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 (CLPR, Financial) 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 (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 (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.
