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What changed in Clipper Realty Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Clipper Realty Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+271 added−265 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-16)

Top changes in Clipper Realty Inc.'s 2023 10-K

271 paragraphs added · 265 removed · 190 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

22 edited+6 added−5 removed28 unchanged
Biggest changeIn connection with the formation transactions, holders of interests in the predecessor entities received Class B LLC units in the Operating Partnership or shares of our common stock. At December 31, 2022, the continuing investors owned an aggregate amount of 26,317,396 Class B LLC units, representing 62.1% of the Company’s common stock on a fully diluted basis.
Biggest changeAt December 31, 2023, the continuing investors owned an aggregate amount of 26,317,396 Class B LLC units, representing 62.1% of the Company’s common stock on a fully diluted basis. Accordingly, the Operating Partnership’s interests in the LLC subsidiaries entitle it to receive 37.9% of the aggregate distributions from the LLC subsidiaries.
Government Regulation The Company and its properties are subject to government regulations including, but not limited to real property, rental and environmental regulations such as the New York State Real Property Law and the New York State Real Property Tax Law.
New York Regulation The Company and its properties are subject to government regulations including, but not limited to real property, rental and environmental regulations such as the New York State Real Property Law and the New York State Real Property Tax Law.
Competitive Strengths We believe that the following competitive strengths distinguish us from other owners and operators of multifamily residential and commercial properties: ● Diverse portfolio of properties in the New York metropolitan area, which is characterized by supply constraints, high barriers to entry, near- and long-term prospects for job creation, vacancy absorption and long-term rental rate growth. ● Expertise in redeveloping and managing multifamily residential properties. ● Experienced management team with a proven track record over generations in New York real estate. ● Balance sheet well-positioned for future growth. ● Strong internal rent growth prospects. 5 Regulation Environmental and Related Matters Under various federal, state and local laws, ordinances and regulations, as a current or former owner and operator of real property, we may be liable for costs and damages resulting from the presence or release of hazardous substances (such as lead, asbestos and polychlorinated biphenyls), waste, petroleum products and other miscellaneous products (including but not limited to natural products such as methane and radon gas) at, on, in, under or from such property, including costs for investigation or remediation, natural resource damages or third-party liability for personal injury or property damage.
Competitive Strengths We believe that the following competitive strengths distinguish us from other owners and operators of multifamily residential and commercial properties: ● Diverse portfolio of properties in the New York metropolitan area, which is characterized by supply constraints, high barriers to entry, near- and long-term prospects for job creation, vacancy absorption and long-term rental rate growth. ● Expertise in redeveloping and managing multifamily residential properties. ● Experienced management team with a proven track record over generations in New York real estate. ● Balance sheet well-positioned for future growth. ● Strong internal rent growth prospects. 6 Regulation Environmental and Related Matters Under various federal, state and local laws, ordinances and regulations, as a current or former owner and operator of real property, we may be liable for costs and damages resulting from the presence or release of hazardous substances (such as lead, asbestos and polychlorinated biphenyls), waste, petroleum products and other miscellaneous products (including but not limited to natural products such as methane and radon gas) at, on, in, under or from such property, including costs for investigation or remediation, natural resource damages or third-party liability for personal injury or property damage.
The Company is committed to making a positive impact in its communities and engages in community activities such as hosting and/or sponsoring free or not-for-profit activities at its properties. 6 The health and safety of the Company’s employees and their families remains a top priority, along with the health and safety of the Company’s tenants and the communities they serve.
The Company is committed to making a positive impact in its communities and engages in community activities such as hosting and/or sponsoring free or not-for-profit activities at its properties. 7 The health and safety of the Company’s employees and their families remains a top priority, along with the health and safety of the Company’s tenants and the communities they serve.
Company Information Our principal executive offices are located at 4611 12 th Avenue, Brooklyn, New York 11219. Our current facilities are adequate for our present and future operations. Our telephone number is (718) 438-2804. Our website address is www.clipperrealty.com .
Company Information Our principal executive offices are located at 4611 12th Avenue, Brooklyn, New York 11219. Our current facilities are adequate for our present and future operations. Our telephone number is (718) 438-2804. Our website address is www.clipperrealty.com .
As of December 31, 2022, the properties owned by the Company consist of the following (collectively, the “Properties”): • Tribeca House in Manhattan, comprising two buildings, one with 21 stories and one with 12 stories, containing residential and retail space with an aggregate of approximately 483,000 square feet of residential rental Gross Leasable Area (“GLA”) and 77,000 square feet of retail rental and parking GLA; • Flatbush Gardens in Brooklyn, a 59-building residential housing complex with 2,494 rentable units and approximately 1,749,000 square feet of residential rental GLA; • 141 Livingston Street in Brooklyn, a 15-story office building with approximately 216,000 square feet of GLA; • 250 Livingston Street in Brooklyn, a 12-story office and residential building with approximately 370,000 square feet of GLA (fully remeasured); • Aspen in Manhattan, a 7-story building containing residential and retail space with approximately 166,000 square feet of residential rental GLA and approximately 21,000 square feet of retail rental GLA; • Clover House in Brooklyn, a 11-story residential building with approximately 102,000 square feet of residential rental GLA; • 10 West 65 th Street in Manhattan, a 6-story residential building with approximately 76,000 square feet of residential rental GLA; • 1010 Pacific Street in Brooklyn, which the Company plans to redevelop as a 9-story residential building with approximately 119,000 square feet of residential rental GLA; and • 953 Dean Street (“Dean Street”) in Brooklyn, which the Company plans to redevelop as a 9-story residential building with approximately 160,000 square feet of residential rental GLA and approximately 9,000 square feet of retail rental GLA.
As of December 31, 2023, the properties owned by the Company consist of the following (collectively, the “Properties”): • Tribeca House in Manhattan, comprising two buildings, one with 21 stories and one with 12 stories, containing residential and retail space with an aggregate of approximately 483,000 square feet of residential rental Gross Leasable Area (“GLA”) and 77,000 square feet of retail rental and parking GLA; • Flatbush Gardens in Brooklyn, a 59-building residential housing complex with 2,494 rentable units and approximately 1,749,000 square feet of residential rental GLA; • 141 Livingston Street in Brooklyn, a 15-story office building with approximately 216,000 square feet of GLA; • 250 Livingston Street in Brooklyn, a 12-story office and residential building with approximately 370,000 square feet of GLA (fully remeasured); • Aspen in Manhattan, a 7-story building containing residential and retail space with approximately 166,000 square feet of residential rental GLA and approximately 21,000 square feet of retail rental GLA; 5 • Clover House in Brooklyn, a 11-story residential building with approximately 102,000 square feet of residential rental GLA; • 10 West 65th Street in Manhattan, a 6-story residential building with approximately 76,000 square feet of residential rental GLA; • 1010 Pacific Street in Brooklyn, a 9-story residential building with approximately 119,000 square feet of residential rental GLA; and • The Dean Street property in Brooklyn, which the Company plans to redevelop as a 9-story residential building with approximately 160,000 square feet of residential rental GLA and approximately 9,000 square feet of retail rental GLA.
We contributed the proceeds of the IPO to Clipper Realty L.P., our operating partnership subsidiary (the “Operating Partnership”), in exchange for units in the Operating Partnership.
We contributed the net proceeds of the private offering to Clipper Realty L.P., our operating partnership subsidiary (the “Operating Partnership”), in exchange for units in the Operating Partnership.
The Company provides employees with competitive compensation and a wide range of benefits including comprehensive medical and dental insurance coverage, short and long-term disability benefits, a 401(K) retirement program with matching, vacation, sick and personal leave, flexible work arrangements, flexible savings accounts, and other benefits.
The Company places a high value on the physical and mental health of its employees. The Company provides employees with competitive compensation and a wide range of benefits including comprehensive medical and dental insurance coverage, short and long-term disability benefits, a 401(K) retirement program with matching, vacation, sick and personal leave, flexible work arrangements, flexible savings accounts, and other benefits.
We expect competition from other real estate investors, including other REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, pension trusts, partnerships, individual investors and others, that may have greater financial resources or access to capital than we do or that are willing to acquire properties in transactions which are more highly leveraged or are less attractive from a financial viewpoint than we are willing to pursue.
We expect competition from other real estate investors, including other REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, pension trusts, partnerships, individual investors and others, that may have greater financial resources or access to capital than we do or that are willing to acquire properties in transactions which are more highly leveraged or are less attractive from a financial viewpoint than we are willing to pursue. 8 Human Capital Resources As of December 31, 2023, we had 148 employees who provide property management, maintenance, landscaping, construction management and accounting services.
These properties are owned by the predecessor entities, which after the formation transactions are referred to as the “LLC subsidiaries.” The LLC subsidiaries are managed by the Company through the Operating Partnership.
These properties are owned by the predecessor entities, which after the formation transactions are referred to as the “LLC subsidiaries.” .The LLC subsidiaries are managed by the Company through the Operating Partnership, which is the managing member of the LLC subsidiaries and owns Class A units in such LLC subsidiaries.
While we do carry commercial general liability insurance, property insurance and terrorism insurance with respect to our properties, these policies include limits and terms we consider commercially reasonable.
We currently have coverage for losses incurred in connection with both domestic and foreign terrorist-related activities. While we do carry commercial general liability insurance, property insurance and terrorism insurance with respect to our properties, these policies include limits and terms we consider commercially reasonable.
The Local 32BJ Service Employees International Union commercial building contract is in effect through December 31, 2023.
The Local 32BJ Service Employees International Union apartment building contract is in effect through April 20, 2026. The Local 32BJ Service Employees International Union commercial building contract was in effect through December 31, 2023 and the contract is still under negotiation. The Building Maintenance Employees Union, Local 486 contract is in effect through February 28, 2026.
Contributions to the plans are determined in accordance with the provisions of the negotiated labor contracts. The Local 94 International Union of Operating Engineers contract is in effect through December 31, 2026. The Local 32BJ Service Employees International Union apartment building contract is in effect through April 20, 2026.
Certain of these employees are covered by union-sponsored, collectively bargained, multiemployer defined benefit pension and profit-sharing plans, and health insurance, legal and training plans. Contributions to the plans are determined in accordance with the provisions of the negotiated labor contracts. The Local 94 International Union of Operating Engineers contract is in effect through December 31, 2026.
In furtherance of that goal, the company provides diversity equity and inclusion training as part of its annual harassment training for both supervisors and non-supervisors. The Company places a high value on the physical and mental health of its employees.
The Company believes that its success is dependent upon the diverse backgrounds of its employees and strives to build a culture that is collaborative, diverse, supportive and inclusive. In furtherance of that goal, the company provides diversity equity and inclusion training as part of its annual harassment training for both supervisors and non-supervisors.
These properties are located in the most densely populated major city in the United States, each with immediate access to mass transportation. 4 The Company’s ownership interest in its initial portfolio of properties (Tribeca House, Flatbush Gardens, 141 Livingston Street and 250 Livingston Street) was acquired in the formation transactions in connection with the private offering.
The Company’s ownership interest in its initial portfolio of properties (Tribeca House, Flatbush Gardens, 141 Livingston Street and 250 Livingston Street) was acquired in the formation transactions in connection with the private offering of shares of our common stock on August 3, 2015.
For properties in development, the Company is working with its vendors to obtain environmentally friendly products and materials. Insurance We carry commercial general liability insurance coverage on our properties, with limits of liability customary within the industry to insure against liability claims and related defense costs.
Insurance We carry commercial general liability insurance coverage on our properties, with limits of liability customary within the industry to insure against liability claims and related defense costs. Similarly, we are insured against the risk of direct and indirect physical damage to our properties including coverage for the perils of flood and earthquake shock.
We derive approximately 70% of our revenues from rents received from residents in our apartment rental properties and the remainder from commercial and retail rental customers. As of December 31, 2022, agencies of the City of New York leased approximately 17% of the total rentable square feet in our portfolio, representing approximately 20% of our total portfolio’s annualized rent.
As of December 31, 2023, agencies of the City of New York leased approximately 16% of the total rentable square feet in our portfolio, representing approximately 19% of our total portfolio’s annualized rent.
Similarly, we are insured against the risk of direct and indirect physical damage to our properties including coverage for the perils of flood and earthquake shock. Our policies also cover the loss of rental revenue during any reconstruction period. Our policies reflect limits and deductibles customary in the industry and specific to the buildings and portfolio.
Our policies also cover the loss of rental revenue during any reconstruction period. Our policies reflect limits and deductibles customary in the industry and specific to the buildings and portfolio. We also obtain title insurance policies when acquiring new properties, which insure fee title to our real properties.
See “Descriptions of Our Properties” in Item 2 for a detailed discussion of the Company’s properties.
See “Descriptions of Our Properties” in Item 2 for a detailed discussion of the Company’s properties. These properties are located in the most densely populated major city in the United States, each with immediate access to mass transportation.
Our primary focus is to continue to own, manage and operate our portfolio, and to acquire and re-position additional multifamily residential and commercial properties in the New York metropolitan area. On August 3, 2015, we closed a private offering of shares of our common stock, in which we raised net proceeds of approximately $130.2 million.
These predecessor entities were formed by principals of our management team from 2002 to 2014. Our primary focus is to continue to own, manage and operate our portfolio, and to acquire and re-position additional multifamily residential and commercial properties in the New York metropolitan area.
Accordingly, the Operating Partnership’s interests in the LLC subsidiaries entitle it to receive 37.9% of the aggregate distributions from the LLC subsidiaries. The Company’s revenue consists primarily of rents received from our residential, commercial and, to a lesser extent, retail tenants.
The Company has two reportable operating segments: residential rental properties and commercial rental properties. Our revenue consists primarily of rents received from our residential, commercial and, to a lesser extent, retail tenants. We derive approximately 70% of our revenues from rents received from residents in our apartment rental properties and the remainder from commercial and retail rental customers.
The Company has also been working to identify areas where it can improve the carbon footprint of its properties. At some of its properties, in both common areas and tenant units, the Company has replaced older electric fixtures with LED lighting.
The Company has also been working to identify areas where it can improve the carbon footprint of its properties. This includes complying with NYC Local Law 97 (LL97) that requires most buildings over 25 thousand square feet meet stringent carbon emissions caps starting in 2024.
Removed
History The Company’s Predecessor is a combination of four limited liability companies - Renaissance Equity Holdings LLC, Berkshire Equity LLC, Gunki Holdings LLC and 50/53 JV LLC - which were formed by principals of our management team from 2002 to 2014. Upon completion of the private offering and the formation transactions, we assumed responsibility for managing the predecessor LLCs.
Added
Upon completion of the private offering and the formation transactions, we assumed responsibility for managing the LLC subsidiaries. We were incorporated in the State of Maryland on July 7, 2015. On August 3, 2015, we closed a private offering of shares of our common stock, in which we raised net proceeds of approximately $130.2 million.
Removed
Vehicles which have been used to assist with operations at some of the properties have been replaced with electric scooters. During 2021 and 2022 the Company has replaced the roofs at many of its properties with insulated roofs to help reduce heat buildup and thereby lower electric costs during the summer months.
Added
We contributed the proceeds of the IPO to the Operating Partnership, in exchange for units in the Operating Partnership.
Removed
We also obtain title insurance policies when acquiring new properties, which insure fee title to our real properties. We currently have coverage for losses incurred in connection with both domestic and foreign terrorist-related activities.
Added
In connection with the formation transactions, holders of interests in the predecessor entities received Class B LLC units in the LLC Subsidiaries and an equal number of special, non-economic, voting stock in the Company. The Class B LLC units, together with the special voting shares, are convertible into shares of stock of the Company on a one-for-one basis.
Removed
Human Capital Resources As of December 31, 2022, we had 147 employees who provide property management, maintenance, landscaping, construction management and accounting services. Certain of these employees are covered by union-sponsored, collectively bargained, multiemployer defined benefit pension and profit-sharing plans, and health insurance, legal and training plans.
Added
As such, the Company has replaced certain roofs, including the upgrading of the roofing insulation, changed light fixtures to LED lighting and insulated building piping.
Removed
The Building Maintenance Employees Union, Local 486 contract is in effect through April 29, 2023. 7 The Company believes that its success is dependent upon the diverse backgrounds of its employees and strives to build a culture that is collaborative, diverse, supportive and inclusive.
Added
On June 29, 2023 the Company’s Flatbush Gardens property entered into a 40 year regulatory agreement under Article 11 of the Private Housing Finance Law with the New York City Department of Housing Preservation and Development ( the “Article 11 Agreement”).
Added
The Company committed to maintain rents with existing area median income groups, to lease 249 units to formerly homeless families and provide certain services as units become vacant, committed to pay prevailing wage rates to employees of the property as defined under New York City regulations and committed to a 3-year capital improvements plan.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

65 edited+36 added−32 removed238 unchanged
Biggest changeRisks associated with joint venture arrangements may include but are not limited to the following: ● our joint venture partners might experience financial distress, become bankrupt or fail to fund their share of required capital contributions, which may delay construction or development of a property or increase our financial commitment to the joint venture; ● we may be responsible to our partners for indemnifiable losses; ● our joint venture partners may have business interests or goals with respect to a property that conflict with our business interests and goals (including as relates to compliance with the REIT requirements), which could increase the likelihood of disputes regarding the ownership, management or disposition of the property; ● we may be unable to take actions that are opposed by our joint venture partners under arrangements that require us to share decision-making authority over major decisions affecting the ownership or operation of the joint venture and any property owned by the joint venture, such as the sale or financing of the property or the making of additional capital contributions for the benefit of the property; ● our joint venture partners may take actions that we oppose; ● our ability to sell or transfer our interest in a joint venture to a third party without prior consent of our joint venture partners may be restricted; ● we may disagree with our joint venture partners about decisions affecting a property or a joint venture, which could result in litigation or arbitration that increases our expenses, distracts our officers and directors and disrupts the day-to-day operations of the property, including by delaying important decisions until the dispute is resolved; ● we may suffer losses as a result of actions taken by our joint venture partners with respect to our joint venture investments; and ● in the event that we obtain a minority position in a joint venture, we may not have significant influence or control over such joint venture or the performance of our investment therein. 17 If there is a transfer of a controlling interest in any of our properties (or in the entities through which we hold our properties), issuances of our common stock in exchange for Class B LLC units pursuant to the exchange right granted to holders of Class B LLC units, sales of Class B LLC units by the holders thereof or the issuance of LLC interests to our Operating Partnership, we may be obligated to pay New York City and New York State transfer tax based on the fair market value of the New York City and/or New York State real property transferred.
Biggest changeRisks associated with joint venture arrangements may include but are not limited to the following: ● our joint venture partners might experience financial distress, become bankrupt or fail to fund their share of required capital contributions, which may delay construction or development of a property or increase our financial commitment to the joint venture; ● we may be responsible to our partners for indemnifiable losses; ● our joint venture partners may have business interests or goals with respect to a property that conflict with our business interests and goals (including as relates to compliance with the REIT requirements), which could increase the likelihood of disputes regarding the ownership, management or disposition of the property; ● we may be unable to take actions that are opposed by our joint venture partners under arrangements that require us to share decision-making authority over major decisions affecting the ownership or operation of the joint venture and any property owned by the joint venture, such as the sale or financing of the property or the making of additional capital contributions for the benefit of the property; ● our joint venture partners may take actions that we oppose; ● our ability to sell or transfer our interest in a joint venture to a third party without prior consent of our joint venture partners may be restricted; ● we may disagree with our joint venture partners about decisions affecting a property or a joint venture, which could result in litigation or arbitration that increases our expenses, distracts our officers and directors and disrupts the day-to-day operations of the property, including by delaying important decisions until the dispute is resolved; ● we may suffer losses as a result of actions taken by our joint venture partners with respect to our joint venture investments; and ● in the event that we obtain a minority position in a joint venture, we may not have significant influence or control over such joint venture or the performance of our investment therein.
A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes, which could reduce the basis of a stockholder ’ s investment in shares of our common stock and may trigger taxable gain. A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes.
A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes, which could reduce the basis of a stockholder ’ s investment in shares of our common stock and may trigger taxable gain.
These risks include, without limitation: ● the availability and pricing of financing on favorable terms or at all; ● the availability and timely receipt of zoning and other regulatory approvals; ● the potential for the fluctuation of occupancy rates and rents at development and redeveloped properties, which may result in our investment not being profitable; ● startup, development and redevelopment costs may be higher than anticipated; ● cost overruns and untimely completion of construction (including risks beyond our control, such as weather or labor conditions or material shortages); and ● changes in the pricing and availability of buyers and sellers of such properties.
These risks include, without limitation: ● the availability and pricing of financing on favorable terms or at all; ● the availability and timely receipt of zoning and other regulatory approvals; ● the potential for the fluctuation of occupancy rates and rents at development and redeveloped properties, which may result in our investment not being profitable; ● startup, development and redevelopment costs may be higher than anticipated; 13 ● cost overruns and untimely completion of construction (including risks beyond our control, such as weather or labor conditions or material shortages); and ● changes in the pricing and availability of buyers and sellers of such properties.
Therefore, a transfer of a controlling interest could occur as a result of the combination of one or more of the private offering, the IPO, other offerings of common stock by us resulting of an increase in our investment in the entities that own our properties, issuances of our common stock to our continuing investors in exchange for Class B LLC units pursuant to the exchange right granted to holders of Class B LLC units, sales of Class B LLC units by the holders thereof, the issuance of LLC interests to our Operating Partnership in connection with the private offering or a subsequent offering of our stock, or as a result of any combination of such transfers being aggregated.
Therefore, a transfer of a controlling interest could occur as a result of the combination of one or more of the private offering, other offerings of common stock by us resulting of an increase in our investment in the entities that own our properties, issuances of our common stock to our continuing investors in exchange for Class B LLC units pursuant to the exchange right granted to holders of Class B LLC units, sales of Class B LLC units by the holders thereof, the issuance of LLC interests to our Operating Partnership in connection with the private offering or a subsequent offering of our stock, or as a result of any combination of such transfers being aggregated.
As a result, our continuing investors as a group or individually could delay, defer or prevent any change of control of our Company and, as a result, adversely affect our stockholders’ ability to realize a premium for their shares of common stock. 19 ● Our charter authorizes our board of directors to, without common stockholder approval, amend our charter to increase or decrease the aggregate number of our authorized shares of stock or the authorized number of shares of any class or series of our stock, authorize us to issue additional shares of our common stock or preferred stock and classify or reclassify unissued shares of our common stock or preferred stock and thereafter authorize us to issue such classified or reclassified shares of stock.
As a result, our continuing investors as a group or individually could delay, defer or prevent any change of control of our Company and, as a result, adversely affect our stockholders’ ability to realize a premium for their shares of common stock. ● Our charter authorizes our board of directors to, without common stockholder approval, amend our charter to increase or decrease the aggregate number of our authorized shares of stock or the authorized number of shares of any class or series of our stock, authorize us to issue additional shares of our common stock or preferred stock and classify or reclassify unissued shares of our common stock or preferred stock and thereafter authorize us to issue such classified or reclassified shares of stock.
Some of the factors that could negatively affect or result in fluctuations in the market price of our common stock include: ● actual or anticipated variations in our quarterly or annual operating results; 29 ● increases in market interest rates that lead purchasers of our shares to demand a higher yield; ● changes in market valuations of similar companies; ● adverse market reaction to any increased indebtedness we incur in the future; ● additions or departures of key personnel; ● actions by stockholders; ● speculation in the press or investment community; ● general market, economic and political conditions, including an economic slowdown or dislocation in the global credit markets; ● our operating performance and the performance of other similar companies; ● negative publicity regarding us specifically or our business lines generally; ● changes in accounting principles; and ● passage of legislation or other regulatory developments that adversely affect us or our industry, such as the Housing Stability and Tenant Protection Act of 2019, which was signed into law in New York in June 2019.
Some of the factors that could negatively affect or result in fluctuations in the market price of our common stock include: ● actual or anticipated variations in our quarterly or annual operating results; ● increases in market interest rates that lead purchasers of our shares to demand a higher yield; ● changes in market valuations of similar companies; 32 ● adverse market reaction to any increased indebtedness we incur in the future; ● additions or departures of key personnel; ● actions by stockholders; ● speculation in the press or investment community; ● general market, economic and political conditions, including an economic slowdown or dislocation in the global credit markets; ● our operating performance and the performance of other similar companies; ● negative publicity regarding us specifically or our business lines generally; ● changes in accounting principles; and ● passage of legislation or other regulatory developments that adversely affect us or our industry, such as the Housing Stability and Tenant Protection Act of 2019, which was signed into law in New York in June 2019.
As permitted by the MGCL, our bylaws contain a provision exempting from the control share acquisition provisions of the MGCL any and all acquisitions by any person of shares of our stock. 20 ● Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, including adopting a classified board.
As permitted by the MGCL, our bylaws contain a provision exempting from the control share acquisition provisions of the MGCL any and all acquisitions by any person of shares of our stock. ● Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, including adopting a classified board.
In these events, we cannot assure you that such tenants will renew those leases or not exercise early termination options or that we will be able to re-lease spaces on economically advantageous terms or at all. For example, the City of New York has advised us that it may vacate the 250 Livingston Street property in 2025.
In these events, we cannot assure you that such tenants will renew those leases or not exercise early termination options or that we will be able to re-lease spaces on economically advantageous terms or at all. For example, the City of New York has advised us that it will vacate the 250 Livingston Street property in 2025.
We have in the past and we may be required to make rent or other concessions and/or significant capital expenditures to improve our properties in order to retain and attract tenants, generate positive cash flows or to make real estate properties suitable for sale, which could adversely affect us, including our financial condition, results of operations and cash flow.
We have in the past and we may be required to make rent or other concessions and/or significant capital expenditures to improve our properties to retain and attract tenants, generate positive cash flows or to make real estate properties suitable for sale, which could adversely affect us, including our financial condition, results of operations and cash flow.
If we are unable to obtain sufficient rental rates across our portfolio, then our ability to generate cash flow growth will be negatively affected. 11 We engage in development and redevelopment activities, which could expose us to different risks that could adversely affect us, including our financial condition, cash flow and results of operations.
If we are unable to obtain sufficient rental rates across our portfolio, then our ability to generate cash flow growth will be negatively affected. We engage in development and redevelopment activities, which could expose us to different risks that could adversely affect us, including our financial condition, cash flow and results of operations.
In addition, we may be subject to liability for personal injury or property damage sustained as a result of exposure to ACM or releases of ACM into the environment. 15 In addition, our properties may contain or develop harmful mold or suffer from other indoor air quality issues.
In addition, we may be subject to liability for personal injury or property damage sustained as a result of exposure to ACM or releases of ACM into the environment. In addition, our properties may contain or develop harmful mold or suffer from other indoor air quality issues.
Nevertheless, the duties and obligations of the general partner of our Operating Partnership and the duties and obligations of the managing member of our predecessor entities may come into conflict with the duties of our directors and officers to our Company and our stockholders. 21 Our charter contains a provision that expressly permits our officers to compete with us.
Nevertheless, the duties and obligations of the general partner of our Operating Partnership and the duties and obligations of the managing member of our predecessor entities may come into conflict with the duties of our directors and officers to our Company and our stockholders. Our charter contains a provision that expressly permits our officers to compete with us.
Our financial results may be adversely affected by our exposure to losses arising from natural disasters or severe weather. We also are exposed to risks associated with inclement winter weather, including increased need for maintenance and repair of our buildings. 14 Actual or threatened terrorist attacks may adversely affect our ability to generate revenues and the value of our properties.
Our financial results may be adversely affected by our exposure to losses arising from natural disasters or severe weather. We also are exposed to risks associated with inclement winter weather, including increased need for maintenance and repair of our buildings. 15 Actual or threatened terrorist attacks may adversely affect our ability to generate revenues and the value of our properties.
If any of our significant tenants were to become bankrupt or insolvent, suffer a downturn in their business or a reduction in funds available to them, default under their leases, fail to renew their leases or renew on terms less favorable to us than their current terms, our results of operations and cash flow could be adversely affected.
If any of our significant tenants were to become bankrupt or insolvent, suffer a downturn in their business or a reduction in funds available to them, default under their leases, fail to renew their leases or renew on terms less favorable to us than their current terms, our financial condition results of operations and cash flow could be adversely affected.
ITEM 1A. RI S K FACTORS Set forth below are certain risk factors that could harm our business, results of operations and financial condition. You should carefully read the following risk factors, together with the financial statements, related notes and other information contained in this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS Set forth below are certain risk factors that could harm our business, results of operations and financial condition. You should carefully read the following risk factors, together with the financial statements, related notes and other information contained in this Annual Report on Form 10-K.
These actions could have the effect of reducing our income and amounts available for distribution to our stockholders. 27 We may be subject to a 100% penalty tax on any prohibited transactions that we enter into, or may be required to forego certain otherwise beneficial opportunities in order to avoid the penalty tax on prohibited transactions.
These actions could have the effect of reducing our income and amounts available for distribution to our stockholders. 30 We may be subject to a 100% penalty tax on any prohibited transactions that we enter into, or may be required to forego certain otherwise beneficial opportunities in order to avoid the penalty tax on prohibited transactions.
As disclosed in Note 9, “Commitments and Contingencies”, Clipper Equity was the subject of an investigation by the Office of the Attorney General of the State of New York with respect to its activities, and in April 2022 entered into an Assurance of Discontinuance with the OAG to resolve the investigation on behalf of itself and its affiliates.
As disclosed in Note 8, “Commitments and Contingencies”, Clipper Equity was the subject of an investigation by the Office of the Attorney General of the State of New York with respect to its activities, and in April 2022 entered into an Assurance of Discontinuance with the OAG to resolve the investigation on behalf of itself and its affiliates.
These restrictions could limit our ability to sell an asset at a time, or on terms, that would be favorable absent such restrictions. 16 From time to time, we may enter into joint venture relationships or other arrangements regarding the joint ownership of property.
These restrictions could limit our ability to sell an asset at a time, or on terms, that would be favorable absent such restrictions. 17 From time to time, we may enter into joint venture relationships or other arrangements regarding the joint ownership of property.
Generally, failure to hedge effectively against interest rate changes may adversely affect our results of operations. 25 When a hedging agreement is required under the terms of a mortgage loan, it is often a condition that the hedge counterparty maintains a specified credit rating.
Generally, failure to hedge effectively against interest rate changes may adversely affect our results of operations. 28 When a hedging agreement is required under the terms of a mortgage loan, it is often a condition that the hedge counterparty maintains a specified credit rating.
Our business may also be adversely affected by local economic conditions, as all of our revenue is currently derived from properties located in New York City, with our entire portfolio located in Manhattan and Brooklyn. 8 Factors that may affect our occupancy levels, our rental revenues, our income from operations, our funds from operations (“FFO”), our adjusted funds from operations (“AFFO”), our adjusted earnings before interest, income tax, depreciation and amortization (“Adjusted EBITDA”), our net operating income (“NOI”), our cash flow and/or the value of our properties include the following, among others: ● downturns in global, national, regional and local economic and demographic conditions; ● the Housing Stability and Tenant Protection Act of 2019, which was signed into law in New York in June 2019, as well as other rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs; ● declines in the financial condition of our tenants, which may result in tenant defaults under leases due to bankruptcy, lack of liquidity, operational failures or other reasons, and declines in the financial condition of buyers and sellers of properties; ● declines in local, state and/or federal government budgets and/or increases in local, state and/or federal government budget deficits, which among other things could have an adverse effect on the financial condition of our only office tenant, the City of New York, and may result in tenant defaults under leases and/or cause such tenant to seek alternative office space arrangements; ● the inability or unwillingness of our tenants to pay rent increases, or our inability to collect rents and other amounts due from our tenants; ● significant job losses in the industries in which our commercial and/or retail tenants operate, and/or from which our residential tenants derive their incomes, which may decrease demand for our commercial, retail and/or residential space, causing market rental rates and property values to be affected negatively; ● an oversupply of, or a reduced demand for, commercial and/or retail space and/or apartment homes; ● declines in household formation; ● unfavorable residential mortgage rates; ● changes in market rental rates in our markets and/or the attractiveness of our properties to tenants, particularly as our buildings continue to age, and our ability to fund repair and maintenance costs; ● competition from other available commercial and/or retail lessors and other available apartments and housing alternatives, and from other real estate investors with significant capital, such as other real estate operating companies, other REITs and institutional investment funds; ● economic conditions that could cause an increase in our operating expenses, such as increases in property taxes (particularly as a result of increased local, state and national government budget deficits and debt and potentially reduced federal aid to state and local governments), utilities, insurance, compensation of on-site personnel and routine maintenance; ● opposition from local community or political groups with respect to the development and/or operations at a property; ● investigation, removal or remediation of hazardous materials or toxic substances at a property; ● changes in, and changes in enforcement of, laws, regulations and governmental policies, including without limitation, health, safety, environmental and zoning laws; and ● changes in rental housing subsidies provided by the government and/or other government programs that favor single-family rental housing or owner-occupied housing over multifamily rental housing. 9 Multifamily residential properties are subject to rent stabilization regulations, which limit our ability to raise rents above specified maximum amounts and could give rise to claims by tenants that their rents exceed such specified maximum amounts.
Our business may also be adversely affected by local economic conditions, as all of our revenue is currently derived from properties located in New York City, with our entire portfolio located in Manhattan and Brooklyn. 9 Factors that may affect our occupancy levels, our rental revenues, our income from operations, our funds from operations (“FFO”), our adjusted funds from operations (“AFFO”), our adjusted earnings before interest, income tax, depreciation and amortization (“Adjusted EBITDA”), our net operating income (“NOI”), our cash flow and/or the value of our properties include the following, among others: ● downturns in global, national, regional and local economic and demographic conditions; ● the Housing Stability and Tenant Protection Act of 2019, which was signed into law in New York in June 2019, as well as other rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs; ● declines in the financial condition of our tenants, which may result in tenant defaults under leases due to bankruptcy, lack of liquidity, operational failures or other reasons, and declines in the financial condition of buyers and sellers of properties; ● declines in local, state and/or federal government budgets and/or increases in local, state and/or federal government budget deficits, which among other things could have an adverse effect on the financial condition of our only office tenant, the agencies of the City of New York, and may result in tenant defaults under leases and/or cause such tenant to seek alternative office space arrangements; ● the inability or unwillingness of our tenants to pay rent increases, or our inability to collect rents and other amounts due from our tenants; ● significant job losses in the industries in which our commercial and/or retail tenants operate, and/or from which our residential tenants derive their incomes, which may decrease demand for our commercial, retail and/or residential space, causing market rental rates and property values to be affected negatively; ● an oversupply of, or a reduced demand for, commercial and/or retail space and/or apartment homes; ● declines in household formation; ● unfavorable residential mortgage rates; ● changes in market rental rates in our markets and/or the attractiveness of our properties to tenants, particularly as our buildings continue to age, and our ability to fund repair and maintenance costs; ● competition from other available commercial and/or retail lessors and other available apartments and housing alternatives, and from other real estate investors with significant capital, such as other real estate operating companies, other REITs and institutional investment funds; ● economic conditions that could cause an increase in our operating expenses, such as increases in property taxes (particularly as a result of increased local, state and national government budget deficits and debt and potentially reduced federal aid to state and local governments), utilities, insurance, compensation of on-site personnel and routine maintenance; ● opposition from local community or political groups with respect to the development and/or operations at a property; ● investigation, removal or remediation of hazardous materials or toxic substances at a property; 10 ● changes in, and changes in enforcement of, laws, regulations and governmental policies, including without limitation, health, safety, environmental and zoning laws; and ● changes in rental housing subsidies provided by the government and/or other government programs that favor single-family rental housing or owner-occupied housing over multifamily rental housing.
If we choose to make all or part of a distribution in our own stock, shareholders may be required to pay income taxes with respect to such distributions in excess of the cash portion, if any, of the distribution received.
If we choose to make all or part of a distribution in our own stock, stockholders may be required to pay income taxes with respect to such distributions in excess of the cash portion, if any, of the distribution received.
Our transition to becoming subject to the additional requirements of Section 404 of the Sarbanes-Oxley Act has been and will continue to be time-consuming. Further, the costs associated with compliance with and implementation of procedures under these and future laws and related rules could have a material impact on our results of operations.
Our compliance with the additional requirements of Section 404 of the Sarbanes-Oxley Act has been and will continue to be time-consuming. Further, the costs associated with compliance with and implementation of procedures under these and future laws and related rules could have a material impact on our results of operations.
Our Co-Chairman and Chief Executive Officer, David Bistricer, our Co-Chairman and Head of the Investment Committee, Sam Levinson, and other members of our senior management team continue to own interests in properties and businesses that were not contributed to us in the formation transactions.
David Bistricer, our Co-Chairman of the board of directors and Chief Executive Officer, Sam Levinson our Co-Chairman of the board of directors and Chairman of the Investment Committee, , and other members of our senior management team continue to own interests in properties and businesses that were not contributed to us in the formation transactions.
For instance, each of David Bistricer, our Co-Chairman and Chief Executive Officer, and JJ Bistricer, our Chief Operating Officer, is an officer of Clipper Equity and each of Sam Levinson, our Co-Chairman and Head of the Investment Committee, and Jacob Schwimmer, our Chief Property Management Officer, has ownership interests in Clipper Equity.
For instance, each of David Bistricer, our Co-Chairman of the board of directors and Chief Executive Officer, and JJ Bistricer, our Chief Operating Officer, is an officer of Clipper Equity and each of Sam Levinson, our Co-Chairman of the board of directors and Chairman of the Investment Committee, and Jacob Schwimmer, our Chief Property Management Officer, has ownership interests in Clipper Equity.
This Annual Report on Form 10-K contains forward-looking statements that contain risks and uncertainties; please refer to the discussion under "Cautionary Note Concerning Forward-Looking Statements." Risks Related to Real Estate Unfavorable market and economic conditions in the United States and globally and in the specific markets or submarkets where our properties are located could adversely affect occupancy levels, rental rates, rent collections, operating expenses, and the overall market value of our assets, impair our ability to sell, recapitalize or refinance our assets and have an adverse effect on our results of operations, financial condition, cash flow and our ability to make distributions to our stockholders.
This Annual Report on Form 10-K contains forward-looking statements that involve risks see "Cautionary Note Concerning Forward-Looking Statements." Risks Related to Real Estate Unfavorable market and economic conditions in the United States and globally and in the specific markets or submarkets where our properties are located could adversely affect occupancy levels, rental rates, rent collections, operating expenses, and the overall market value of our assets, impair our ability to sell, recapitalize or refinance our assets and have an adverse effect on our results of operations, financial condition, cash flow and our ability to make distributions to our stockholders.
As of December 31, 2022, Kings County Court, the Human Resources Administration, and the Department of Environmental Protection, all of which are agencies of the City of New York, leased an aggregate of 548,580 rentable square feet of commercial space at our commercial office properties at 141 Livingston Street and 250 Livingston Street, representing approximately 17% of the total rentable square feet in our portfolio and approximately 20% of our total portfolio’s annualized rent.
As of December 31, 2023, Kings County Court, the Human Resources Administration, and the Department of Environmental Protection, all of which are agencies of the City of New York, leased an aggregate of 548,580 rentable square feet of commercial space at our commercial office properties at 141 Livingston Street and 250 Livingston Street, representing approximately 16% of the total rentable square feet in our portfolio and approximately 19% of our total portfolio’s annualized rent.
In periods when the capital and credit markets experience significant volatility, the amounts, sources and cost of capital available to us may be adversely affected. We primarily use third-party financing to fund acquisitions of properties and to refinance indebtedness as it matures. As of December 31, 2022, we had no corporate debt and $1,171.2 million in property-level debt.
In periods when the capital and credit markets experience significant volatility, the amounts, sources and cost of capital available to us may be adversely affected. We primarily use third-party financing to fund acquisitions of properties and to refinance indebtedness as it matures. As of December 31, 2023, we had no corporate debt and $1,219.0 million in property-level debt.
As of December 31, 2022, we had approximately 63,000 rentable square feet of vacant residential space (excluding leases signed but not yet commenced) at our operating properties, and leases representing approximately 69% of the square footage of residential space at the operating properties will expire during the year ending December 31, 2023 (including month-to-month leases).
As of December 31, 2023, we had approximately 111,000 rentable square feet of vacant residential space (excluding leases signed but not yet commenced) at our operating properties, and leases representing approximately 74% of the square footage of residential space at the operating properties will expire during the year ending December 31, 2024 (including month-to-month leases).
Provisions of the law make it extremely difficult for apartments to exit rent regulation, repeal vacancy decontrol and high-income deregulation, repeal vacancy and longevity bonuses, establish a preferential rent as the base rent at lease renewal, and reduce / limit rent increases associated with major capital improvements and individual apartment improvements.
The legislation affects rent-stabilized apartments in New York City. Provisions of the law make it extremely difficult for apartments to exit rent regulation, repeal vacancy decontrol and high-income deregulation, repeal vacancy and longevity bonuses, establish a preferential rent as the base rent at lease renewal, and reduce / limit rent increases associated with major capital improvements and individual apartment improvements.
We engage in development and redevelopment activities with respect to our properties as we believe market conditions dictate. For example, we are currently redeveloping the 1010 Pacific Street property and plan to develop the Dean Street property as fully amenitized residential rental buildings.
We engage in development and redevelopment activities with respect to our properties as we believe market conditions dictate. For example, in 2023 we completed the development of the 1010 Pacific Street property and plan to develop the Dean Street property as fully amenitized residential rental buildings.
Our portfolio ’ s revenue is currently generated from seven properties.
Our portfolio ’ s revenue is currently generated from eight properties.
As of December 31, 2022, we had $1,171.2 million of total indebtedness, all of which was property-level debt. See Note 6 of the accompanying “Notes to Consolidated Financial Statements” for a discussion of the Company’s property-level debt.
As of December 31, 2023, we had $1,219.0 million of total indebtedness, all of which was property-level debt. See Note 6 of the accompanying “Notes to Consolidated Financial Statements” for a discussion of the Company’s property-level debt.
As of December 31, 2022, we had no vacant commercial space, and approximately 10,000 rentable square feet of vacant retail space.
As of December 31, 2023, we had no vacant commercial space, and approximately 14,000 rentable square feet of vacant retail space.
Clipper Equity owns interests in, and controls and manages entities that own interests in, multifamily and commercial properties in the New York metropolitan area. 22 We have adopted an Investment Policy that provides that our officers, including David Bistricer, JJ Bistricer and Jacob Schwimmer, are not required to present certain identified investment opportunities to us, including assets located outside the New York metropolitan area, for-sale condominium or cooperative conversions, development projects, projects that would require us to obtain guarantees from third parties or to backstop obligations of other parties, and land acquisitions.
We have adopted an Investment Policy that provides that our officers, including David Bistricer, JJ Bistricer and Jacob Schwimmer, are not required to present certain identified investment opportunities to us, including assets located outside the New York metropolitan area, for-sale condominium or cooperative conversions, development projects, projects that would require us to obtain guarantees from third parties or to backstop obligations of other parties, and land acquisitions.
Such adverse developments could materially reduce the value of our real estate portfolio and our rental revenues, and thus adversely affect our ability to meet our debt obligations and to make distributions to our stockholders. 10 We depend on a single government tenant in our office buildings, which could cause an adverse effect on us, including our results of operations and cash flow, if the City of New York were to suffer financial difficulty.
Such adverse developments could materially reduce the value of our real estate portfolio and our rental revenues, and thus adversely affect our ability to meet our debt obligations and to make distributions to our stockholders. 11 We depend on certain agencies of the City of New York, as a single government tenant in our office buildings, which could cause an adverse effect on us, including our results of operations and cash flow, if the City of New York were to suffer financial difficulty or if these agencies opt to early terminate or opt not to renew their leases.
Risks Related to Our Organization and Structure Our continuing investors hold shares of our special voting stock that entitle them to vote together with holders of our common stock on an as-exchanged basis, based on their ownership of Class B LLC units in our predecessor entities, and are generally able to significantly influence the composition of our board of directors, our management and the conduct of our business.
Such disclosures are costly, and the disclosure or the failure to comply with such disclosure requirements could lead to adverse consequences. 21 Risks Related to Our Organization and Structure Our continuing investors hold shares of our special voting stock that entitle them to vote together with holders of our common stock on an as-exchanged basis, based on their ownership of Class B LLC units in our predecessor entities, and are generally able to significantly influence the composition of our board of directors, our management and the conduct of our business.
Because our status as an emerging growth company ended December 31, 2022 and we are a smaller reporting company with $100 million or more of annual revenues, Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires our independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting for the first time.
Because our status as an emerging growth company ended December 31, 2022 and we are an accelerated filer, Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires our independent registered public accounting firm to attest to the effectiveness of our internal control over financial reporting for the first time.
For so long as our continuing investors continue to own shares of our stock entitling them to exercise a significant percentage of our voting power, the concentration of voting power in our continuing investors may discourage unsolicited acquisition proposals and may delay, defer or prevent any change of control of our Company that might involve a premium price for holders of our common stock or otherwise be in their best interest.
For so long as our continuing investors continue to own shares of our stock entitling them to exercise a significant percentage of our voting power, the concentration of voting power in our continuing investors may discourage unsolicited acquisition proposals and may delay, defer or prevent any change of control of our Company that might involve a premium price for holders of our common stock or otherwise be in their best interest. 22 The ability of stockholders to control our policies and effect a change of control of our Company is limited by certain provisions of our charter and bylaws and by Maryland law.
In addition, if we are compelled to liquidate our assets to repay obligations to our lenders or make distributions to our stockholders, we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as property held primarily for sale to customers in the ordinary course of business. 28 The ability of our board of directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.
In addition, if we are compelled to liquidate our assets to repay obligations to our lenders or make distributions to our stockholders, we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as property held primarily for sale to customers in the ordinary course of business.
In the future, our cash flow could be insufficient to meet required payments of principal and interest or to pay distributions on our shares at expected levels.
We may not have sufficient cash flow to meet the required payments of principal and interest on our debt or to pay distributions on our common stock at expected levels. In the future, our cash flow could be insufficient to meet required payments of principal and interest or to pay distributions on our shares at expected levels.
The loss of rental revenues from our tenants and our inability to replace such tenants may adversely affect us, including our profitability, our ability to meet our debt and other financial obligations and our ability to make distributions to our stockholders. 12 Real estate investments are relatively illiquid and may limit our flexibility.
The loss of rental revenues from our tenants and our inability to replace such tenants may adversely affect us, including our profitability, our ability to meet our debt and other financial obligations and our ability to make distributions to our stockholders.
As of December 31, 2022, our portfolio consisted of nine properties, seven of which generated revenues in 2022 – the Tribeca House properties, the Flatbush Gardens complex, the 141 Livingston Street property, the 250 Livingston Street property, the Aspen property, the 10 West 65 th Street property and the Clover House property, which accounted for 29.1%, 31.8%, 12.5%, 13.2%, 5.3%, 2.7%, and 5.4%, respectively, of our portfolio’s total revenue for the year ended December 31, 2022.
As of December 31, 2023, our portfolio consisted of nine properties, eight of which generated revenues in 2023 – the Tribeca House properties, the Flatbush Gardens complex, the 141 Livingston Street property, the 250 Livingston Street property, the Aspen property, the 10 West 65th Street property, the Clover House property and the 1010 Pacific Street property, which accounted for 28.8%, 31.1%, 11.9%, 12.7%, 4.8%, 2.8%, 5.6% and 2.3%, respectively, of our portfolio’s total revenue for the year ended December 31, 2023.
If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on our total return to our stockholders.
If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on our total return to our stockholders. 31 Our ability to provide certain services to our tenants may be limited by the REIT rules, or may have to be provided through a TRS.
We may be unable to renew leases or lease currently vacant space or vacating space on favorable terms or at all as leases expire or terminate, which could adversely affect our financial condition, results of operations and cash flow.
Our results of operations and cash available for distribution to our stockholders would be adversely affected if any of these properties were materially damaged or destroyed. 12 We may be unable to renew leases or lease currently vacant space or vacating space on favorable terms or at all as leases expire or terminate, which could adversely affect our financial condition, results of operations and cash flow.
Higher construction costs could adversely impact our investments in real estate assets and our expected returns on development projects. 18 We may from time to time be subject to litigation or government investigations that could have an adverse effect on our financial condition, results of operations, cash flow and the market value of our common stock.
We may from time to time be subject to litigation or government investigations that could have an adverse effect on our financial condition, results of operations, cash flow and the market value of our common stock.
As of December 31, 2022, we had approximately $113.8 million of variable rate indebtedness outstanding, primarily for our development properties, which constitutes approximately 15% of total outstanding indebtedness as of such date, and we have experienced increases in the interest rates on such indebtedness, which has increased our interest expense and adversely impacted our results of operations and cash flows.
As of December 31, 2023, we had approximately $82.0 million of variable rate indebtedness outstanding, for our Dean Street development property and our 10 West 65 th Street property, which constitutes approximately 6.7% of total outstanding indebtedness as of such date, and we have experienced increases in the interest rates on such indebtedness, which has increased our interest expense and adversely impacted our results of operations and cash flows.
We agreed to these provisions in order to assist our continuing investors in deferring the recognition of taxable gain as a result of and after the formation transactions.
We agreed to these provisions in order to assist our continuing investors in deferring the recognition of taxable gain as a result of and after the formation transactions. These obligations require us to maintain more or different indebtedness than we would otherwise require for our business.
We cannot assure you that expiring leases will be renewed or tenants will not exercise any early termination options or that our properties will be re-leased at net effective rental rates equal to or above the current average net effective rental rates.
We cannot assure you that expiring leases will be renewed or tenants will not exercise any early termination options or that our properties will be re-leased at net effective rental rates equal to or above the current average net effective rental rates As of February 23, 2024, the NYC has notified the Company of its intention to terminate its lease at 250 Livingston Street effective August 23, 2025.
We cannot assure you that costs or liabilities incurred as a result of environmental issues will not affect our ability to make distributions to our stockholders or that such costs, liabilities, or other remedial measures will not have an adverse effect on our financial condition, results of operations and cash flows.
In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants or others if property damage or personal injury occurs. 16 We cannot assure you that costs or liabilities incurred as a result of environmental issues will not affect our ability to make distributions to our stockholders or that such costs, liabilities, or other remedial measures will not have an adverse effect on our financial condition, results of operations and cash flows.
As a result, we depend on distributions and other payments from our Operating Partnership and subsidiaries in order to satisfy our financial obligations and make payments to our investors. The ability of our subsidiaries to make such distributions and other payments depends on their earnings and cash flow and may be subject to statutory or contractual limitations.
The ability of our subsidiaries to make such distributions and other payments depends on their earnings and cash flow and may be subject to statutory or contractual limitations.
Additionally, inflation may also increase the costs to complete our development projects, including costs of materials, labor and services from third-party contractors and suppliers.
Additionally, inflation may also increase the costs to complete our development projects, including costs of materials, labor and services from third-party contractors and suppliers. Higher construction costs could adversely impact our investments in real estate assets and our expected returns on development projects.
Accordingly, while not intending to do so, we may adopt policies that may have an adverse effect on our financial condition, results of operations, ability to pay dividends or make other distributions to our stockholders and the market value of our common stock.
Accordingly, while not intending to do so, we may adopt policies that may have an adverse effect on our financial condition, results of operations, ability to pay dividends or make other distributions to our stockholders and the market value of our common stock. 24 Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of OP Units and of LLC units in our predecessor entities, which may impede business decisions that could benefit our stockholders.
We refer to these restrictions as the “ownership limit.” The ownership limit may prevent or delay a change in control and, as a result, could adversely affect our stockholders’ ability to realize a premium for their shares of our common stock. ● The provisions in our charter regarding the removal of directors and the advance notice provisions of our bylaws, among others, could delay, defer or prevent a transaction or a change of control of our Company that might involve a premium price for holders of our common stock or otherwise be in their best interest.
We refer to these restrictions as the “ownership limit.” The ownership limit may prevent or delay a change in control and, as a result, could adversely affect our stockholders’ ability to realize a premium for their shares of our common stock. ● The provisions in our charter regarding the removal of directors and the advance notice provisions of our bylaws, among others, could delay, defer or prevent a transaction or a change of control of our Company that might involve a premium price for holders of our common stock or otherwise be in their best interest. 23 In addition, certain provisions of the Maryland General Corporation Law (“MGCL”) may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including the Maryland business combination and control share provisions.
Our ability to provide certain services to our tenants may be limited by the REIT rules, or may have to be provided through a TRS. As a REIT, we generally cannot provide services to our tenants other than those that are customarily provided by landlords, nor can we derive income from a third party that provides such services.
As a REIT, we generally cannot provide services to our tenants other than those that are customarily provided by landlords, nor can we derive income from a third party that provides such services. If we forego providing such services to our tenants, we may be at a disadvantage to competitors who are not subject to the same restrictions.
Changing interest rates could increase interest costs and adversely affect our cash flows and the market price of our securities. We currently have, and expect to incur in the future, interest-bearing debt at rates that vary with market interest rates.
We currently have, and expect to incur in the future, interest-bearing debt at rates that vary with market interest rates.
If any one of these events were to occur, our financial condition, results of operations, cash flow and the market value of our common stock could be adversely affected. Furthermore, foreclosures could create taxable income without accompanying cash proceeds, which could hurt our ability to meet the REIT distribution requirements imposed by the Code.
If any one of these events were to occur, our financial condition, results of operations, cash flow and the market value of our common stock could be adversely affected.
Risks Related to Our Business and Operations Capital and credit market conditions, including higher interest rates, may adversely affect our access to various sources of capital or financing and/or the cost of capital, which could affect our business activities, dividends, earnings and common stock price, among other things.
In addition, we may or may not be eligible to take advantage of the 50% reduction to the New York City and New York State transfer tax rates that could apply with respect to transfers of real property to certain REITs. 18 Risks Related to Our Business and Operations Capital and credit market conditions, including higher interest rates, may adversely affect our access to various sources of capital or financing and/or the cost of capital, which could affect our business activities, dividends, earnings and common stock price, among other things.
Our subsidiaries may be prohibited from making distributions and other payments to us. All of our properties are owned indirectly by subsidiaries, in particular our LLC subsidiaries, and substantially all of our operations are conducted by our Operating Partnership.
All of our properties are owned indirectly by subsidiaries, in particular our LLC subsidiaries, and substantially all of our operations are conducted by our Operating Partnership. As a result, we depend on distributions and other payments from our Operating Partnership and subsidiaries in order to satisfy our financial obligations and make payments to our investors.
These potential difficulties in selling real estate in our markets may limit our ability to change, or reduce our exposure to, the properties in our portfolio promptly in response to changes in economic or other conditions.
These potential difficulties in selling real estate in our markets may limit our ability to change, or reduce our exposure to, the properties in our portfolio promptly in response to changes in economic or other conditions. 14 Competition could limit our ability to acquire attractive investment opportunities and increase the costs of those opportunities, which may adversely affect us, including our profitability, and impede our growth.
Moreover, these agreements were not negotiated at arm’s length and in the course of structuring the formation transactions, certain of our executive officers had the ability to influence the types and level of benefits that they receive from us under these agreements.
Moreover, these agreements were not negotiated at arm’s length and in the course of structuring the formation transactions, certain of our executive officers had the ability to influence the types and level of benefits that they receive from us under these agreements. 25 David Bistricer, our Co-Chairman of the board of directors and Chief Executive Officer, and Sam Levinson, our Co-Chairman of the board of directors and Head of the Investment Committee, have outside business interests that will take their time and attention away from us, which could materially and adversely affect us.
Numerous municipalities, including New York City where our multi-family residential properties are located, impose rent control or rent stabilization on apartment buildings. The rent stabilization regulations applicable to our multifamily residential properties set maximum rates for annual rent increases, entitle our tenants to receive required services from us and entitle our tenants to have their leases renewed.
The rent stabilization regulations applicable to our multifamily residential properties set maximum rates for annual rent increases, entitle our tenants to receive required services from us and entitle our tenants to have their leases renewed. On June 14, 2019, the Housing Stability and Tenant Protection Act of 2019 was signed into law in New York State.
We do not presently intend to sell or take any other action that would result in a tax protection payment with respect to the properties covered by the tax protection agreement. 23 In addition, David Bistricer and Sam Levinson may be subject to tax on a disproportionately large amount of the built-in gain that would be realized upon the sale or refinancing of certain properties.
David Bistricer, our Co-Chairman of the board of directors and Chief Executive Officer, and Sam Levinson, our Co-Chairman of the board of directors and Chairman of the Investment Committee may be subject to tax on a disproportionately large amount of the built-in gain that would be realized upon the sale or refinancing of certain properties.
To avoid entity-level U.S. federal income and excise taxes, we anticipate distributing at least 100% of our taxable income. 26 We believe that we are organized, have operated and will continue to operate in a manner that will allow us to qualify as a REIT commencing with our first taxable year ended December 31, 2015.
However, our ability to make such distributions may be limited by a requirement to escrow cash flow from our lease at 250 Livingston Street, which may be classified as taxable income. 29 We believe that we are organized, have operated and will continue to operate in a manner that will allow us to qualify as a REIT commencing with our first taxable year ended December 31, 2015.
Competition could limit our ability to acquire attractive investment opportunities and increase the costs of those opportunities, which may adversely affect us, including our profitability, and impede our growth. We compete with numerous commercial developers, real estate companies and other owners and operators of real estate for properties for acquisition and pursuing buyers for dispositions.
We compete with numerous commercial developers, real estate companies and other owners and operators of real estate for properties for acquisition and pursuing buyers for dispositions.
Alternatively, to avoid realizing such built-in gains, they may have to agree to additional reimbursements or guarantees involving additional financial risk. Risks Related to Our Indebtedness and Financing We have a substantial amount of indebtedness that may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs.
Alternatively, to avoid realizing such built-in gains, they may have to agree to additional reimbursements or guarantees involving additional financial risk. We hold a portion of our cash and cash equivalents in deposit accounts that could be adversely affected if the financial institutions holding such deposits fail. We maintain our cash and cash equivalents at insured financial institutions.
Removed
On June 14, 2019, the Housing Stability and Tenant Protection Act of 2019 was signed into law in New York State. The legislation affects rent-stabilized apartments in New York City.
Added
Multifamily residential properties are subject to rent stabilization regulations, which limit our ability to raise rents above specified maximum amounts and could give rise to claims by tenants that their rents exceed such specified maximum amounts. Numerous municipalities, including New York City where our multi-family residential properties are located, impose rent control or rent stabilization on apartment buildings.
Removed
Our results of operations and cash available for distribution to our stockholders would be adversely affected if any of these properties were materially damaged or destroyed.
Added
As of February 23, 2024, The City of New York, a municipal corporation acting through the Department of Citywide Administrative Services (“NYC”), notified us of its intention to terminate its lease at 250 Livingston Street effective August 23, 2025. The lease generally provides for rent payments in the amount of $15.4 million per annum.
Removed
The ongoing COVID-19 pandemic, and measures intended to curb its spread, have had and could continue to have a material adverse impact on our business, financial condition, liquidity and results of operations.
Added
The Company may be unable to replace NYC as a tenant or unable to replace them with other commercial tenants at comparable rent rates, may incur substantial costs to improve the vacated space or may have to offer significant inducements to fill the space, all of which may have an adverse effect on our financial condition, results of operations and cash flow.
Removed
The COVID-19 pandemic, which was declared a pandemic by the World Health Organization in March 2020, has had an ongoing significant adverse impact on local, national, and global economic activity and has contributed to volatility in global financial markets.
Added
In connection with the termination of the 250 Livingston lease, pursuant to the terms of the loan agreement related to $125 million building mortgage (see Item 2 below), we expect to establish a cash management account for the benefit of the lender, into which we will be obligated to deposit all revenue generated by the building at 250 Livingston Street.
Removed
The pandemic led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control the spread of the virus, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders.
Added
All amounts remaining in such cash management account after the lender’s allocations set forth in the Loan Agreement will be disbursed to 250 Livingston Owner once the tenant cure conditions are satisfied under the loan agreement.
Removed
These restrictions have been mostly lifted, and the negative impact of the COVID-19 pandemic appears to be much improved, some of the impact of the restrictions by the State and City of New York have continued and there can be no assurance that broader lockdown restrictions will not be re-imposed or that additional new restrictions will not be put in place. 13 The impact of the COVID-19 pandemic and measures enacted by governmental authorities to curb its spread have negatively impacted, and may continue to negatively impact, our business in a number of ways, including affecting our tenants’ ability or willingness to pay rents and reducing demand for housing in the New York metropolitan area.
Added
If the Company is unable to replace the NYC at comparable rents it may not be able to cure the conditions listed in the loan agreement. If the excess cash is not released to us, it could impact our available cash to fund corporate operations and pay dividends and distributions to our its stockholders.
Removed
For example, certain government programs intended to provide rent relief had extended tenant eviction protections for nonpayment and New York tenant courts had limited their availability in 2020 and 2021.
Added
Additionally, if NYC were to decide not to renew the 141 Livingston lease, we would be at risk of not being able to replace the NYC as a tenant, leasing the space below the current rates, incurring costs to improve the space or offer other inducements to fill the space, all of which may have an adverse effect on our financial condition, results of operations and cash flow.
Removed
While the courts have since opened, the back log in cases, as well as lingering economic impact on certain of our tenants’ ability and or willingness to pay both back and current rent, could negatively impact our results. Additionally, certain of our commercial tenants requested and received partial rent deferrals in 2020 through 2021, during the pandemic.

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Item 2. Properties

Properties — owned and leased real estate

27 edited+7 added−8 removed26 unchanged
Biggest changeFt. # Units Percent Leased Annualized December 2022 Base Rental Revenue (millions) (1) Net Effective Rent Per Occupied Square Foot Multifamily 50 Murray Street Manhattan 1964 396,224 390 99.2 % $ 27.7 $ 71.21 53 Park Place Manhattan 1921 86,288 116 99.1 % $ 6.3 $ 76.29 Flatbush Gardens complex Brooklyn 1950 1,748,671 2,494 98.8 % $ 44.4 $ 25.97 250 Livingston Street Brooklyn 1920 26,819 36 94.4 % $ 1.4 $ 54.63 Aspen Manhattan 2004 165,542 232 98.3 % $ 5.8 $ 36.78 10 West 65 th Street Manhattan 1939 75,678 82 100.0 % $ 3.7 $ 51.21 Clover House Brooklyn 1959 102,131 158 94.9 % $ 7.0 $ 73.31 2,601,353 3,508 98.7% (2) $ 96.3 $ 38.19 (2) Commercial 141 Livingston Street Brooklyn 1959 206,084 1 100.0 % $ 10.3 $ 50.00 250 Livingston Street Brooklyn 1920 342,496 1 100.0 % $ 15.4 $ 44.93 548,580 2 100.0% (2) $ 25.7 $ 46.84 (2) Retail 50 Murray Street (retail) Manhattan 44,583 8 100.0 % $ 2.4 $ 54.71 50 Murray Street (parking) Manhattan 24,200 1 100.0 % $ 1.4 $ 57.85 53 Park Place (retail) Manhattan 8,600 1 — — — 141 Livingston Street (parking/other) Brooklyn 14,853 1 100.0 % $ 0.4 $ 27.17 250 Livingston Street (retail) Brooklyn 990 1 100.0 % $ 0.1 $ 125.83 250 Livingston Street (parking) Brooklyn — — — $ 0.2 — Aspen (retail) Manhattan 12,429 5 100.0 % $ 0.6 $ 49.97 Aspen (parking) Manhattan — — — — — 105,655 17 91.9% (2) $ 5.1 $ 53.97 (2) Total 3,255,588 3,527 98.7% (2) $ 127.1 $ 37.95 (2) Real Estate Under Development 1010 Pacific Street Brooklyn 115,444 (3) 175 (3) Dean Street Brooklyn 154,468 (4) 242 (4) (1) Represents annualized revenue based on December 2022 data.
Biggest changeFt. # Units Percent Leased Annualized December 2023 Base Rental Revenue (millions)(1) Net Effective Rent Per Occupied Square Foot Multifamily 50 Murray Street Manhattan 1964 396,224 390 95.9 % $ 28.1 $ 76.54 53 Park Place Manhattan 1921 86,288 116 97.4 % $ 6.8 $ 81.32 Flatbush Gardens complex Brooklyn 1950 1,748,671 2,494 98.0 % $ 45.0 $ 26.69 250 Livingston Street Brooklyn 1920 26,819 36 100.0 % $ 1.6 $ 58.93 Aspen Manhattan 2004 165,542 232 97.4 % $ 6.1 $ 38.65 10 West 65th Street Manhattan 1939 75,678 82 98.8 % $ 4.0 $ 53.87 Clover House Brooklyn 1959 102,131 158 95.6 % $ 7.9 $ 80.80 1010 Pacific Street Brooklyn 2023 115,401 175 100.0 % $ 5.5 $ 50.47 2,716,754 3,683 97.7 %(2) $ 105.0 $ 40.51 (2) Commercial 141 Livingston Street Brooklyn 1959 206,084 1 100.0 % $ 10.3 $ 50.00 250 Livingston Street Brooklyn 1920 342,496 1 100.0 % $ 15.4 $ 44.93 548,580 2 100.0 %(2) $ 25.7 $ 46.84 (2) Retail 50 Murray Street (retail) Manhattan 44,583 8 94.7 % $ 2.2 $ 51.23 50 Murray Street (parking) Manhattan 24,200 1 100.0 % $ 1.4 $ 59.01 53 Park Place (retail) Manhattan 8,600 1 — — — 141 Livingston Street (parking/other) Brooklyn 14,853 1 100.0 % $ 0.4 $ 28.18 250 Livingston Street (retail) Brooklyn 990 1 100.0 % $ 0.1 $ 128.35 250 Livingston Street (parking) Brooklyn — — — $ 0.2 — Aspen (retail) Manhattan 12,429 5 73.4 % $ 0.4 $ 44.46 Aspen (parking) Manhattan — — — — — 105,655 17 86.5 %(2) $ 4.7 $ 52.44 (2) Total 3,370,989 3,702 97.7 %(2) $ 135.4 $ 37.78 (2) Real Estate Under Development Dean Street Brooklyn 154,468 (3) 242 (3) (1) Represents annualized revenue based on December 2023 data.
We have the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to certain prepayment premiums, as defined. 37 1010 Pacific Street In November 2019, the Company purchased the 1010 Pacific Street property in the Prospect Heights neighborhood of Brooklyn for $31 million.
We have the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to certain prepayment premiums, as defined. 1010 Pacific Street In November 2019, the Company purchased the 1010 Pacific Street property in the Prospect Heights neighborhood of Brooklyn for $31 million.
Property highlights include: Location • 250 Livingston Street Building Type • Commercial • Residential • Retail Commercial Tenant • City of New York Amenities • Elevators Nearby Rapid Transit Access • MTA Subway A, B, C, F, G, Q, R, 2, 3, 4, 5 trains The 250 Livingston Street property is encumbered by a mortgage note to Citi Real Estate Funding Inc. with a balance of $125.0 million as of December 31, 2022.
Property highlights include: Location • 250 Livingston Street Building Type • Commercial • Residential • Retail Commercial Tenant • City of New York Amenities • Elevators Nearby Rapid Transit Access • MTA Subway A, B, C, F, G, Q, R, 2, 3, 4, 5 trains The 250 Livingston Street property is encumbered by a mortgage note to Citi Real Estate Funding Inc. with a balance of $125.0 million as of December 31, 2023.
Property highlights include: Location • 107 Columbia Heights Building Type • Residential Number of Units • 158 Amenities • Courtyard, rooftop terrace, fitness center Nearby Rapid Transit Access • MTA Subway 2, 3, A, C, F trains The Clover House property is encumbered by a mortgage note to MetLife Investment Management with a balance of $82.0 million as of December 31, 2022.
Property highlights include: Location • 107 Columbia Heights Building Type • Residential Number of Units • 158 Amenities • Courtyard, rooftop terrace, fitness center Nearby Rapid Transit Access • MTA Subway 2, 3, A, C, F trains The Clover House property is encumbered by a mortgage note to MetLife Investment Management with a balance of $82.0 million as of December 31, 2023.
Property highlights include: Location • 50 Murray Street and 53 Park Place Building Type • Residential • Retail Number of Units • 506 Amenities • Doorman • Elevators • Landscaped roof deck • Rooftop basketball court • Tenant lounge • Game room • Toddler’s play room • In-house valet service • Screening room Nearby Rapid Transit Access • MTA Subway A, C, E, N, R, 1, 2, 3 trains • PATH train The Tribeca House properties are encumbered by a loan through Deutsche Bank AG with a balance of $360.0 million as of December 31, 2022.
Property highlights include: Location • 50 Murray Street and 53 Park Place Building Type • Residential • Retail Number of Units • 506 Amenities • Doorman • Elevators • Landscaped roof deck • Rooftop basketball court • Tenant lounge • Game room • Toddler’s play room • In-house valet service • Screening room Nearby Rapid Transit Access • MTA Subway A, C, E, N, R, 1, 2, 3 trains • PATH train 36 The Tribeca House properties are encumbered by a loan through Deutsche Bank AG with a balance of $360.0 million as of December 31, 2023.
Property highlights include: Building Type • Residential Number of Units • 2,494 Amenities • Park-like space between buildings • Parking lots Nearby Rapid Transit Access • MTA Subway 2, 5 trains Flatbush Gardens is encumbered by a mortgage note to New York Community Bank with a balance of $329.0 million as of December 31, 2022.
Property highlights include: Building Type • Residential Number of Units • 2,494 Amenities • Park-like space between buildings • Parking lots Nearby Rapid Transit Access • MTA Subway 2, 5 trains Flatbush Gardens is encumbered by a mortgage note to New York Community Bank with a balance of $329.0 million as of December 31, 2023.
The City of New York has advised us that it may vacate the 250 Livingston Street property in 2025. Additionally, the property includes 36 multifamily residential apartment units (26,819 square feet), which were developed by Clipper Equity from 2003 through 2013.
The City of New York has advised us that it will vacate the 250 Livingston Street property in 2025. Additionally, the property includes 36 multifamily residential apartment units (26,819 square feet), which were developed by Clipper Equity from 2003 through 2013.
In addition, the property includes an adjacent lot at 22 Smith Street, currently used as a parking lot measuring approximately 5,000 square feet. 35 Property highlights include: Location • 141 Livingston Street Building Type • Commercial • Retail (parking) Tenant • City of New York Amenities • Elevators • Parking Nearby Rapid Transit Access • MTA Subway A, C, F, G, R, 2, 3, 4, 5 trains The 141 Livingston Street property is encumbered by a mortgage note to Citi Real Estate Funding Inc. with a balance of $100 million as of December 31, 2022.
In addition, the property includes an adjacent lot at 22 Smith Street, currently used as a parking lot measuring approximately 5,000 square feet. 37 Property highlights include: Location • 141 Livingston Street Building Type • Commercial • Retail (parking) Tenant • City of New York Amenities • Elevators • Parking Nearby Rapid Transit Access • MTA Subway A, C, F, G, R, 2, 3, 4, 5 trains The 141 Livingston Street property is encumbered by a mortgage note to Citi Real Estate Funding Inc. with a balance of $100 million as of December 31, 2023.
We have the option, commencing on January 1, 2024, to prepay the note prior to the maturity date, subject to a prepayment premium if it occurs prior to September 2, 2029. 10 West 65 th Street In October 2017, the Company purchased the 10 West 65 th Street property in the Upper West Side neighborhood of Manhattan for $79 million.
We have the option, commencing on January 1, 2024, to prepay the note prior to the maturity date, subject to a prepayment premium if it occurs prior to September 2, 2029. 10 West 65th Street In October 2017, the Company purchased the 10 West 65th Street property in the Upper West Side neighborhood of Manhattan for $79 million.
These properties include Tribeca House (two nearly adjacent residential properties with street-level and mezzanine-level retail space and an externally managed parking garage), the Flatbush Gardens complex (a 59-building residential complex), two properties in Downtown Brooklyn (one exclusively commercial, one mixed commercial and residential), the Aspen property (a residential building with street-level retail space and an externally managed parking garage), the 10 West 65 th Street residential property, the Clover House residential property, the 1010 Pacific Street property (currently under development) and the Dean Street property (currently under development). 32 The table below presents an overview of the Company’s portfolio as of December 31, 2022: Address Submarket Year Built Leasable Sq.
These properties include Tribeca House (two nearly adjacent residential properties with street-level and mezzanine-level retail space and an externally managed parking garage), the Flatbush Gardens complex (a 59-building residential complex), two properties in Downtown Brooklyn (one exclusively commercial, one mixed commercial and residential), the Aspen property (a residential building with street-level retail space and an externally managed parking garage), the 10 West 65th Street residential property, the Clover House residential property, the 1010 Pacific Street residential property and the Dean Street property (currently under development). 34 The table below presents an overview of the Company’s portfolio as of December 31, 2023: Address Submarket Year Built Leasable Sq.
The properties also feature approximately 77,400 square feet of retail space, comprising approximately 53,000 square feet of street-level and mezzanine-level retail space, and an externally managed garage. Tenants include Equinox (a premium fitness club), Starbucks, 7 Eleven and Apple Bank. The weighted average remaining lease duration of the retail tenants at December 31, 2022, is approximately five years.
The properties also feature approximately 77,400 square feet of retail space, comprising approximately 53,000 square feet of street-level and mezzanine-level retail space, and an externally managed garage. Tenants include Equinox (a premium fitness club), Starbucks and 7 Eleven. The weighted average remaining lease duration of the retail tenants at December 31, 2023, is approximately four years.
Property highlights include: Location • 10 West 65 th Street Building Type • Residential Number of Units • 82 Amenities • Elevator Nearby Rapid Transit Access • MTA Subway A, B, C, D, 1, 2, 3 trains The 10 West 65 th Street property is encumbered by a mortgage note to New York Community Bank, entered into in connection with the acquisition of the property, with a balance of $32.2 million as of December 31, 2022.
Property highlights include: Location • 10 West 65th Street Building Type • Residential Number of Units • 82 Amenities • Elevator Nearby Rapid Transit Access • MTA Subway A, B, C, D, 1, 2, 3 trains 39 The 10 West 65th Street property is encumbered by a mortgage note to New York Community Bank, entered into in connection with the acquisition of the property, with a balance of $31.8 million as of December 31, 2023.
On August 26, 2022 the Company signed an amendment to the note that changed the benchmark and spread used from LIBOR plus 2.75% to 1-Month CME term SOFR plus 2.5%, rounded up to the nearest 1/8 th and reset monthly. The benchmark rate at December 31, 2022 was 4.36%.
On August 26, 2022 the Company signed an amendment to the note that changed the benchmark and spread used from LIBOR plus 2.75% to 1-Month CME term SOFR plus 2.5%, rounded up to the nearest 1/8th and reset monthly. The benchmark rate at December 31, 2023 was 5.375%.
Aspen In June 2016, the Company purchased the Aspen property located at 1955 1 st Avenue in Manhattan for $103 million. The property fronts the west side of First Avenue on the full block between 100 th and 101 st Streets, and comprises 186,602 square feet, 232 residential rental units, four retail units and a parking garage.
Aspen In June 2016, the Company purchased the Aspen property located at 1955 1st Avenue in Manhattan for $103 million. The property fronts the west side of First Avenue on the full block between 100th and 101st Streets, and comprises 186,602 square feet, 232 residential rental units, four retail units and a parking garage.
ITEM 2. PROPERTIES Our Portfolio Summary As of December 31, 2022, our portfolio consisted of nine properties totaling approximately 3.3 million rentable square feet (plus an approximate 270,000 rentable square feet under development) and was approximately 99% leased (excluding square footage under development).
ITEM 2. PROPERTIES Our Portfolio Summary As of December 31, 2023, our portfolio consisted of nine properties totaling approximately 3.4 million rentable square feet (plus an approximately 154 thousand rentable square feet under development) and was approximately 98% leased (excluding square footage under development).
Property highlights include: Location • 1955 1 st Avenue Building Type • Residential • Retail Number of Units • 232 Amenities • Courtyard, game room, fitness center Nearby Rapid Transit Access • MTA Subway Q, 4, 5, 6 trains 36 The Aspen property is encumbered by a mortgage note to Capital One Multifamily Finance LLC with a balance of $62.5 million as of December 31, 2022.
Property amenities include a courtyard, game room, fitness center, clubhouse, laundry facilities and onsite below-grade garage parking. 38 Property highlights include: Location • 1955 1st Avenue Building Type • Residential • Retail Number of Units • 232 Amenities • Courtyard, game room, fitness center Nearby Rapid Transit Access • MTA Subway Q, 4, 5, 6 trains The Aspen property is encumbered by a mortgage note to Capital One Multifamily Finance LLC with a balance of $61.0 million as of December 31, 2023.
(4) Land purchases made on December 22, 2021, February 14, 2022 and April 14, 2022, square footage and number of units based on management’s development estimates 33 The table below presents an overview of commercial and retail lease expirations for the next ten years and thereafter, beginning in 2023. Excludes residential leases which are generally of one year duration.
(2) Represents weighted average. (3) Land purchases made on December 22, 2021, February 14, 2022 and April 14, 2022, square footage and number of units based on management’s development estimates 35 The table below presents an overview of commercial and retail lease expirations for the next ten years and thereafter, beginning in 2024.
The property will also feature approximately 9,000 square feet of retail space. The construction process is estimated to take approximately two years. At December 31, 2022, the 953 Dean Street property was encumbered by a $30.0 million mortgage note to Bank Leumi, N.A., entered into in connection with the initial acquisition of parcels of the property.
The property will also feature approximately 9,000 square feet of retail space. The construction process is estimated to take approximately two years. On December 22, 2021, the Company entered into a $30 million mortgage note agreement with Bank Leumi, N.A related to the Dean Street acquisition.
The loan provided initial funding of $60.0 million and a further $20.0 million subject to achievement of certain financial targets. The loan has a term of five years and an initial annual interest rate of 5.7% subject to reduction by up to 25 basis points upon achievement of certain financial targets.
The loan provided initial funding of $60.0 million and a further $20.0 million subject to the achievement of certain financial targets. The initial funding of $60.0 million has an annual interest rate of 5.55%. The additional borrowing of $20.0 million has an annual interest rate of 6.37%.
Year Number of Tenants Total Square Feet Annualized Rental Revenue % of Annualized Rental Revenue Expiring 2023 2 10,839 $ 762,500 2.5 % 2024 1 1,597 76,800 0.3 % 2025 3 550,275 25,756,016 84.1 % 2026 1 510 18,360 0.1 % 2027 3 42,068 1,686,672 5.5 % 2028 1 — 55,200 0.2 % 2029 — — — 0.0 % 2030 1 990 93,043 0.3 % 2031 1 540 160,680 0.5 % 2032 2 4,606 306,996 1.0 % Thereafter 2 26,925 1,697,300 5.5 % Total 17 638,350 $ 30,613,567 100.0 % Descriptions of Our Properties Tribeca House The Company purchased the 50 Murray Street and 53 Park Place buildings on December 15, 2014.
Year Number of Tenants Total Square Feet Annualized Rental Revenue % of Annualized Rental Revenue Expiring 2024 1 1,597 $ 78,336 0.3 % 2025 3 550,275 25,757,897 85.3 % 2026 1 510 18,727 0.1 % 2027 3 42,068 1,730,482 5.7 % 2028 1 — 55,200 0.2 % 2029 — — — 0.0 % 2030 1 990 94,905 0.3 % 2031 1 540 165,500 0.5 % 2032 2 4,606 334,632 1.1 % 2033 1 24,200 1,428,000 4.7 % Thereafter 3 8,052 541,500 1.8 % Total 17 632,838 $ 30,205,179 100.0 % Descriptions of Our Properties Tribeca House The Company purchased the 50 Murray Street and 53 Park Place buildings on December 15, 2014.
The property’s buildings are located on seven tax parcels. The complex was constructed around 1950 and contains 2,494 studio, one-bedroom, two-bedroom, and three-bedroom apartments, and four below-grade garages. The aggregate site area is 898,940 square feet, the aggregate gross building area is 1,926,180 square feet and the aggregate gross leasable area is 1,748,671 square feet.
Flatbush Gardens Flatbush Gardens is a 59-building complex located along Foster Avenue between Nostrand and Brooklyn Avenues in the East Flatbush neighborhood of Brooklyn. The property’s buildings are located on seven tax parcels. The complex was constructed around 1950 and contains 2,494 studio, one-bedroom, two-bedroom, and three-bedroom apartments, and four below-grade garages.
The loan is interest only for the first two years and principal and interest thereafter based on a 30-year amortization schedule. 953 Dean Street During the period December 2021 through April 2022, the Company purchased the Dean Street property which consists of multiple parcels of land in the Prospect Heights neighborhood of Brooklyn for approximately $48.5 million.
The Company has the option to prepay in full, or in part, the unpaid balance of the note prior to the maturity date. 953 Dean Street During the period December 2021 through April 2022, the Company purchased the Dean Street property which consists of multiple parcels of land in the Prospect Heights neighborhood of Brooklyn for approximately $48.5 million.
The note was extended as of December 22, 2022 through June 22, 2023, is subject to one six-month extension option, and bears interest at the prime rate (with a floor of 3.25%) plus 1.60% (9.10% as of December 31, 2022).
The notes original maturity was December 22, 2022, and was subsequently extended to September 22, 2023. The note required interest-only payments and bore interest at the prime rate (with a floor of 3.25%) plus 1.60%.
We have the option to prepay all (but not less than all) of the unpaid balance of the loan prior to the maturity date, subject to a prepayment premium if it occurs prior to December 6, 2027. 34 Flatbush Gardens Flatbush Gardens is a 59-building complex located along Foster Avenue between Nostrand and Brooklyn Avenues in the East Flatbush neighborhood of Brooklyn.
The loan matures on March 6, 2028, bears interest at 4.506% and requires interest-only payments for the entire term. We have the option to prepay all (but not less than all) of the unpaid balance of the loan prior to the maturity date, subject to a prepayment premium if it occurs prior to December 6, 2027.
The Company intends to redevelop the property as a fully amenitized residential building with approximately 119,000 square feet of leasable area. The building is expected to have 175 total units, 70% of which will be leased at market rates and 30% of which will be designated as affordable housing. The construction process is estimated to take approximately two years.
The building has 175 total units, 70% of which will be leased at market rates and 30% of which will be designated as affordable housing.
Address Block Lot Site Area (Sq. Ft.) Net Leasable Area (Sq.
The aggregate site area is 898,940 square feet, the aggregate gross building area is 1,926,180 square feet and the aggregate gross leasable area is 1,748,671 square feet. Address Block Lot Site Area (Sq. Ft.) Net Leasable Area (Sq.
In April 2022, the Company borrowed an additional $6.9 million under the mortgage note in connection with the acquisition of additional parcels of land in February and April 2022.
In April 2022, the Company borrowed an additional $7.0 under the mortgage note in connection with the acquisition of additional parcels of land in February and April 2022. 40 On August 10, 2023, the Company refinanced its $37 million mortgage on its Dean Street development with a senior construction loan with Valley National Bank that permits borrowings up to $115 million and a Mezzanine Loan with BADF 953 Dean Street Lender LLC that permits borrowings up to $8 million.
Removed
(2) Represents weighted average. (3) Land purchase made on November 8, 2019; square footage and number of units based on management’s development estimates.
Added
Excludes residential leases which are generally of one year duration.
Removed
The loan matures on March 6, 2028, bears interest at 4.506% and requires interest-only payments for the entire term.
Added
The Company redeveloped the property as a fully amenitized residential building with 115,000 square feet of leasable area. Amenities include on-site parking, media room, fitness center, library bridge, co-working lounge, kids’ playroom & gym, outdoor deck bar & lounge and pet spa.
Removed
Property amenities include a courtyard, game room, fitness center, clubhouse, laundry facilities and onsite below-grade garage parking.
Added
Property highlights include: Location • 1010 Pacific Street Building Type • Residential Number of Units • 175 Amenities • Elevator, media room, fitness center Nearby Rapid Transit Access • MTA Subway A, C, S, 2, 3 trains There is $80.0 million in mortgage debt secured by 1010 Pacific Street as of December 31, 2023, in the form of a mortgage note to Valley National Bank which provides for maximum borrowings of $80.0 million.
Removed
As of December 31, 2022, the 1010 Pacific Street property was encumbered by a group of mortgage notes to AIG Asset Management (U.S.), LLC, entered into in connection with the commencement of construction at the property. The balance on the note was $43.5 million as of December 31, 2022.
Added
The total borrowing of $80.0 million has a term of twenty-four months and matures on September 15, 2025.
Removed
The notes, which provided for maximum borrowing of $52.5 million, had a 36-month term, bore interest at 30-day LIBOR plus 3.60% (with a floor of 4.1%) (7.37% at December 31, 2022).
Added
On August 10, 2023, the Company entered into a $5 million corporate line of credit with Valley National Bank. The line of credit bears interest of Prime + 1.5%. The Company has not drawn on the line of credit as of December 31, 2023. The Company has provided a limited guaranty for mortgage notes at several of its properties.
Removed
The notes would have matured on September 1, 2024, could have been extended until September 1, 2026, and the Company could have prepaid the unpaid balance of the note within five months of maturity. On February 10, 2023 the Company refinanced this construction loan with a mortgage loan with Valley National Bank providing for maximum borrowings of $80.0 million.
Added
The Company’s loan agreements contain customary representations, covenants, and events of default. Certain loan agreements require the Company to comply with affirmative and negative covenants, including the maintenance of debt service coverage ratios and liquidity balances. If the Company is not compliant, certain lenders may require cash sweeps of rent until the conditions are cured.
Removed
The interest rate on subsequent fundings will be fixed at the time of any funding.
Added
The Company believes it is not in default on any of its loan agreements.
Removed
The Company currently intends to refinance the note with a construction loan prior to maturity, although there are no assurances that the Company will be able to do so.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed8 unchanged
Biggest changeITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the NYSE under the ticker symbol “CLPR”. The stock began trading on February 10, 2017. Holders As of February 17, 2023, there were 5,629 holders of record of our common stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the NYSE under the ticker symbol “CLPR”. The stock began trading on February 10, 2017. Holders As of February 16, 2024, there were 4,812 beneficial holders of our common stock.
Our actual results of operations, liquidity, cash flows and financial condition will be affected by a number of factors, including the revenue we receive from our properties, our operating expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures.
Our actual results of operations, liquidity, cash flows and financial condition will be affected by several factors, including the revenue we receive from our properties, our operating expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures.
For more information regarding risk factors that could materially adversely affect our ability to pay dividends and make other distributions to our stockholders, see “Risk Factors.” 39 Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities None. 40 ITEM 6. RESERVED
For more information regarding risk factors that could materially adversely affect our ability to pay dividends and make other distributions to our stockholders, see “Risk Factors.” 42 Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities None. ITEM 6. RESERVED

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+32 added−30 removed90 unchanged
Biggest changeIncome Statement for the Years Ended December 31, 2022 and 2021 (in thousands) 2022 2021 Increase (decrease) % Revenues Residential rental income $ 90,262 $ 85,771 $ 4,491 5.2 % Commercial rental income 39,484 36,958 2,526 6.8 % Total revenues 129,746 122,729 7,017 5.7 % Operating Expenses Property operating expenses 29,306 28,997 309 1.1 % Real estate taxes and insurance 32,561 30,449 2,112 6.9 % General and administrative 12,752 10,570 2,182 20.6 % Transaction pursuit costs 506 60 446 743.3 % Depreciation and amortization 26,985 25,762 1,223 4.7 % Total operating expenses 102,110 95,838 6,272 6.5 % Litigation settlement and other — (2,730 ) 2,730 100.0 % Income from operations 27,636 24,161 3,475 14.4 % Interest expense, net (40,207 ) (41,284 ) 1,077 2.6 % Loss on modification/extinguishment of debt — (3,034 ) 3,034 100.0 % Gain on involuntary conversion — 139 (139 ) (100.0 )% Net loss $ (12,571 ) $ (20,018 ) $ 7,447 37.2 % The dollar amounts in the narrative disclosure below are in thousands, other than the base rent per square foot figures.
Biggest changeThe discussion below highlights the specific properties contributing to the changes in the results of operations and focuses on the properties that the Company owned and operated for the full period in each comparison. 50 Income Statement for the Years Ended December 31, 2023 and 2022 (in thousands) 2023 Less: 1010 Pacific 2023: Excluding 1010 Pacific 2022 Increase (decrease) % Revenues Residential rental income $ 99,716 $ 3,114 $ 96,602 $ 90,262 $ 6,340 7.0 % Commercial rental income 38,489 24 38,465 39,484 (1,019 ) (2.6 )% Total revenues 138,205 3,138 135,067 129,746 5,321 4.1 % Operating Expenses Property operating expenses 30,619 702 29,917 29,306 611 2.1 % Real estate taxes and insurance 31,951 360 31,591 32,561 (970 ) (3.0 )% General and administrative 13,169 240 12,929 12,752 177 1.4 % Transaction pursuit costs 357 — 357 506 (149 ) (29.4 )% Depreciation and amortization 28,939 1,305 27,634 26,985 649 2.4 % Total operating expenses 105,035 2,607 102,428 102,110 318 0.3 % Income from operations 33,170 531 32,639 27,636 5,003 18.1 % Interest expense, net (44,867 ) (3,013 ) (41,854 ) (40,207 ) (1,647 ) (4.1 )% Loss on modification/extinguishment of debt (3,868 ) — (3,868 ) — (3,868 ) (100.0 )% Net loss $ (15,565 ) $ (2,482 ) $ (13,083 ) $ (12,571 ) $ (512 ) (4.1 )% The dollar amounts in the narrative disclosure below are in thousands, other than the base rent per square foot figures.
As a result, we are particularly affected by the local economic conditions in these markets, including, but not limited to, changes in supply of or demand for apartment units in our markets, competition for real property investments in our markets, changes in government rules, regulations and fiscal policies, including those governing real estate usage and tax, and any environmental risks related to the presence of hazardous or toxic substances or materials at or in the vicinity of our properties, which could negatively affect our overall performance. 43 We may be unable to accurately predict future changes in national, regional or local economic, demographic or real estate market conditions.
As a result, we are particularly affected by the local economic conditions in these markets, including, but not limited to, changes in supply of or demand for apartment units in our markets, competition for real property investments in our markets, changes in government rules, regulations and fiscal policies, including those governing real estate usage and tax, and any environmental risks related to the presence of hazardous or toxic substances or materials at or in the vicinity of our properties, which could negatively affect our overall performance. 45 We may be unable to accurately predict future changes in national, regional or local economic, demographic or real estate market conditions.
Accordingly, no provision has been made for federal, state or local income or franchise taxes in the accompanying consolidated financial statements. 47 In accordance with FASB ASC Topic 740, the Company believes that it has appropriate support for the income tax positions taken and, as such, does not have any uncertain tax positions that, if successfully challenged, could result in a material impact on its financial position or results of operations.
Accordingly, no provision has been made for federal, state or local income or franchise taxes in the accompanying consolidated financial statements. 49 In accordance with FASB ASC Topic 740, the Company believes that it has appropriate support for the income tax positions taken and, as such, does not have any uncertain tax positions that, if successfully challenged, could result in a material impact on its financial position or results of operations.
Expenditures for improvements, renovations, and replacements of real estate assets are capitalized and depreciated over their estimated useful lives if the expenditures qualify as betterment or the life of the related asset will be substantially extended beyond the original life expectancy. 44 The Company evaluates each acquisition of real estate or in-substance real estate to determine if the integrated set of assets and activities acquired meets the definition of a business and needs to be accounted for as a business combination.
Expenditures for improvements, renovations, and replacements of real estate assets are capitalized and depreciated over their estimated useful lives if the expenditures qualify as betterment or the life of the related asset will be substantially extended beyond the original life expectancy. 46 The Company evaluates each acquisition of real estate or in-substance real estate to determine if the integrated set of assets and activities acquired meets the definition of a business and needs to be accounted for as a business combination.
We have the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to certain prepayment premiums, as defined. 250 Livingston Street There is $125.0 million in mortgage debt secured by 250 Livingston Street, as of December 31, 2022, in the form of a mortgage note to Citi Real Estate Funding Inc.
We have the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to certain prepayment premiums, as defined. 250 Livingston Street There is $125.0 million in mortgage debt secured by 250 Livingston Street, as of December 31, 2023, in the form of a mortgage note to Citi Real Estate Funding Inc.
We have the option to prepay all (but not less than all) of the unpaid balance of the note within three months of maturity, without a prepayment premium. 141 Livingston Street There is $100.0 million in mortgage debt secured by 141 Livingston Street, as of December 31, 2022, in the form of a mortgage note to Citi Real Estate Funding Inc.
We have the option to prepay all (but not less than all) of the unpaid balance of the note within three months of maturity, without a prepayment premium. 141 Livingston Street There is $100.0 million in mortgage debt secured by 141 Livingston Street, as of December 31, 2023, in the form of a mortgage note to Citi Real Estate Funding Inc.
As of December 31, 2022 and 2021, the Company had unvested LTIP units which provide for non-forfeitable rights to dividend-equivalent payments. Accordingly, these unvested LTIP units are considered participating securities and are included in the computation of basic and diluted net loss per share pursuant to the two-class method.
As of December 31, 2023 and 2022, the Company had unvested LTIP units which provide for non-forfeitable rights to dividend-equivalent payments. Accordingly, these unvested LTIP units are considered participating securities and are included in the computation of basic and diluted net loss per share pursuant to the two-class method.
Clover House There is $82.0 million in mortgage debt secured by Clover House as of December 31, 2022, in the form of a mortgage note to MetLife Investment Management. The note matures on December 1, 2029, bears interest at 3.53% and requires interest-only payments for the entire term.
Clover House There is $82.0 million in mortgage debt secured by Clover House as of December 31, 2023, in the form of a mortgage note to MetLife Investment Management. The note matures on December 1, 2029, bears interest at 3.53% and requires interest-only payments for the entire term.
To the extent impairment has occurred, a write-down is recorded and measured by the amount of the difference between the carrying value of the asset and the fair value of the asset. Management of the Company does not believe that any of its properties within the portfolio are impaired as of December 31, 2022.
To the extent impairment has occurred, a write-down is recorded and measured by the amount of the difference between the carrying value of the asset and the fair value of the asset. Management of the Company does not believe that any of its properties within the portfolio are impaired as of December 31, 2023.
Depreciation is not recorded on real estate held for sale. 45 If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balances of the related intangibles are written off.
Depreciation is not recorded on real estate held for sale. 47 If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balances of the related intangibles are written off.
The Company did not have dilutive securities as of December 31, 2022, or 2021. The effect of the conversion of the 26,317 Class B LLC units outstanding is not reflected in the computation of basic and diluted net loss per share, as the effect would be anti-dilutive.
The Company did not have dilutive securities as of December 31, 2023, or 2022. The effect of the conversion of the 26,317 Class B LLC units outstanding is not reflected in the computation of basic and diluted net loss per share, as the effect would be anti-dilutive.
As of December 31, 2022, the Company has no derivatives for which it applies hedge accounting. Loss Per Share Basic and diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding.
As of December 31, 2023, the Company has no derivatives for which it applies hedge accounting. Loss Per Share Basic and diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding.
For comparison of the year ended December 31, 2021 to the year ended December 31, 2020, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
For comparison of the year ended December 31, 2022 to the year ended December 31, 2021, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The net loss allocable to such units is reflected as non-controlling interests in the accompanying consolidated financial statements. 48 Results of Operations Our focus throughout the years ended December 31, 2022 and 2021, has been to manage our properties to optimize revenues and control costs, while continuing to renovate and reposition certain properties.
The net loss allocable to such units is reflected as non-controlling interests in the accompanying consolidated financial statements. Results of Operations Our focus throughout the years ended December 31, 2023 and 2022, has been to manage our properties to optimize revenues and control costs, while continuing to renovate and reposition certain properties.
There are no rent stabilization restrictions at our Tribeca House properties, our 250 Livingston Street property, our Clover House property and a portion of our 10 West 65 th Street property. We also incur costs on turnover of residents when one resident moves out and we prepare the apartment for a new resident.
There are no rent stabilization restrictions at our Tribeca House properties, our 250 Livingston Street property, our Clover House property and a portion of our 10 West 65th Street property. We also incur costs on turnover of residents when one resident moves out and we prepare the apartment for a new resident.
On October 27, 2017, the Company completed the acquisition of an 82-unit residential property at 10 West 65 th Street in Manhattan, New York, for $79.0 million. On November 8, 2019, the Company completed the acquisition of property located at 1010 Pacific Street in Prospect Heights, New York, for $31.0 million.
On October 27, 2017, the Company completed the acquisition of an 82-unit residential property at 10 West 65th Street in Manhattan, New York, for $79.0 million. On November 8, 2019, the Company completed the acquisition of property located at 1010 Pacific Street in Prospect Heights, New York, for $31.0 million.
Our ability to seek increased rents at our Flatbush Gardens property, our Aspen property and a portion of our 10 West 65 th Street property is limited, however, as a result of the rent stabilization laws and regulations of New York City, including the Housing Stability and Tenant Protection Act of 2019, which was signed into law in New York in June 2019.
Our ability to seek increased rents at our Flatbush Gardens property, our Aspen property and a portion of our 10 West 65th Street property is limited, however, as a result of the rent stabilization laws and regulations of New York City, including the Housing Stability and Tenant Protection Act of 2019 (“HSTP”), which was signed into law in New York in June 2019.
Significant Accounting Policies Segments At December 31, 2022, the Company had two reportable operating segments, Residential Rental Properties and Commercial Rental Properties. The Company’s chief operating decision maker may review operational and financial data on a property basis.
Significant Accounting Policies Segments On December 31, 2023, the Company had two reportable operating segments, Residential Rental Properties and Commercial Rental Properties. The Company’s chief operating decision maker may review operational and financial data on a property basis.
ASC 842 applies to the Company principally as lessor; as a lessee, the Company’s leases are immaterial. The Company has determined that all its leases as lessor are operating leases. The Company has elected to not bifurcate lease and non-lease components under a practical expedient provision.
ASC842 applies to the Company principally as lessor; as a lessee, the Company’s leases are immaterial. The Company has determined that all its leases as lessor are operating leases. The Company has elected to not bifurcate lease and non-lease components under a practical expedient provision.
On August 26, 2022 the Company and NYCB amended the note to replace prime plus 2.75% rate with SOFR plus 2.5% (6.75% at December 31, 2022). The note required interest-only payments through November 2019, and monthly principal and interest payments thereafter based on a 30-year amortization schedule.
On August 26, 2022 the Company and NYCB amended the note to replace prime plus 2.75% rate with SOFR plus 2.5% (7.875% at December 31, 2023). The note required interest-only payments through November 2019, and monthly principal and interest payments thereafter based on a 30-year amortization schedule.
The regulations also limit the maximum rent we can charge at our Flatbush Gardens property, our Aspen property and a portion of our 10 West 65 th Street property on new leases.
The regulations also limit the maximum rent we can charge at our Flatbush Gardens property, our Aspen property and a portion of our 10 West 65th Street property on new leases.
We have the option, commencing on January 1, 2024, to prepay the note prior to the maturity date, subject to a prepayment premium if it occurs prior to September 2, 2029. 10 West 65 th Street There is $32.2 million in mortgage debt secured by 10 West 65 th Street as of December 31, 2022, in the form of a mortgage note to New York Community Bank (“NYCB”), entered into in connection with the acquisition of the property.
We have the option, commencing on January 1, 2024, to prepay the note prior to the maturity date, subject to a prepayment premium if it occurs prior to September 2, 2029. 10 West 65th Street There is $31.8 million in mortgage debt secured by 10 West 65th Street as of December 31, 2023, in the form of a mortgage note to New York Community Bank (“NYCB”), entered into in connection with the acquisition of the property.
In transitioning to ASC 842 in the first quarter of 2022, the Company has elected the modified retrospective approach to existing leases at the beginning of the quarter and has recorded a cumulative-effect adjustment in retained earnings using the above methods applied to balances as of January 1, 2022, of $6.0 million.
In transitioning to ASC 842 in the first quarter of 2022, the Company elected the modified retrospective approach to existing leases at the beginning of the quarter and has recorded a cumulative-effect adjustment in retained earnings using the above methods applied to balances as of December 31, 2021, of $6.0 million.
In accordance with ASC 842, the Company performed a detailed review of amounts due from tenants to determine if accounts receivable balances and future lease payments were probable of collection, wrote off receivables not probable of collection and recorded a general reserve against revenues for receivables probable of collection for which a loss can be reasonably estimated.
In accordance with ASC 842, the Company performs a detailed review of amounts due from tenants to determine if accounts receivable balances and future lease payments were probable of collection, writes off receivables not probable of collection and records a general reserve against revenues for receivables probable of collection for which a loss can be reasonably estimated.
Costs incurred in seeking financing transactions which do not close are expensed in the period the financing transaction is terminated. 46 Revenue Recognition As mentioned above under Tenant and Other Receivables and Allowance for Doubtful Accounts , effective the first quarter of 2022, the Company has adopted ASC 842, “Leases” which replaces the guidance under ASC 840.
Costs incurred in seeking financing transactions which do not close are expensed in the period the financing transaction is terminated. 48 Revenue Recognition As mentioned above under Tenant and Other Receivables and Allowance for Doubtful Accounts, effective the first quarter of 2022, the Company has adopted ASC842, “Leases” which replaces the guidance under ASC840.
Overview of Our Company Clipper Realty Inc. (the “Company” or “we”) 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 current portfolio in Manhattan and Brooklyn.
(the “Company” or “we”) 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 current portfolio in Manhattan and Brooklyn.
The note matures on July 1, 2028, and bears interest at 3.68%. The note required interest-only payments through July 2018, and monthly principal and interest payments of approximately $321,000 thereafter based on a 30-year amortization schedule. We have the option to prepay the note prior to the maturity date, subject to a prepayment premium.
The note required interest-only payments through July 2018, and monthly principal and interest payments of approximately $321,000 thereafter based on a 30-year amortization schedule. We have the option to prepay the note prior to the maturity date, subject to a prepayment premium.
Liquidity and Capital Resources As of December 31, 2022, we had $1,161.6 million of indebtedness (net of unamortized issuance costs) secured by our properties, $18.2 million of cash and cash equivalents, and $12.5 million of restricted cash. See Note 6 “Notes Payable” of the accompanying “Notes to Consolidated Financial Statements” for a discussion of the Company’s property-level debt.
Liquidity and Capital Resources As of December 31, 2023, we had $1,205.6 million of indebtedness (net of unamortized issuance costs) secured by our properties, $22.2 million of cash and cash equivalents, and $14.1 million of restricted cash. See Note 6 “Notes Payable” of the accompanying “Notes to Consolidated Financial Statements” for a discussion of the Company’s property-level debt.
Certain loan agreements require the Company to comply with affirmative and negative covenants, including the maintenance of debt service coverage and debt yield ratios. In the event that they are not compliant, certain lenders may require cash sweeps of rent until the conditions are cured.
Certain loan agreements require the Company to comply with affirmative and negative covenants, including the maintenance of debt service coverage and debt yield ratios. In the event that the Company is not compliant, certain lenders may require cash sweeps of rent until the conditions are cured. The Company believes it is not in default on any of its loan agreements.
When the probability assessment has changed for these receivables, the Company has recognized lease income to the extent of the difference between the lease income that would have been recognized if collectability had always been assessed as probable and the lease income recognized to date.
When the probability assessment has changed for these receivables, the Company has recognized lease income to the extent of the difference between the lease income that would have been recognized if collectability had always been assessed as probable and the lease income recognized to date. For remaining receivables probable of collection, the Company has recorded a general reserve under ASC450.
We further consider AFFO useful in determining funds available for payment of distributions. Neither FFO nor AFFO represent net income (loss) or cash flows from operations computed in accordance with GAAP.
We consider FFO useful in evaluating potential property acquisitions and measuring operating performance. We further consider AFFO useful in determining funds available for payment of distributions. Neither FFO nor AFFO represent net income (loss) or cash flows from operations computed in accordance with GAAP.
Separately, certain of our smaller commercial spaces which were vacated as a result of the COVID-19 pandemic have been released at favorable rental rates. Throughout 2022 and 2021, we continued to benefit from relatively low interest rates. Our weighted average interest rate as of December 31, 2022, was approximately 4.1% per annum.
Separately, certain of our smaller commercial spaces which were vacated because of the COVID-19 pandemic had been released at favorable rental rates. 44 Throughout 2023 and 2022, we continued to benefit from relatively low interest rates on our debt. Our weighted average interest rate as of December 31, 2023, was approximately 4.2% per annum.
AFFO is defined by us as FFO excluding amortization of identifiable intangibles incurred in property acquisitions, straight-line rent adjustments to revenue from long-term leases, amortization costs incurred in originating debt, interest rate cap mark-to-market adjustments, amortization of non-cash equity compensation, acquisition and other costs, loss on modification/extinguishment of debt, gain on involuntary conversion, gain on termination of lease and certain litigation-related expenses, less recurring capital spending. 54 Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.
AFFO is defined by us as FFO excluding amortization of identifiable intangibles incurred in property acquisitions, straight-line rent adjustments to revenue from long-term leases, amortization costs incurred in originating debt, interest rate cap mark-to-market adjustments, amortization of non-cash equity compensation, acquisition and other costs, loss on modification/extinguishment of debt, gain on involuntary conversion, gain on termination of lease and certain litigation-related expenses, less recurring capital spending.
Property-Level Debt The mortgages, loans and mezzanine notes payable collateralized by the properties, or the Company’s interest in the entities that own the properties and assignment of leases, are as follows (in thousands): Property Maturity Interest Rate December 31, 2022 Flatbush Gardens, Brooklyn, NY 6/1/2032 3.125 % $ 329,000 250 Livingston Street, Brooklyn, NY 6/6/2029 3.63 % 125,000 141 Livingston Street, Brooklyn, NY 3/6/2031 3.21 % 100,000 Tribeca House, Manhattan, NY 3/6/2028 4.506 % 360,000 Aspen, Manhattan, NY 7/1/2028 3.68 % 62,554 Clover House, Brooklyn, NY 12/1/2029 3.53 % 82,000 10 West 65 th Street, Manhattan, NY 11/1/2027 SOFR + 2.50 % 32,222 1010 Pacific Street, Brooklyn, NY 9/1/2024 LIBOR + 3.60 % 43,477 953 Dean Street, Brooklyn, NY 6/22/2023 Prime Rate + 1.60 % 36,985 $ 1,171,238 Flatbush Gardens There is $329.0 million of mortgage debt secured by Flatbush Gardens, as of December 31, 2022, in the form of a mortgage note to New York Community Bank.
Property-Level Debt The mortgages, loans and mezzanine notes payable collateralized by the properties, or the Company’s interest in the entities that own the properties and assignment of leases, are as follows (in thousands): Property Maturity Interest Rate December 31, 2023 Flatbush Gardens, Brooklyn, NY 6/1/2032 3.125 % $ 329,000 250 Livingston Street, Brooklyn, NY 6/6/2029 3.63 % 125,000 141 Livingston Street, Brooklyn, NY 3/6/2031 3.21 % 100,000 Tribeca House, Manhattan, NY 3/6/2028 4.506 % 360,000 Aspen, Manhattan, NY 7/1/2028 3.68 % 61,004 Clover House, Brooklyn, NY 12/1/2029 3.53 % 82,000 10 West 65th Street, Manhattan, NY 11/1/2027 SOFR + 2.50 % 31,836 1010 Pacific Street, Brooklyn, NY 9/15/2025 5.55 % 60,000 1010 Pacific Street, Brooklyn, NY 9/15/2025 6.37 % 20,000 953 Dean Street, Brooklyn, NY 8/10/2026 SOFR + 4 % 42,909 953 Dean Street, Brooklyn, NY 8/10/2026 SOFR + 10 % 7,280 $ 1,219,029 Flatbush Gardens There is $329.0 million of mortgage debt secured by Flatbush Gardens, as of December 31, 2023, in the form of a mortgage note to New York Community Bank.
These regulations generally limit rental increases that we can charge at our Flatbush Gardens property, our Aspen property and a portion of our Tribeca House and 10 West 65 th Street property upon lease renewal; effective October 1, 2022, such increases are 3.25% for a one-year lease and 5% for a two-year lease. .
These regulations generally limit rental increases that we can charge at our Flatbush Gardens property, our Aspen property and a portion of our Tribeca House and 10 West 65th Street property upon lease renewal; effective October 1, 2023, such increases are 3.0% for a one-year lease and 2.75% in the first year and 3.2% in the second year for a two-year lease.
This is likely to result in an increase in our operating and general and administrative expenses over time. A majority of the leases at our apartment communities are for approximately one-year terms, which, in a rising market, generally enables us to seek increased rents upon renewal of existing leases or commencement of new leases.
A majority of the leases at our apartment communities are for approximately one-year terms, which, in a rising market, generally enables us to seek increased rents upon renewal of existing leases or commencement of new leases.
The following table sets forth a reconciliation of FFO and AFFO for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands): Years ended December 31, 2022 2021 FFO Net loss $ (12,571 ) $ (20,018 ) Real estate depreciation and amortization 26,985 25,762 FFO $ 14,414 $ 5,744 AFFO FFO $ 14,414 $ 5,744 Amortization of real estate tax intangible 481 481 Amortization of above- and below-market leases (35 ) (104 ) Straight-line rent adjustments (163 ) (202 ) Amortization of debt origination costs 1,252 1,247 Amortization of LTIP awards 2,920 2,611 Transaction pursuit costs 506 60 Loss on modification/extinguishment of debt — 3,034 Gain on involuntary conversion — (139 ) Litigation settlement and other — 2,730 Certain litigation-related expenses 188 299 Recurring capital spending (326 ) (205 ) AFFO $ 19,237 $ 15,556 Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization We believe that Adjusted EBITDA is a useful measure of our operating performance.
The following table sets forth a reconciliation of FFO and AFFO for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands): Years ended December 31, 2023 2022 FFO Net loss $ (15,565 ) $ (12,571 ) Real estate depreciation and amortization 28,939 26,985 FFO $ 13,374 $ 14,414 AFFO FFO $ 13,374 $ 14,414 Amortization of real estate tax intangible 481 481 Amortization of above- and below-market leases (18 ) (35 ) Straight-line rent adjustments 214 (163 ) Amortization of debt origination costs 1,705 1,252 Amortization of LTIP awards 3,015 2,920 Transaction pursuit costs 357 506 Loss on modification/extinguishment of debt 3,868 — Certain litigation-related expenses (10 ) 188 Recurring capital spending (436 ) (326 ) AFFO $ 22,550 $ 19,237 57 Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization We believe that Adjusted EBITDA is a useful measure of our operating performance.
As of December 31, 2022, the Company owns: • two neighboring residential/retail rental properties at 50 Murray Street and 53 Park Place in the Tribeca neighborhood of Manhattan; • one residential property complex in the East Flatbush neighborhood of Brooklyn consisting of 59 buildings; • two primarily commercial properties in Downtown Brooklyn (one of which includes 36 residential apartment units); • one residential/retail rental property at 1955 1 st Avenue in Manhattan; • one residential rental property at 107 Columbia Heights in the Brooklyn Heights neighborhood of Brooklyn; • one residential rental property at 10 West 65 th Street in the Upper West Side neighborhood of Manhattan; 41 • one property at 1010 Pacific Street in the Prospect Heights neighborhood of Brooklyn, being redeveloped as a residential rental building; and • the Dean Street property, to be redeveloped as a residential/retail rental building.
During the period December 2021 through April 2022, the Company purchased the Dean Street property located in Prospect Heights, New York, for approximately $48.5 million. 43 As of December 31, 2023, the Company owned: • two neighboring residential/retail rental properties at 50 Murray Street and 53 Park Place in the Tribeca neighborhood of Manhattan; • one residential property complex in the East Flatbush neighborhood of Brooklyn consisting of 59 buildings; • two primarily commercial properties in Downtown Brooklyn (one of which includes 36 residential apartment units); • one residential/retail rental property at 1955 1st Avenue in Manhattan; • one residential rental property at 107 Columbia Heights in the Brooklyn Heights neighborhood of Brooklyn; • one residential rental property at 10 West 65th Street in the Upper West Side neighborhood of Manhattan; • one residential rental property at 1010 Pacific Street in the Prospect Heights neighborhood of Brooklyn; and • the Dean Street property, to be redeveloped as a residential/retail rental building.
The Company paid distributions of $17,073 and $16,758 in the years ended December 31, 2022 and 2021, respectively. 53 Income Taxes No provision has been made for income taxes since all of the Company’s operations are held in pass-through entities and accordingly the income or loss of the Company is included in the individual income tax returns of the partners or members.
Income Taxes No provision has been made for income taxes since all of the Company’s operations are held in pass-through entities and accordingly the income or loss of the Company is included in the individual income tax returns of the partners or members.
Commercial rental income increased to $39,484 for the year ended December 31, 2022, from $36,958 for the year ended December 31, 2021, primarily due to the restoration of revenue as per ASC 842 from a tenant at Tribeca House now probable of collection of $1,100, commencement of new leases at the Tribeca House property and increased escalation billings at the 141 Livingston Street property, partially offset by the inclusion of $513 of bad debt expense due to adoption of ASC 842 in 2022.
Commercial rental income decreased to $38,465 for the year ended December 31, 2023, from $39,484 for the year ended December 31, 2022, primarily due to a net, $1,103 restoration of revenue as per ASC 842 from a tenant at Tribeca House deemed probable of collection during the year ended December 31, 2023, partially offset by the commencement of new leases at the Tribeca House property and increased escalation billings at the 141 Livingston Street property.
As a result of the foregoing, net loss decreased to $12,571 for the year ended December 31, 2022, from $20,018 for the year ended December 31, 2021.
As a result of the foregoing, net loss increased to $13,083 for the year ended December 31, 2023, from $12,571 for the year ended December 31, 2022.
Our ability to access the equity capital markets will depend on a number of factors as well, including general market conditions for REITs and market perceptions about our company. 50 We believe that our current cash flows from operations and cash on hand, coupled with additional mortgage debt, will be sufficient to allow us to continue operations, satisfy our contractual obligations and make distributions to our stockholders and the members of our LLC subsidiaries for at least the next twelve months.
We believe that our current cash flows from operations and cash on hand, coupled with additional mortgage debt, will be sufficient to allow us to continue operations, satisfy our contractual obligations and make distributions to our stockholders and the members of our LLC subsidiaries for at least the next twelve months.
We believe that we have expertise in operating, renovating and repositioning our properties. As we grow, we will likely add personnel as necessary to provide outstanding customer service to our residents in order to maintain or increase occupancy levels at our apartment communities and to preserve the ability to increase rents.
As we grow, we will likely add personnel as necessary to provide outstanding customer service to our residents in order to maintain or increase occupancy levels at our apartment communities and to preserve the ability to increase rents. This is likely to result in an increase in our operating and general and administrative expenses over time.
The following table sets forth a reconciliation of NOI for the periods presented to income from operations, computed in accordance with GAAP (amounts in thousands): Years ended December 31, 2022 2021 NOI Income from operations $ 27,636 $ 24,161 Real estate depreciation and amortization 26,985 25,762 General and administrative expenses 12,752 10,570 Transaction pursuit costs 506 60 Amortization of real estate tax intangible 481 481 Amortization of above- and below-market leases (35 ) (104 ) Straight-line rent adjustments (163 ) (202 ) Litigation settlement and other — 2,730 NOI $ 68,162 $ 63,458 Recent Accounting Pronouncements See Note 2, “Significant Accounting Policies” of our consolidated financial statements included in Item 15 for a discussion of recent accounting pronouncements. 56
Further, other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to that of other REITs. 58 The following table sets forth a reconciliation of NOI for the periods presented to income from operations, computed in accordance with GAAP (amounts in thousands): Years ended December 31, 2023 2022 NOI Income from operations $ 33,170 $ 27,636 Real estate depreciation and amortization 28,939 26,985 General and administrative expenses 13,169 12,752 Transaction pursuit costs 357 506 Amortization of real estate tax intangible 481 481 Amortization of above- and below-market leases (18 ) (35 ) Straight-line rent adjustments 214 (163 ) NOI $ 76,312 $ 68,162 Recent Accounting Pronouncements See Note 2, “Significant Accounting Policies” of our consolidated financial statements included in Item 15 for a discussion of recent accounting pronouncements.
In fact, real estate values have historically risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO useful in evaluating potential property acquisitions and measuring operating performance.
Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values have historically risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income.
The note matures on March 6, 2031, bears interest at 3.21% and requires interest-only payments for the entire term. We have the option to prepay all (but not less than all) of the unpaid balance of the loan within three months of maturity, without a prepayment premium.
The loan matures on March 6, 2028, bears interest at 4.506% and requires interest-only payments for the entire term. We have the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to a prepayment premium if it occurs prior to December 6, 2027.
Further, other REITs may use different methodologies for calculating Adjusted EBITDA, and accordingly, our Adjusted EBITDA may not be comparable to that of other REITs. 55 The following table sets forth a reconciliation of Adjusted EBITDA for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands): Years ended December 31, 2022 2021 Adjusted EBITDA Net loss $ (12,571 ) $ (20,018 ) Real estate depreciation and amortization 26,985 25,762 Amortization of real estate tax intangible 481 481 Amortization of above- and below-market leases (35 ) (104 ) Straight-line rent adjustments (163 ) (202 ) Amortization of LTIP awards 2,920 2,611 Interest expense, net 40,207 41,284 Transaction pursuit costs 506 60 Loss on modification/extinguishment of debt — 3,034 Gain on involuntary conversion — (139 ) Litigation settlement and other — 2,730 Certain litigation-related expenses 188 299 Adjusted EBITDA $ 58,518 $ 55,798 Net Operating Income We believe that NOI is a useful measure of our operating performance.
The following table sets forth a reconciliation of Adjusted EBITDA for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands): Years ended December 31, 2023 2022 Adjusted EBITDA Net loss $ (15,565 ) $ (12,571 ) Real estate depreciation and amortization 28,939 26,985 Amortization of real estate tax intangible 481 481 Amortization of above- and below-market leases (18 ) (35 ) Straight-line rent adjustments 214 (163 ) Amortization of LTIP awards 3,015 2,920 Interest expense, net 44,867 40,207 Transaction pursuit costs 357 506 Loss on modification/extinguishment of debt 3,868 — Certain litigation-related expenses (10 ) 188 Adjusted EBITDA $ 66,148 $ 58,518 Net Operating Income We believe that NOI is a useful measure of our operating performance.
Non-GAAP Financial Measures In this Annual Report on Form 10-K, we disclose and discuss funds from operations (“FFO”), adjusted funds from operations (“AFFO”), adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and net operating income (“NOI”), all of which meet the definition of “non-GAAP financial measures” set forth in Item 10(e) of Regulation S-K promulgated by the SEC.
Non-GAAP Financial Measures In this Annual Report on Form 10-K, we disclose and discuss funds from operations (“FFO”), adjusted funds from operations (“AFFO”), adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and net operating income (“NOI”), all of which meet the definition of “non-GAAP financial measures” set forth in Item 10(e) of Regulation S-K promulgated by the SEC. 56 While management and the investment community in general believe that presentation of these measures provides useful information to investors, neither FFO, AFFO, Adjusted EBITDA, nor NOI should be considered as an alternative to net income (loss) or income from operations as an indication of our performance.
MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion of our financial condition and results of operations in conjunction with the more detailed information set forth under the captions “ Selected Financial Data ” and “ Cautionary Note Concerning Forward-Looking Statements, ” and in our financial statements and the related notes thereto appearing elsewhere in this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
At the Clover House property, average residential rent per square foot at December 31, 2022, was $73.36, an increase from $63.41 at December 31, 2021.
At the Aspen property, average residential rent per square foot increased at December 31, 2023, was $38.65, up from $36.78 at December 31, 2022. At the Clover House property, average residential rent per square foot at December 31, 2023, was $80.93, an increase from $73.71 at December 31, 2022.
However, NOI should only be used as an alternative measure of our financial performance. Further, other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to that of other REITs.
Further, other REITs may use different methodologies for calculating Adjusted EBITDA, and accordingly, our Adjusted EBITDA may not be comparable to that of other REITs.
Depreciation and amortization expense increased to $26,985 for the year ended December 31, 2022, from $25,762 for the year ended December 31, 2021, due to additions to real estate across the portfolio. Litigation settlement and other.
Depreciation and amortization expense increased to $27,634 for the year ended December 31, 2023, from $26,985 for the year ended December 31, 2022, due to additions to real estate across the portfolio, primarily at Flatbush Gardens and 141 Livingston. Interest expense, net .
The original note maturity of December 22, 2022 was extended by six months to June 22, 2023, and is subject to one additional six month extension option. The note bears interest at the prime rate (with a floor of 3.25%) plus 1.60% (7.10% as of December 31, 2022).
The note’s original maturity was December 22, 2022 and was subsequently extended to September 22, 2023. The note required interest-only payments and bears interest at the prime rate (with a floor of 3.25%) plus 1.60%.
We believe that as a publicly traded REIT, we will have access to multiple sources of capital to fund our long-term liquidity requirements. These sources include the incurrence of additional debt and the issuance of additional equity. However, we cannot provide assurance that this will be the case.
These sources include the incurrence of additional debt and the issuance of additional equity. However, we cannot provide assurance that this will be the case.
Although urban office markets have also generally been negatively impacted as a result of the COVID-19 pandemic, with an increase in remote working leading to less demand for office space, the Company’s office properties have not been adversely affected from a rent perspective given its long-term leases with the City of New York.
Urban office markets have also generally been negatively impacted as a result of the increase in remote working that began during the COVID-19 pandemic, leading to less demand for office space.
We do not expect that net cash provided by operations will be sufficient to meet all of these long-term liquidity needs. We anticipate meeting our long-term liquidity requirements by using cash as an interim measure and funds from public and private equity offerings and long-term secured and unsecured debt offerings.
We anticipate meeting our long-term liquidity requirements by using cash as an interim measure and funds from public and private equity offerings and long-term secured and unsecured debt offerings. 52 We believe that as a publicly traded REIT, we will have access to multiple sources of capital to fund our long-term liquidity requirements.
We have the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to certain prepayment premiums, as defined. 1010 Pacific Street As of December 31, 2022, there was a group of mortgage notes secured by the 1010 Pacific Street property to AIG Asset Management (U.S.), LLC, entered into in connection with the commencement of construction at the property.
We have the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to certain prepayment premiums, as defined. 1010 Pacific Street There is $80.0 million in mortgage debt secured by 1010 Pacific Street as of December 31, 2023, in the form of two mortgage notes to Valley National Bank.
Despite recent increases, interest rates continue to be at relatively low levels versus historical norms. Factors that May Influence Future Results of Operations We derive approximately 70% of our revenues from rents received from residents in our apartment rental properties and the remainder from commercial and retail rental customers.
Factors that May Influence Future Results of Operations We derive approximately 72% of our revenues from rents received from residents in our apartment rental properties and the remainder from commercial and retail rental customers. We believe that we have expertise in operating, renovating and repositioning our properties.
Real estate taxes and insurance . Real estate taxes and insurance expenses increased to $32,561 for the year ended December 31, 2022, from $30,449 for the year ended December 31, 2021, primarily due to increased real estate taxes and insurance expense across the portfolio. General and administrative .
Real estate taxes and insurance expenses decreased to $31,591 for the year ended December 31, 2023, from $32,561 for the year ended December 31, 2022, due to increased property taxes and insurance across the portfolio partially offset by the real estate tax exemption at Flatbush Gardens that began July 1, 2023. 51 General and administrative .
Cash Flows for the Years ended December 31, 2022 and 2021 (in thousands) Year Ended December 31, 2022 2021 Operating activities $ 20,139 $ 10,822 Investing activities (51,476 ) (77,944 ) Financing activities 9,779 30,314 Cash flows provided by (used in) operating activities, investing activities and financing activities for the years ended December 31, 2022 and 2021, are as follows: Net cash provided by operating activities was $20,139 for the year ended December 31, 2022, compared to $10,822 for the year ended December 31, 2021.
During the years ended December 31, 2023 and 2022, we paid dividends and distributions on our common shares, Class B LLC units and LTIP units totaling $17.4 million and $17.1 million, respectively. 55 Cash Flows for the Years ended December 31, 2023 and 2022 (in thousands) Year Ended December 31, 2023 2022 Operating activities $ 26,185 $ 20,139 Investing activities (41,357 ) (51,476 ) Financing activities 20,731 9,779 Cash flows provided by (used in) operating activities, investing activities and financing activities for the years ended December 31, 2023 and 2022, are as follows: Net cash provided by operating activities was $26,185 for the year ended December 31, 2023, compared to $20,139 for the year ended December 31, 2022.
Interest expense, net, decreased to $40,207 for the year ended December 31, 2022 from $41,284 for the year ended December 31, 2021. The decrease is primarily resulted from increased capitalized interest in 2022 partially offset by increased interest expense at our 10 West 65 th street building due to the resetting of the interest rate from fixed to floating.
Interest expense, net, increased to $41,854 for the year ended December 31, 2023 from $40,207 for the year ended December 31, 2022, primarily due to increased interest at the 10 West 65th Street as a result of the interest rate changing from fixed to a floating rate in the fourth quarter of 2022 and lower capitalized interest as a result of the completion of the 1010 Pacific development in the second quarter of 2023.
The Company currently intends to refinance the note with a construction loan prior to maturity, although there are no assurances that the Company will be able to do so. The Company has provided a limited guaranty for the mortgage notes at several of its properties. The Company’s loan agreements contain customary representations, covenants and events of default.
The Company has provided a limited guaranty for mortgage notes at several of its properties which require the Company to maintain certain minimum liquidity and net worth levels. The Company’s loan agreements contain customary representations, covenants and events of default.
In the year-ended December 31, 2022, the Company has charged revenue in the amount of $4.9 million for receivables not deemed probable of collection and recorded an increase in revenues of $2.1 million for various residential tenants and $1.1 million for one customer at Tribeca House that were reassessed and determined to be probable of collection..
In the year ended December 31, 2022, the Company has charged revenue in the amount of $6.2 million for residential receivables not deemed probable of collection and recognized revenue of $3.0 million for a reassessment of collectability of residential receivables previously not deemed probable of collection.
Distributions In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. During the years ended December 31, 2022 and 2021, we paid dividends and distributions on our common shares, Class B LLC units and LTIP units totaling $17.1 million and $16.8 million, respectively.
Distributions In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our stockholders.
The Company, through the Operating Partnership, owns all of the ownership interests in the Aspen property, the Clover House property, the 10 West 65 th Street property, the 1010 Pacific Street property and the Dean Street property. COVID-19 Pandemic The Company is making substantial progress in recovering from the effects of the COVID-19 pandemic.
The Company, through the Operating Partnership, owns all of the ownership interests in the Aspen property, the Clover House property, the 10 West 65th Street property, the 1010 Pacific Street property and the Dean Street property. How We Derive Our Revenue Our revenue consists primarily of rents received from our residential, commercial and, to a lesser extent, retail tenants.
Base rent per square foot increased at the Tribeca House property to $73.75 (99.2% leased occupancy) at December 31, 2022, from $62.68 (97.8% leased occupancy) at December 31, 2021. Leased occupancy at the Flatbush Gardens property increased to 98.8% leased at December 31, 2022, from 92.3% leased at December 31, 2021.
For example, base rent per square foot increased at the Tribeca House property to $77.70 at December 31, 2023, from $73.75 at December 31, 2022 and base rent per square foot increased at the Clover House property to $80.93 at December 31, 2023, from $73.31 at December 31, 2022.
Property operating expenses increased to $29,306 for the year ended December 31, 2022, from $28,997 for the year ended December 31, 2021, primarily due to higher utilities, repairs and maintenance, legal, supplies, water and sewer costs and other miscellaneous costs, partially offset by bad debt expense of $1,850 recorded in 2021 under ASC 450 which is now recorded as a reduction of revenues in accordance with the adoption of ASC 842 and lower commissions.
Property operating expenses increased to $29,917 for the year ended December 31, 2023, from $29,306 for the year ended December 31, 2022, primarily due to increased repairs and maintenance, payroll costs, union costs and security costs partially offset by lower utilities costs, commissions, and miscellaneous other costs. Real estate taxes and insurance .
General and administrative expenses increased to $12,752 for the year ended December 31, 2022, from $10,570 for the year ended December 31, 2021, primarily due to primarily due to increased executive compensation expense. Transaction pursuit costs. Transaction pursuit costs primarily reflect costs incurred for abandoned acquisition disposition or other transaction pursuits. 49 Depreciation and amortization .
Transaction pursuit costs primarily reflect costs related to the Article 11 Agreement during the year ended December 31, 2023 and costs incurred for an abandoned acquisition during the year ended December 31, 2022. Depreciation and amortization .
We have the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to a prepayment premium if it occurs prior to December 6, 2027. 51 Aspen There is $62.5 million in mortgage debt secured by Aspen, as of December 31, 2022, in the form of a mortgage note to Capital One Multifamily Finance LLC.
We have the option to prepay all (but not less than all) of the unpaid balance of the loan within three months of maturity, without a prepayment premium. 53 Tribeca House There is a $360.0 million loan secured by the Tribeca House properties, as of December 31, 2023, through Deutsche Bank AG.
For the year ended December 31, 2021, we received $150 of insurance proceeds from the disposal of assets damaged in a fire at a property. Net cash provided by financing activities was $9,779 for the year ended December 31, 2022, compared to $30,314 for the year ended December 31, 2021.
These were partially offset by a refund of a potential acquisition deposit of $2,015 during the year ended December 31, 2023. Net cash provided by financing activities was $20,731 for the year ended December 31, 2023, compared to $9,779 for the year ended December 31, 2022.
The average rental rate per square foot at the Tribeca House property at December 31, 2022 was $73.75, up from $62.68 at December 31, 2021. At the Aspen property, average residential rent per square foot increased at December 31, 2022, to $36.78, up from $35.60 at December 31, 2021.
Trends During 2023, the Company’s residential properties continued to have elevated occupancy levels and experienced growth in rental rates, as a result of a robust rental market in the New York metro area. The average rental rate per square foot at the Tribeca House property at December 31, 2023 was $77.70, up from $73.75 at December 31, 2022.
Removed
During the period December 2021 through April 2022, the Company purchased the Dean Street property located in Prospect Heights, New York, for approximately $48.5 million.
Added
This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “ Risk Factors ” or in other parts of this Annual Report on Form 10-K .
Removed
In 2022, the Company recorded steadily increasing quarterly revenue culminating in record levels in the fourth quarter of 2022 of $33.0 million. This compares to revenue in the fourth quarter of 2019, immediately prior to the onset of the COVID-19 pandemic, of $30.6 million.
Added
See “ Cautionary Note Concerning Forward-Looking Statements. ” in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Overview of Our Company Clipper Realty Inc.
Removed
At December 31, 2022, leased occupancy in the residential portfolio was 98.7% and weighted average rent per square foot was $38.41, both exceeding pre-pandemic levels in the fourth quarter of 2019 of 97.7% and $36.47 per square foot, respectively.
Added
We have two reportable operating segments, Residential Rental Properties and Commercial Rental Properties. See Note 10. Segment Reporting to our consolidated financial statements included in this Form 10-K.
Removed
Throughout 2022, residential rents per square foot for new tenants increased by over 20.7% from prior rental rates and by over 9.8% for renewals. While these trends may not continue, we expect our properties and the New York City market to remain desirable to a broad range of tenants.
Added
As of December 31, 2023 the Company’s office properties had not been adversely affected from a rent perspective as a result of its long-term leases with the City of New York. However, as of February 23, 2024, the City of New York informed the Company of its intention to terminate the lease at 250 Livingston effective August 23, 2025.
Removed
Business conditions in 2022 contrast with those in 2020 and 2021, where government actions intended to curb the spread of COVID-19 created disruptions in many industries and negatively impacted the Company’s business in several ways, including reducing our tenants’ ability or willingness to pay rents and reducing demand for housing in the New York metropolitan area.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe fair value of the Company’s notes payable was approximately $1,092.3 million and $1,199.4 million as of December 31, 2022 and 2021, respectively.
Biggest changeThe fair value of the Company’s notes payable was approximately $1,160.4 million and $1,092.3 million as of December 31, 2023 and 2022, respectively.
A one percent change in interest rates on our $112.7 million of variable rate debt as of December 31, 2022, would impact annual net income by approximately $1.1 million. At December 31, 2022, there were no interest rate caps for the Company’s outstanding debt.
A one percent change in interest rates on our $82.0 million of variable rate debt as of December 31, 2023, would impact annual net income by approximately $0.8 million. At December 31, 2023, there were no interest rate caps for the Company’s outstanding debt.

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