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Clipper Realty Inc. Announces Third Quarter 2019 Results

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Reports Record Revenues, Clover House Refinancing and Property Acquisition

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 September 30, 2019.

Highlights for the Three Months Ended September 30, 2019

  • Achieved record quarterly revenues of $29.4 million for the third quarter of 2019, representing an increase of 5.3% compared to the same period in 2018. Residential rental income increased 7.0% and 3.5% at the Flatbush Gardens and Tribeca House properties, respectively
  • Recorded quarterly income from operations of $8.5 million for the third quarter of 2019
  • Achieved quarterly net operating income ("NOI")1 of $15.4 million for the third quarter of 2019, representing an increase of 1.2% compared to the same period in 2018
  • Recorded quarterly net loss of $0.2 million for the third quarter of 2019
  • Achieved quarterly adjusted funds from operations ("AFFO")1 of $5.4 million for the third quarter of 2019
  • Declared a dividend of $0.095 per share for the third quarter of 2019

The Company also announced today (i) the refinancing of its Clover House property, and (ii) the acquisition of property located at 1010 Pacific Street in Brooklyn, to be redeveloped as a multifamily rental building.

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

"We are very pleased with our third quarter 2019 results, with ongoing solid revenue growth reflecting the quality of our portfolio and the operational excellence of our team, and proud that our portfolio is 99% leased. With strong management and prudent capital improvements, we believe our properties will deliver meaningful cash flow growth over time. As we approach year-end and beyond, we remain focused on executing our strategic initiatives, including expertly operating our high-quality portfolio, driving cash flow, enhancing efficiencies through asset repositioning and increasing scale, to create long-term value for our shareholders. As previously disclosed, our Clover House property reached stabilization following a three-month lease-up period; we are pleased to announce that we have refinanced the property with an $82 million, ten-year, fixed rate, interest-only loan. The Company's entire outstanding debt balance is now fixed at a blended 3.9% interest rate. We are also excited to acquire 1010 Pacific Street, adjacent to downtown Brooklyn, which we plan to redevelop as a fully amenitized, 119,000 rentable square foot residential building, further expanding our high-quality portfolio."

Financial Results

For the third quarter of 2019, revenues grew by $1.5 million, or 5.3%, to $29.4 million, compared to $27.9 million for the third quarter of 2018. The growth was primarily attributable to improvements in rental rates and occupancy at the Flatbush Gardens and Tribeca House properties, which had residential rental income increases of 7.0% and 3.5%, respectively, compared to the same period in 2018, and bringing the Clover House property online during the quarter. Commercial rental income grew 0.7% to $7.3 million for the third quarter of 2019.

For the third quarter of 2019, net loss was $0.2 million, or $0.01 per share, compared to net income of $1.3 million, or $0.02 per share ($1.1 million, or $0.02 per share, excluding a non-recurring $0.2 million gain on involuntary conversion), for the third quarter of 2018. The change was primarily attributable to the revenue increases discussed above, offset by higher property operating expenses, property taxes, insurance expense, and depreciation and amortization expense (inclusive of the impact of bringing the Clover House property online during the quarter), and higher interest expense from the refinancings of the 250 Livingston Street property in May 2019 and December 2018.

For the third quarter of 2019, AFFO was $5.4 million, or $0.12 per share, compared to $5.8 million, or $0.13 per share, for the third quarter of 2018. The change was primarily attributable to the revenue increases discussed above, offset by higher property operating expenses, property taxes, insurance expense and interest expense.

Balance Sheet

At September 30, 2019, notes payable (excluding unamortized loan costs) was $973.5 million, compared to $925.6 million at December 31, 2018; the increase reflected the refinancing of the 250 Livingston Street property in May 2019, partially offset by scheduled principal amortization.

Clover House Refinancing

On November 8, 2019, the Company refinanced the debt on its Clover House property with an $82 million, ten-year, fixed rate, interest-only secured first mortgage loan. With the proceeds, the Company repaid the existing loans on the property totaling $64.7 million due May 2020, which bore interest at a one-month LIBOR plus 3.85% annual rate. Net remaining proceeds of $16 million increased the Company's cash position. The refinancing is expected to reduce annual interest expense by approximately $0.7 million, based on current rates.

1010 Pacific Street Acquisition and Redevelopment

On November 8, 2019, the Company acquired property located at 1010 Pacific Street in Brooklyn, New York, for $31 million. The property is located adjacent to downtown Brooklyn, approximately one mile from the Atlantic Terminal/Barclays Center hub. The Company plans to redevelop the property as a nine-story, fully amenitized multifamily rental building, including indoor parking, with approximately 119,000 rentable square feet. The building is expected to have 175 total residential units, 70% of which will be free-market and 30% affordable; the property is eligible for a thirty-five year 421(a) tax abatement due to the affordable component. The construction process is estimated to take approximately two years.

Capital Expenditures

The Company continued to strategically develop its properties, selectively repositioning assets and driving ongoing rent growth. For the third quarter of 2019, the Company incurred $13.0 million of capital expenditures, compared to $10.1 million for the same period in 2018. The majority of these expenditures were related to renovation projects at the Clover House property; since acquisition, the Company funded $5.7 million of the expenditures under a $14.7 million construction loan. Other capital projects included unit upgrades at the Tribeca House property.

Dividend

The Company today declared a third quarter dividend of $0.095 per share to shareholders of record on November 25, 2019, payable December 3, 2019.

Conference Call and Supplemental Material

The Company will host a conference call on November 12, 2019, at 5:30 PM Eastern Time to discuss the third quarter 2019 results. The conference call can be accessed by dialing (800) 346-7359 or (973) 528-0008, conference entry code 371156. A replay of the call will be available from November 12, 2019, following the call, through November 26, 2019, by dialing (800) 332-6854 or (973) 528-0005, replay conference ID 371156. Supplemental data to this 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 ("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 the amount of 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, 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, 2018, 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)
 
September 30,
2019
December 31,
2018

(unaudited)

ASSETS
Investment in real estate
Land and improvements

$

540,859

 

$

497,343

 

Building and improvements

 

597,600

 

 

479,360

 

Tenant improvements

 

3,051

 

 

3,051

 

Furniture, fixtures and equipment

 

11,659

 

 

10,978

 

Real estate under development

 

-

 

 

125,467

 

Total investment in real estate

 

1,153,169

 

 

1,116,199

 

Accumulated depreciation

 

(103,958

)

 

(90,462

)

Investment in real estate, net

 

1,049,211

 

 

1,025,737

 

 
Cash and cash equivalents

 

43,552

 

 

37,028

 

Restricted cash

 

17,084

 

 

8,836

 

Tenant and other receivables, net of allowance for doubtful accounts

 

4,979

 

 

3,580

 

of $3,162 and $2,624, respectively
Deferred rent
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