Clipper Realty Inc.

Good afternoon, and thank you for joining us for the fourth quarter 2023 Clipper Realty, Inc. earnings conference call. Participating with me on today's call are David Bistresser, co-chairman of the board and chief executive officer, and J.J. Bistresser, 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 2023 annual report on Form 10-K, which is accessible at www.sec.gov and our website. As a reminder, the forward-looking statements speak only as of the date of this call, March 14, 2024, 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 10-K posted today for a reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will now turn the call over to our chairman and our co-chairman and CEO, David Bisserson.

David Bisserson Thank you, Larry. Good afternoon. Welcome to the fourth quarter of 2023 earnings call for Clipper Realty. I will provide a summary of some of our business performance and some existing new developments Afterwards, JJ will discuss property level activity, including leasing performance, and I will speak to our quarterly financial performance. We will then take your questions. I'm pleased to report that we have recorded record operating income in AFFO, continuing the positive trends from previous quarters. Rental demand continues to be strong at all our properties. In the fourth quarter, move leases exceeded prior rents by 6% across the entire market-based portfolio. and our properties were 98% leased. At the Tribeca House property in Manhattan and the Clover House property in Brooklyn, new leases were $88 per square foot, and overall rent levels remained at record levels, $78 at Tribeca House, $81 at Clover House, 40% better than the 63 square foot at the end of December 2021. And Flavage Gardens, since July, previously announced to be operating under a 40-year agreement according to the Article 11 of the Private Housing Finance Law and New York City Housing and Preservation Development. Under this agreement, known as the Article 11, the elimination of real estate taxes and enhanced rental recoveries for assisted tenants should allow us to profitably provide for our communities for property improvements, tenant assistance, and higher wages. Of course, we are at the early stages of reporting our progress as we move forward. Operationally, we are pleased to report that our ground-up development at Pacific House at 1010 Pacific Street in Brooklyn came online last quarter on budget and is 100% leased and on target to yield a 7% cap rate. The property is located across the High East Brooklyn, about one mile from the Atlantic Terminal, property has 175 units, 70% free market, and 30% affordable, and this is tax abated for 35 years. As the nearby 953 D Street ground of development, which is underway, we have completed the superstructure ahead of schedule, expect to complete the construction on time for 2025 leasing season, utilizing the $123 million construction loan we closed on last quarter. We purchased the land in 2021 and 22, which to build a nine-story fully amenitized residential building with 162,000 square feet of rentable square feet, 240 units, 70% free market, 30% affordable, 8,500 commercial rental square feet. And again, this is also tax abated for 35 years. As the continued high interest rate environment, we believe the higher rates make for high demand for our rental product versus the purchase option, and we are buttressed by the relatively long duration of debt at our operating properties. Our debt is 93% fixed at an average rate of 3.8%, an average duration of 5.5 years, non-recourse subject to limited standards carve-outs, and is not cross-collateralized by any one of the properties. We finance our properties on an asset-by-asset basis. With respect to inflation, we look to the short duration and high demand for the residential leases to allow us to cover increased operating expenses. With regard to our fourth quarter results, we are reporting quarterly revenue at $34.9 million, record NOI of $20 million, and record AF of over $6.3 million as a result of the strong leasing and cost reduction I just mentioned. These results represent significant improvements over the fourth quarter last year and as JJ and Larry will further detail. I will now turn the call over to JJ, who will provide an update on operations.

Thank you. I am pleased to report that our residential leasing performance at all our properties continues to improve. At the end of the fourth quarter, all our residential properties had very high occupancy averaging 98%, and rents are continuing at record levels while still recording increases over previous levels. Overall new lease and renewal rental rates in the fourth quarter exceeded previous rents by over 6% at our free market properties. We expect leasing to remain very strong in the foreseeable future as demand remains high and the overall rental housing supply remains constrained in the absence of significant new developments as widely publicized. At Chebekah House and Clover House, we have maintained leased occupancy between 96 to 99% and increased average rent per square foot to $78 per square foot from $71 over the last 12 months and $63 per square foot near the end of the pandemic. And our new development property, Pacific House, is almost fully stabilized. The 70% free market and 30% affordable property came online at the beginning of the second quarter and was 100% leased at the end of this quarter. We expect the property to achieve a cap rate over 7% in 2024 in line with the original underwriting. At the Flappers Gardens property, we are pleased to be operating under the new Article 11 agreement made with the Housing Preservation Department of New York City that was completed on June 29, 2023. We received the full abatement of real estate taxes beginning July 1, have begun completing the capital projects we committed, have begun placing formerly homeless residents and have begun obtaining the enhanced reimbursement under Section 610 of the Private Housing Finance Law for tenants receiving assistance. The benefits we receive will allow us to profitably improve the property. We are also getting increases from non-assisted tenants where increases have been permitted under Rent Guidelines Board for the last couple of years at the 3% level per annum. As a result, overall average rents for the property are increasing, rising to $2,600 at the end of the quarter versus $25,097 at the end of the last year. Operationally, our other residential properties at 10 West 65th Street, Aspen, and 250 Livingston Street continue to perform well. Average leased occupancy for these properties has been above 96% and average rental rates have increased 11% from a year ago. Rent collections across our portfolio remain as expected at seasonally high levels The overall collection rate in the fourth quarter was over 95%, despite the lingering challenges of the pandemic. Looking ahead, we remain focused on optimizing occupancy, pricing, and expenses across the business, expeditiously completing our development projects, and fully implementing the Article 11 transaction to best position ourselves for growth. I will now turn the call over to Larry, who will discuss our financial results.