Clipper Realty Inc.

Good day, and welcome to the Clipper Realty Second Quarter Earnings Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Larry Kreider. The floor is yours.

Thank you, and good afternoon, and thank you for joining us for the Second Quarter 2023 Clipper Realty Inc. Earnings Conference Call. Participating with me on today's call are David Bistrasser, co-chairman of the board and chief executive officer, and JJ Bistrasser, chief operating officer. Please be aware that statements made during the call that are not historical may be deemed forward-looking statements, and actual results may differ materially from those indicated by such forward-looking statements. These statements are subject to numerous risks and uncertainties, including those disclosed in the company's 2022 annual report on Form 10-K and updated in the 2023 second quarter report on Form 10-Q, which are both accessible at www.scc.gov and our website. As a reminder, the forward-looking statements speak only as of the date of this call, August 3, 2023, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including adjusted funds from operations, or AFFO, adjusted earnings before interest, taxes, depreciation, and amortization, or adjusted EBITDA, and net operating income, or NOI. Please see our press release, supplemental financial information, and Form 10Q posted today. for a reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will turn the call over to our co-chairman and CEO, David Distercer.

Thank you, Larry. Good afternoon, and welcome to the second quarter 2023 earnings call for Clipper Realty. I will provide an update to our business performance and some exciting new developments. I will then turn the call over to JJ, who will discuss property-level activity, including leasing performance. Finally, Larry will speak about our quarterly financial performance. We will then take your questions. Our operating results continue the positive trends we have reported in prior quarters. We continue to see strong rental demand at all our properties. In the second quarter, our properties were 99% leased and new leases exceeded prior rents by 15% across the entire market-based portfolio. At Tribeca House, in Manhattan and a Clover House property in Brooklyn, new leases were $83 a foot and overall rental levels reached a record $76 per foot, 21% better than $63 at the end of December 22. At Flatbush Gardens, we have entered into a transformative new phase of the property with completion in the quarter for a 40-year agreement with New York City Housing and Preservation under Article 11, which is available to all New Yorkers, of the private housing finance laws under which we have committed to maintain current rents as adjusted for annual rent guidelines based on RGB increases and make capital improvements over a three-year period that will address many of the issues expected of a large 70-plus-year-old property. As a part of the agreement with HPD to receive the Article 11 tax exemption, Flappage Gardens has committed to a three-year capital improvement plan at the property. Maintenance of rents within current categories based on the area median income, set aside of vacant units for formerly homeless households, and an increase in pay rates for the nine-year employees at the property to prevailing wage guidelines. The three-year capital improvement commitment could amount to $27 million, and it follows improvements over the last three years of about the same amount. Operationally, we are pleased that a ground-up development at 1010 Pacific and Pacific House, now branded Pacific House, has come online this quarter on schedule and on budget. The property is located in Prospect Heights, Brooklyn, about one mile from the Atlantic Terminal Barclays Center Hub. Leasing is progressing well and will lease up to a cap rate of above 7%. The property has 175 units, 70% free market, 30% affordable, and it has a tax abatement for 35 years. As previously reported in the first quarter, we replaced the property's construction loan ahead of schedule, a five-year $80 million loan, $60 million loan closing, $20 million available upon achievement of financial targets, after full lease up. Initial interest of 5.7% was reduced 15 bps due to issuance of certificate of occupancy and will be reduced by a further 25 bps upon full lease up. Next door at 953 D Street, we have begun the ground up development of the land parcels we bought in 2021 and 2022 into a non-story fully amenitized residential building with 160,000 106,000 rentable square feet of residential space, 240 total units, 70% free market, 30% affordable, and a 35-year tax abatement, and an 8,500 square foot commercial space. We paid $56 million for all the parcels, partially funded with acquisition financing of $37 million, which we are scheduled to convert into a construction loan shortly to take us through the completion of the construction. Added to the continued interest rate of alignment, we believe we are buttressed by a relatively long duration of debt on all our operating properties, of which 94% is fixed at an average rate of 3.82%, with an average duration of 6.23 years. Our debt is non-recourse, subject to limited standard carve-outs, and is not cross-collateralized. We finance our portfolio on a massive asset basis. With respect to the inflation, we look to a short duration of high demand of our residential leases to allow us to cover increased expenses on our operation needs of the properties of a high construction cost offset by higher rents. With regard to our record second quarter results, we are reporting record quarterly revenue of $34.5 million. record NOI of $19.2 million and AFFO of $5.4 million as a result of improved leasing, as I just mentioned. These results represent significant improvements over the second quarter of last year, and JJ and I will further detail. I will now turn over the call to JJ, who will provide an update on operations.