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 March
31, 2023.
Highlights for the Three Months Ended March 31, 2023
- Record quarterly revenues of $33.7 million for the first
quarter of 2023
- Quarterly income from operations of $6.9 million for the first
quarter of 2023
- Net operating income (“NOI”)1 of $17.1 million for the first
quarter of 2023
- Quarterly net loss of $7.1 million for the first quarter of
2023
- Quarterly adjusted funds from operations (“AFFO”)1 of $4.5
million for the first quarter of 2023
- Declared a dividend of $0.095 per share for the first quarter
of 2023
David Bistricer, Co-Chairman and Chief Executive Officer,
commented,
“In the first quarter the Company has built on its momentum from
the prior year. New leases continue to rent at higher levels than
the previous ones. This has resulted in record revenue for the
quarter. In the first quarter, we recorded record revenue of $33.7
million, NOI of $17.1 million, leased occupancy of 98.9% and our
overall collection rate remains high at 98.7%. We have
substantially completed our development of the 1010 Pacific Street
building, branded “Pacific House”, including obtaining a temporary
certificate of occupancy for a majority of the building at the end
of the first quarter, well ahead of schedule and on budget. As a
result, we were able to refinance the building early to a fixed
rate mortgage that will substantially decrease our interest costs
compared to the construction loan. As occupancy increases, we will
have access to additional borrowings on the loan and we will see
the rate we pay on the loan decrease by up to 25 additional basis
points. This new loan increases the percentage of our
non-development portfolio with fixed rates loans to over 90% and
with none of the loans maturing until 2027. This puts us in a
strong position as it relates to the current interest rate
environment. We remain committed to executing our strategic
initiatives, including the development of our Dean Street project,
to create long-term value.”
Financial Results
For the first quarter of 2023, revenues increased by $1.6
million, or 5.0%, to $33.7 million and $2.7 million, or 8.8%
excluding a net $1.1 million recovery of a bad debt reserve at a
commercial tenant in the first quarter of 2022. This compares to
revenue of $32.1 million or $31.0 million, excluding this one-time
bad debt recovery where we reached an agreement with a commercial
tenant whose arrears were included in bad debt under the new
accounting standard first implemented on January 1, 2022.
Residential revenue increased by $2.5 million, or 11.5%, driven by
higher rental rates and occupancy at all our residential
properties. Commercial income decreased $0.9 million as reported,
or 8.1%, but increased by $0.2 million, or 2.5%, excluding the
one-time recovery of a bad debt reserve. The adjusted increase was
due to new commercial leases signed during 2022.
For the first quarter of 2023, net loss was $7.1 million, or
$0.19 per share compared to net loss of $3.5 million, or $0.09 per
share, for the first quarter of 2022, or $4.6 million, or $0.12 per
share excluding the one-time bad debt recovery. The adjusted change
was primarily attributable to the $3.9 million loss on
extinguishment of debt discussed below (see Pacific House
Refinance) partially offset by the increased rental revenue
discussed above net of higher utilities costs, real estate taxes
and general and administrative costs.
For the first quarter of 2023, AFFO was $4.5 million, or $0.11
per share, compared to $4.4 million, or $0.10 per share, for the
first quarter of 2022, or $3.3 million excluding the one-time bad
debt recovery mentioned above. The adjusted increase was primarily
attributable to the increased revenue discussed above, net of
higher utilities, real estate taxes, and general and administrative
costs.
Balance Sheet
At March 31, 2023, notes payable (excluding unamortized loan
costs) was $1,187.3 million, compared to $1,171.2 million at
December 31, 2022. The increase was primarily due to the
refinancing of the Pacific House loan described below.
Pacific House Refinance
On February 10, 2023, the Company refinanced its Pacific House
construction loan with a mortgage loan with Valley National Bank
providing for maximum borrowings of $80 million. The loan provided
initial funding of $60 million and a further $20 million subject to
the achievement of certain financial targets. The loan has a term
of five years and an initial annual interest rate of 5.7% subject
to reduction by up to 25 basis points upon achievement of certain
financial targets. The loan is interest only for the first two
years and principal and interest thereafter based on a 30-year
amortization schedule. The refinancing with fixed rate debt took
advantage of the prompt and on-budget completion of construction by
which the Company avoided the higher cost of continued variable
rate interest, including a related interest rate cap, in return for
the recorded early termination fee.
Dividend
The Company today declared a first quarter dividend of $0.095
per share, the same amount as last quarter, to shareholders of
record on May 15, 2023, payable May 24, 2023.
Conference Call and Supplemental Material
The Company will host a conference call on May 4, 2023, at 5:00
PM Eastern Time to discuss the first quarter 2023 results and
provide a business update. The conference call can be accessed by
dialing (800) 346-7359 or (973) 528-0008, conference entry code
313340. A replay of the call will be available from May 4, 2023,
following the call, through May 18, 2023, by dialing (800) 332-6854
or (973) 528-0005, replay conference ID 313340. 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, 2022, 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)
March 31, 2023 December 31, 2022 (unaudited)
ASSETS Investment in real estate Land and improvements
$
540,859
$
540,859
Building and improvements
659,109
656,460
Tenant improvements
3,406
3,406
Furniture, fixtures and equipment
12,964
12,878
Real estate under development
150,719
142,287
Total investment in real estate
1,367,057
1,355,890
Accumulated depreciation
(191,580
)
(184,781
)
Investment in real estate, net
1,175,477
1,171,109
Cash and cash equivalents
18,801
18,152
Restricted cash
19,023
12,514
Tenant and other receivables, net of allowance for doubtful
accounts
4,768
5,005
of $200 and $321, respectively Deferred rent
2,138
2,573
Deferred costs and intangible assets, net
6,532
6,624
Prepaid expenses and other assets
10,659
13,654
TOTAL ASSETS
$
1,237,398
$
1,229,631
LIABILITIES AND EQUITY Liabilities: Notes payable,
net of unamortized loan costs
$
1,178,027
$
1,161,588
of $9,240 and $9,650, respectively Accounts payable and accrued
liabilities
13,938
17,094
Security deposits
8,230
7,940
Below-market leases, net
10
18
Other liabilities
10,803
5,812
TOTAL LIABILITIES
1,211,008
1,192,452
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
88,952
88,829
Accumulated deficit
(79,108
)
(74,895
)
Total stockholders' equity
10,004
14,094
Non-controlling interests
16,386
23,085
TOTAL EQUITY
26,390
37,179
TOTAL LIABILITIES AND EQUITY
$
1,237,398
$
1,229,631
Clipper Realty Inc. Consolidated Statements of
Operations (In thousands, except per share data)
(Unaudited) Three Months Ended March 31,
2023
2022
REVENUES Residential rental income
$
23,940
$
21,462
Commercial rental income
9,727
10,588
TOTAL REVENUES
33,667
32,050
OPERATING EXPENSES Property operating expenses
8,099
7,539
Real estate taxes and insurance
8,536
7,931
General and administrative
3,293
2,942
Transaction pursuit costs
-
424
Depreciation and amortization
6,825
6,705
TOTAL OPERATING EXPENSES
26,753
25,541
INCOME FROM OPERATIONS
6,914
6,509
Interest expense, net
(10,135
)
(9,985
)
Loss on extinguishment of debt
(3,868
)
-
Net loss
(7,089
)
(3,476
)
Net loss attributable to non-controlling interests
4,402
2,158
Net loss attributable to common stockholders
$
(2,687
)
$
(1,318
)
Basic and diluted net loss per share
$
(0.19
)
$
(0.09
)
Weighted average common shares / OP units Common shares
outstanding
16,063
16,063
OP units outstanding
26,317
26,317
Diluted shares outstanding
42,380
42,380
Clipper Realty Inc. Consolidated Statements of
Cash Flows (In thousands) (Unaudited)
Three Months Ended March 31, .
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES Net loss
$
(7,089
)
$
(3,476
)
Adjustments to reconcile net loss to net cash provided by
operating activities: Depreciation
6,799
6,646
Amortization of deferred financing costs
313
313
Amortization of deferred costs and intangible assets
146
179
Amortization of above- and below-market leases
(9
)
(9
)
Loss on extinguishment of debt
3,868
-
Deferred rent
435
(189
)
Stock-based compensation
648
495
Bad debt expense
(121
)
(379
)
Changes in operating assets and liabilities: Tenant and other
receivables
358
(237
)
Prepaid expenses, other assets and deferred costs
2,941
3,122
Accounts payable and accrued liabilities
(1,801
)
(668
)
Security deposits
290
89
Other liabilities
643
701
Net cash provided by operating activities
7,421
6,587
CASH FLOWS FROM INVESTING ACTIVITIES Additions to
land, buildings and improvements
(12,494
)
(13,885
)
Acquisition deposit
-
(265
)
Cash paid in connection with acquisition of real estate
-
(3,701
)
Net cash used in investing activities
(12,494
)
(17,851
)
CASH FLOWS FROM FINANCING ACTIVITIES Payments of
mortgage notes
(46,301
)
(554
)
Proceeds from mortgage notes
62,330
7,617
Dividends and distributions
-
(4,188
)
Loan issuance and extinguishment costs
(3,798
)
-
Net cash provided by financing activities
12,231
2,875
Net increase (decrease) in cash and cash equivalents and
restricted cash
7,158
(8,389
)
Cash and cash equivalents and restricted cash - beginning of period
30,666
52,224
Cash and cash equivalents and restricted cash - end of
period
$
37,824
$
43,835
Cash and cash equivalents and restricted cash - beginning of
period: Cash and cash equivalents
$
18,152
$
34,524
Restricted cash
12,514
17,700
Total cash and cash equivalents and restricted cash - beginning of
period
$
30,666
$
52,224
Cash and cash equivalents and restricted cash - end of
period: Cash and cash equivalents
$
18,801
$
25,342
Restricted cash
19,023
18,493
Total cash and cash equivalents and restricted cash - end of period
$
37,824
$
43,835
Supplemental cash flow information: Cash paid for interest,
net of capitalized interest of $2,382 and $607 in 2023 and 2022,
respectively
$
9,863
$
10,351
Non-cash interest capitalized to real estate under development
27
508
Additions to investment in real estate included in accounts payable
and accrued liabilities
3,527
6,906
Non-cash dividend declared
4,348
-
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 March 31,
2023
2022
FFO Net loss
$
(7,089
)
$
(3,476
)
Real estate depreciation and amortization
6,825
6,705
FFO
$
(264
)
$
3,229
AFFO FFO
$
(264
)
$
3,229
Amortization of real estate tax intangible
120
120
Amortization of above- and below-market leases
(9
)
(9
)
Straight-line rent adjustments
(5
)
(189
)
Amortization of debt origination costs
313
313
Amortization of LTIP awards
648
495
Transaction pursuit costs
-
424
Loss on extinguishment of debt
3,868
-
Certain litigation-related expenses
-
86
Recurring capital spending
(195
)
(49
)
AFFO
$
4,476
$
4,420
AFFO Per Share/Unit
$
0.11
$
0.10
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 March 31,
2023
2022
Adjusted EBITDA Net loss
$
(7,089
)
$
(3,476
)
Real estate depreciation and amortization
6,825
6,705
Amortization of real estate tax intangible
120
120
Amortization of above- and below-market leases
(9
)
(9
)
Straight-line rent adjustments
(5
)
(189
)
Amortization of LTIP awards
648
495
Interest expense, net
10,135
9,985
Transaction pursuit costs
-
424
Loss on extinguishment of debt
3,868
-
Certain litigation-related expenses
-
86
Adjusted EBITDA
$
14,493
$
14,141
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 March 31,
2023
2022
NOI Income from operations
$
6,914
$
6,509
Real estate depreciation and amortization
6,825
6,705
General and administrative expenses
3,293
2,942
Transaction pursuit costs
-
424
Amortization of real estate tax intangible
120
120
Amortization of above- and below-market leases
(9
)
(9
)
Straight-line rent adjustments
(5
)
(189
)
NOI
$
17,138
$
16,502
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230504005153/en/
Lawrence Kreider Chief Financial Officer (718) 438-2804 x2231
larry@clipperrealty.com
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