clipper Realty Inc. Announces Second Quarter 2022 Results

·17 min read

NEW YORK, August 09, 2022--(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 June 30, 2022.

Highlights for the Three Months Ended June 30, 2022

  • Achieved near record quarterly revenues of $31.9 million for the second quarter of 2022

  • Achieved quarterly income from operations of $7.1 million for the second quarter of 2022

  • Achieved near record quarterly net operating income ("NOI")1 of $17.2 million for the second quarter of 2022

  • Recorded quarterly net loss of $3.0 million for the second quarter of 2022

  • Achieved quarterly adjusted funds from operations ("AFFO")1 of $5.1 million for the second quarter of 2022

  • Declared a dividend of $0.095 per share for the second quarter of 2022

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

"We are seeing accelerating improvements in our operations as demand for rental properties in New York City is reaching high levels and, as a result, we have experienced higher rental rates with nearly maximum occupancy. We remain focused on efficiently operating our portfolio and optimizing our results. Our properties are 98% leased and our second quarter rent collection rate was 97.3%. We have a strong liquidity position with $44.0 million of cash on the balance sheet, consisting of $29.5 million of unrestricted cash and $14.5 million of restricted cash and no debt maturities on any operating properties until 2027. Additionally, our development properties are progressing very well. We remain committed to executing our strategic initiatives to create long-term value."

Financial Results

For the second quarter of 2022, revenues increased by $1.2 million, or 4.0%, to $31.9 million, compared to $30.7 million for the second quarter of 2021. Apart from the effects of a new accounting standard discussed below, residential revenue increased by $1.6 million, or 7.6%, due to higher rental rates at the Tribeca House, Clover House and 10 West 65th Street properties and higher occupancy at the Flatbush Gardens, Tribeca House and Aspen properties; commercial income increased $0.3 million, or 3.5%, due to new leases at the Tribeca House property and higher escalation billings at the 141 Livingston St property. Revenue in the second quarter of 2022 reflects implementation of a new accounting standard effective 2022 by which adjustments to receivables for collectability were made to revenue in the amount of $0.7 million; in the second quarter of 2021, such adjustments were made to operating expenses in the amount of $0.9 million.

For the second quarter of 2022, net loss was $3.0 million, or $0.08 per share compared to net loss of $3.2 million, or $0.09 per share, for the second quarter of 2021. The change was primarily attributable to the revenue change discussed above and lower property operating expenses, partially offset by increases in insurance, depreciation and amortization and general and administrative expenses.

For the second quarter of 2022, AFFO was $5.1 million, or $0.12 per share, compared to $4.1 million, or $0.10 per share, for the second quarter of 2021. The change was primarily attributable to the revenue change discussed above partially offset by increases in insurance and general and administrative expenses.

Balance Sheet

At June 30, 2022, notes payable (excluding unamortized loan costs) was $1,163.8 million, compared to $1,144.1 million at December 31, 2021; the increase primarily reflected borrowings to develop the 1010 Pacific Street property and make final property acquisition payments at the 953 Dean Street property partially offset by scheduled principal amortization payments.

Dividend

The Company today declared a second quarter dividend of $0.095 per share, the same amount as last quarter, to shareholders of record on August 19, 2022, payable August 26, 2022.

Conference Call and Supplemental Material

The Company will host a conference call on August 9, 2022, at 5:00 PM Eastern Time to discuss the second quarter 2022 results and provide a business update. The conference call can be accessed by dialing (800) 346-7359 or (973) 528-0008, conference entry code 585368. A replay of the call will be available from August 9, 2022, following the call, through August 23, 2022, by dialing (800) 332-6854 or (973) 528-0005, replay conference ID 585368. 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 (including uncertainties regarding the ongoing impact of the COVID-19 pandemic, and measures intended to curb its spread, on our business, our tenants and the economy generally), 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, 2021, and other reports filed from time to time with the SEC.

_________________________________

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.

Clipper Realty Inc.

Consolidated Balance Sheets

(In thousands, except for share and per share data)

June 30,
2022

December 31,
2021

(unaudited)

ASSETS

Investment in real estate

Land and improvements

$

540,859

$

540,859

Building and improvements

652,887

649,686

Tenant improvements

3,406

3,406

Furniture, fixtures and equipment

12,697

12,500

Real estate under development

126,507

97,301

Total investment in real estate

1,336,356

1,303,752

Accumulated depreciation

(171,320

)

(158,002

)

Investment in real estate, net

1,165,036

1,145,750

Cash and cash equivalents

29,432

34,524

Restricted cash

14,537

17,700

Tenant and other receivables, net of allowance for doubtful accounts

4,689

10,260

of $178 and $7,905, respectively

Deferred rent

2,600

2,656

Deferred costs and intangible assets, net

6,861

7,126

Prepaid expenses and other assets

9,916

15,641

TOTAL ASSETS

$

1,233,071

$

1,233,657

LIABILITIES AND EQUITY

Liabilities:

Notes payable, net of unamortized loan costs

$

1,152,301

$

1,131,154

of $11,489 and $12,898, respectively

Accounts payable and accrued liabilities

17,640

19,558

Security deposits

7,586

7,110

Below-market leases, net

36

53

Other liabilities

5,286

5,833

TOTAL LIABILITIES

1,182,849

1,163,708

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,

160

160

16,063,228 shares issued and outstanding

Additional paid-in-capital

88,392

88,089

Accumulated deficit

(69,516

)

(61,736

)

Total stockholders' equity

19,036

26,513

Non-controlling interests

31,186

43,436

TOTAL EQUITY

50,222

69,949

TOTAL LIABILITIES AND EQUITY

$

1,233,071

$

1,233,657

Clipper Realty Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

REVENUES

Residential rental income

$

22,597

$

21,573

$

44,059

$

43,177

Commercial rental income

9,290

9,098

19,878

18,145

TOTAL REVENUES

31,887

30,671

63,937

61,322

OPERATING EXPENSES

Property operating expenses

6,928

7,221

14,467

15,863

Real estate taxes and insurance

7,886

7,363

15,817

14,675

General and administrative

3,197

2,802

6,139

5,095

Transaction pursuit costs

92

-

516

60

Depreciation and amortization

6,732

6,289

13,437

12,516

TOTAL OPERATING EXPENSES

24,835

23,675

50,376

48,209

INCOME FROM OPERATIONS

7,052

6,996

13,561

13,113

Interest expense, net

(10,005

)

(10,366

)

(19,990

)

(20,583

)

Loss on extinguishment of debt

-

-

-

(3,034

)

Gain on involuntary conversion

-

139

-

139

Net loss

(2,953

)

(3,231

)

(6,429

)

(10,365

)

Net loss attributable to non-controlling interests

1,834

2,006

3,992

6,436

Net loss attributable to common stockholders

$

(1,119

)

$

(1,225

)

$

(2,437

)

$

(3,929

)

Basic and diluted net loss per share

$

(0.08

)

$

(0.09

)

$

(0.18

)

$

(0.27

)

Weighted average common shares / OP units

Common shares outstanding

16,063

16,063

16,063

16,063

OP units outstanding

26,317

26,317

26,317

26,317

Diluted shares outstanding

42,380

42,380

42,380

42,380

Clipper Realty Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six Months Ended June 30,

.

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

$

(6,429

)

$

(10,365

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation

13,318

12,404

Amortization of deferred financing costs

626

621

Amortization of deferred costs and intangible assets

360

353

Amortization of above- and below-market leases

(17

)

(63

)

Loss on extinguishment of debt

-

3,034

Gain on involuntary conversion

(139

)

Deferred rent

(190

)

(53

)

Stock-based compensation

1,209

1,281

Bad debt expense

(379

)

2,078

Transaction pursuit costs

-

60

Changes in operating assets and liabilities:

Tenant and other receivables

150

(1,579

)

Prepaid expenses, other assets and deferred costs

3,615

1,989

Accounts payable and accrued liabilities

(510

)

378

Security deposits

476

(13

)

Other liabilities

(547

)

(980

)

Net cash provided by operating activities

11,682

9,006

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to land, buildings and improvements

(24,851

)

(12,756

)

Acquisition deposit

2,015

-

Cash paid in connection with acquisition of real estate

(8,043

)

-

Net cash used in investing activities

(30,879

)

(12,756

)

CASH FLOWS FROM FINANCING ACTIVITIES

Payments of mortgage notes

(1,101

)

(75,303

)

Proceeds from mortgage notes

20,839

100,505

Dividends and distributions

(8,461

)

(8,382

)

Loan issuance and extinguishment costs

(335

)

(3,809

)

Net cash provided by financing activities

10,942

13,011

Net (decrease) increase in cash and cash equivalents and restricted cash

(8,255

)

9,261

Cash and cash equivalents and restricted cash - beginning of period

52,224

89,032

Cash and cash equivalents and restricted cash - end of period

$

43,969

$

98,293

Cash and cash equivalents and restricted cash - beginning of period:

Cash and cash equivalents

$

34,524

$

72,058

Restricted cash

17,700

16,974

Total cash and cash equivalents and restricted cash - beginning of period

$

52,224

$

89,032

Cash and cash equivalents and restricted cash - end of period:

Cash and cash equivalents

$

29,432

$

85,035

Restricted cash

14,537

13,258

Total cash and cash equivalents and restricted cash - end of period

$

43,969

$

98,293

Supplemental cash flow information:

Cash paid for interest, net of capitalized interest of $2309 and $794 in 2022 and 2021, respectively

$

19,423

$

20,165

Non-cash interest capitalized to real estate under development

1,118

29

Additions to investment in real estate included in accounts payable and accrued liabilities

7,158

3,255

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

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.

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

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

FFO

Net loss

$

(2,953

)

$

(3,231

)

$

(6,429

)

$

(10,365

)

Real estate depreciation and amortization

6,732

6,289

13,437

12,516

FFO

$

3,779

$

3,058

$

7,008

$

2,151

AFFO

FFO

$

3,779

$

3,058

$

7,008

$

2,151

Amortization of real estate tax intangible

1211

121

241

241

Amortization of above- and below-market leases

(8

)

(32

)

(17

)

(63

)

Straight-line rent adjustments

(1

)

(52

)

(190

)

(53

)

Amortization of debt origination costs

313

313

626

621

Amortization of LTIP awards

714

795

1,209

1,281

Transaction pursuit costs

92

-

516

60

Loss on extinguishment of debt

-

-

-

3,034

Gain on involuntary conversion

-

(139

)

-

(139

)

Certain litigation-related expenses

166

65

253

124

Recurring capital spending

(89

)

(58

)

(138

)

(108

)

AFFO

$

5,087

$

4,071

$

9,508

$

7,149

AFFO Per Share/Unit

$

0.12

$

0.10

$

0.22

$

0.17

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 June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Adjusted EBITDA

Net loss

$

(2,953

)

$

(3,231

)

$

(6,429

)

$

(10,365

)

Real estate depreciation and amortization

6,732

6,289

13,437

12,516

Amortization of real estate tax intangible

121

121

241

241

Amortization of above- and below-market leases

(8

)

(32

)

(17

)

(63

)

Straight-line rent adjustments

(1

)

(52

)

(190

)

(53

)

Amortization of LTIP awards

714

795

1,209

1,281

Interest expense, net

10,005

10,366

19,990

20,583

Transaction pursuit costs

92

-

516

60

Loss on extinguishment of debt

-

-

-

3,034

Gain on involuntary conversion

-

(139

)

-

(139

)

Certain litigation-related expenses

166

65

253

124

Adjusted EBITDA

$

14,868

$

14,182

$

29,010

$

27,219

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 June 30,

Six Months Ended June 30,

2022

2021

2022

2021

NOI

Income from operations

$

7,052

$

6,996

$

13,561

$

13,113

Real estate depreciation and amortization

6,732

6,289

13,437

12,516

General and administrative expenses

3,197

2,802

6,139

5,095

Transaction pursuit costs

92

-

516

60

Amortization of real estate tax intangible

121

121

241

241

Amortization of above- and below-market leases

(8

)

(32

)

(17

)

(63

)

Straight-line rent adjustments

(1

)

(52

)

(190

)

(53

)

NOI

$

17,185

$

16,124

$

33,687

$

30,909

View source version on businesswire.com: https://www.businesswire.com/news/home/20220809005831/en/

Contacts

Lawrence Kreider
Chief Financial Officer
(718) 438-2804 x2231
larry@clipperrealty.com