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Clipper Realty Inc (CLPR) (Q1 2024) Earnings Call Transcript Highlights: Record Revenues and ...

GuruFocus Research
·4-min read

  • Quarterly Revenue: $35.8 million, a record high.

  • Net Operating Income (NOI): $20.2 million, also a record.

  • Adjusted Funds From Operations (AFFO): $5.9 million.

  • Residential Revenue: Increased to $26.1 million.

  • Rental Rates: New and renewal leases exceeded previous rents by over 6%.

  • Occupancy Rates: Properties maintained very high occupancy averaging 98%.

  • Interest Expense: Increased by $1.6 million year-over-year.

  • Real Estate Taxes and Insurance: Decreased by $1.4 million, primarily due to the elimination of real estate taxes at Flatbush Gardens.

  • Dividend: Announced at $0.095 per share for the first quarter.

Release Date: May 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Clipper Realty Inc reported record quarterly revenue of $35.8 million and a net operating income (NOI) of $20.2 million, indicating strong financial performance.

  • Rental demand remains robust with properties like Tribeca House and Clover House achieving new leases over $80 per square foot, demonstrating high market value and demand.

  • The company's portfolio is highly occupied, with an average lease occupancy rate of 98%, ensuring stable cash flows.

  • Clipper Realty Inc has successfully navigated the post-COVID market, with rents stabilizing and new lease rates exceeding prior rents by 6% across the market-based portfolio.

  • Strategic developments such as the Pacific House at 1010 Pacific Street are fully leased and contributing positively to cash flow, reflecting effective project execution and market placement.

Negative Points

  • The impending vacancy at 250 Livingston Street in August 2025 poses a potential risk to rental income and requires strategic handling to mitigate impacts.

  • Increased interest expenses, which rose by $1.6 million in the first quarter year on year, could affect net earnings and cash flow availability.

  • General and administrative expenses have increased due to higher compensation expenses, which could impact profitability if not offset by revenue growth.

  • The high interest rate environment, although beneficial in some aspects, could increase borrowing costs and affect future property acquisitions or developments.

  • Operational challenges such as the need for higher payroll at Flatbush Gardens to comply with wage requirements under the Article 11 transaction, which increases operating costs.

Q & A Highlights

Q: Can you provide an update on the business performance and new developments for Clipper Realty? A: David Bistricer, Director of Clipper Realty Inc, reported record revenue and net operating income, with rental demand remaining strong across all properties. New leases exceeded prior rents by 6%, and properties like Tribeca House and Clover House in Manhattan and Brooklyn saw new leases over $80 per square foot. The company also highlighted the successful operation under a 40-year agreement at Flatbush Gardens, which has led to enhanced rental income and significant property improvements.

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Q: How is the Pacific House property performing? A: David Bistricer noted that the Pacific House at 1010 Pacific Street in Brooklyn is nearly fully stabilized and is now 100% leased, yielding a projected 7% cap rate. This property is contributing significantly to the company's cash flow.

Q: What are the financial results for the first quarter of 2024? A: Larry Kreider, CFO of Clipper Realty, reported a record quarterly revenue of $35.8 million and a net operating income (NOI) of $20.2 million. The adjusted funds from operations (AFFO) stood at $5.9 million, indicating strong leasing performance and cost reductions.

Q: Can you discuss the leasing performance and occupancy rates? A: Jacob Bistricer, COO of Clipper Realty, highlighted that all residential properties had high occupancy averaging 98%, with rents continuing at record levels. The first quarter saw new lease and renewal rental rates exceeding previous rents by over 6%.

Q: What is the status of the 953 Dean Street development? A: David Bistricer mentioned that construction at 953 Dean Street is proceeding ahead of schedule, with the superstructure completed early. The company expects to complete construction in time for the 2025 leasing season.

Q: How is the company managing the high interest rate environment? A: David Bistricer explained that the higher interest rates have increased tenant demand for Clipper Realty's rental properties versus purchase options. The company's operating debt is 92% fixed at an average interest rate of 3.87%, with an average duration of 5.2 years, which provides financial stability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.