Good afternoon, ladies and gentlemen, and welcome to the Clipper Realty 2Q 2019 Earnings Call. At this time all participants are placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Michael Frenz, CFO of Clipper Realty. Sir, the floor is yours.

Good afternoon and thank you for joining us for the second quarter 2019 Clipper Realty Inc. earnings conference call. Participating with me on today's call will be David Bistricer, Co-Chairman of the Board and Chief Executive Officer; and J.J. Bistricer, Chief Operating Officer. Please be aware that statements made during the call that are not historical may be deemed forward-looking statements and actual results may differ materially from those indicated by such forward-looking statements. These statements are subject to numerous risks and uncertainties, including those disclosed in the company's 2018 annual report on Form 10-K, which is accessible at www.sec.gov and the company's website. As a reminder, the forward-looking statements speak only as of the date of this call, August 1, 2019, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including adjusted funds from operations, or AFFO; adjusted earnings before interest, taxes, depreciation and amortization or adjusted EBITDA; and net operating income, or NOI. Please see our press release, supplemental financial information and quarterly report on Form 10-Q posted today for reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will now turn the call over to our Co-Chairman and CEO, David Bistricer.

Thank you, Michael. Good afternoon, and welcome to the second quarter 2019 earnings call for Clipper Realty. I'm pleased to provide an update on our business, including recent highlights and milestones. I will then turn the call over to J.J., who will discuss property level activity, including leasing performance and renovation projects. Finally, Michael will speak about our quarterly financial performance. We will then take your questions. I want to congratulate the entire team for an exceptional quarter. We are announcing record results today, a meaningful accomplishment and significant achievement considering some of recent industry headwinds, our portfolio is 99% leased. Turning to some recent developments in this past quarter. We are extremely pleased to announce that we are currently bringing the 107 Columbia Heights property in Brooklyn, rebranded its Clover House online. This fully amenitized residential building has 158 free-market studio one and two bedroom apartments plus an indoor parking garage. As J.J. will describe in detail shortly, the building was just about 40% pre-leased. The first tenants are moving in this week. We anticipate attractiveness of the property, it's amenities, it's location as one of the most desirable names in all of New York City, and its proximity to Manhattan continues to drive strong resident demand. Opening up 107 Columbia Heights is a significant milestone, and we are thrilled to welcome tenants into the Clover House community. We are also proud to report that we have completed ahead of scheduled the extensive unit renovation and re-leasing of 40 units at 10 West 65th Street property in Manhattan, which we received back from Touro College at the end of January. This rapid turnaround is significant operational achievement for the company and position's the property well for the future. I would like to turn to our office portfolio for a…

Thank you. We continue to perform well operationally, driving ongoing cash flows to efficiently seeing focused expense management and targeted capital investment. Clover House is now open to business. The property enjoyed strong pre-leasing with 61 apartments or just about 40% of the building leased before the first tenant started moving in this week. This is a testament to our leasing team's efforts, an inherited team of the fully renovated property and neighborhood. Initial rents are averaging below $70 per square foot. We currently expect that the building will approach 85% to 90% occupancy by year-end. Separately, we are excited to have completed extensive unit renovation and full lease up of the 40 units a 10 West 65th Street. We significantly outperformed our initial project timeline, having received the units back from Touro College just in January. Since the beginning of the year, we have brought 51 total apartments online, representing over 60% of the building. The property is now fully leased. Tribeca House perform – continues to perform very well. The property is over 99% leased continuing its full occupancy trend that we saw last quarter. Tribeca House remains a go-to destination for young professionals and families, who want to live in Downtown Manhattan. With full amenities and a more attractive price point dictated the surrounding neighborhood. Out blended $69 per square foot rent has remained steady as we have bought the building to full occupancy over the last few quarters and also a significant upside potential relative to the neighborhood comparable $80 per square foot rents. We have completed numerous major capital projects at the property bringing it up to market standard to serve as the catalyst in the future and further closing the rent gap. Importantly, we have reduced the apartment turnover downtime from three months to…

Thank you, J.J. Our second quarter results clearly reflect the strong leasing trends and operational efficiencies, highlighted by David and J.J. For the second quarter, we achieved record revenues of $28.4 million, an increase of $1.1 million or 4.2% compared to the same period in 2018. We achieved record NOI of $15.9 million, a 4.2% increase compared to the same period in 2018. We also achieved record AFFO of $6.1 million or $0.14 per share, an 11.9% increase over last year. The year-over-year total revenue increase was primarily attributable to improvements at Flatbush Gardens and Tribeca House. Flatbush and Tribeca residential revenues grew 8.6% and 6.7% year-on-year, respectively, reflecting increases in both rental rates and occupancy. Both properties are currently 99% plus leased. These increases were partially offset by a nonrecurring $350,000 decrease in revenue at 10 West 65th Street year-over-year, in connection with the 40 unit renovation project discussed earlier, that is now complete. As we bring 107 Columbia Heights online during the third quarter, we will record revenue as earned and expenses on a phase basis as sections become available for leasing. We will provide a further update next quarter as we progress the stabilization of the property. On the expense side, key year-over-year changes were as follows: Property operating expenses increased by $166,000 in the second quarter, year-over-year, primarily driven by a higher provision for receivables collection at Flatbush, offset by lower utility and legal expenses at the property. Real estate taxes and insurance increased by $345,000 in the second quarter, primarily due to property tax increases across the portfolio over the prior year, and insurance cost increases resulting from higher loss experience. Cash, general and administrative expenses were essentially flat in the second quarter, with lower executive cash bonus costs and public company professional fees, offset by an increase in legal expenses related to the 421-g litigation of Tribeca House. Interest expense increased marginally in the second quarter as higher interest costs on the 250 Livingston Street refinancings, which includes noncash loan cost amortization were partially offset by increased interest expense capitalization in connection with property development. Separately, we incurred a noncash $1.8 million loss on extinguishment of debt in the second quarter related to the 250 Livingston Street refinancing at the end of May. Turning to CapEx, we incurred $12.8 million of capital expenditures in the second quarter, the majority of which were related to the 107 Columbia Heights renovation. Other capital projects included elevator upgrades at Tribeca House, apartment upgrades at Tribeca House and 10 West 65th Street, and expenditures to comply with various New York City local laws. Finally, today, we are announcing a dividend of $0.095 per share for the second quarter. The dividend will be paid on August 21 to shareholders of record on August 13. Let me now turn the call back over to David for concluding remarks.

Thank you, Michael. We're extremely pleased with our current results. Our portfolio continues to perform very well and bringing Columbia Heights online is significant. Looking forward, we are positioned to continue to execute on our strategic initiatives and drive value to our shareholders. With that, I would like to open up the line for questions.

Thank you, ladies and gentlemen. The floor is now open for questions. [Operator Instructions] Your first question is coming from Craig Kucera [B. Riley FBR, Inc].

Hey, good afternoon guys. I wanted to circle back to Touro. I think before you had taken the units off-line, it was generating about $1.9 million in annual NOI. Based on the current rents that you're getting, I think, you mentioned about $70. Can you give us a sense of what would the improvement to NOI might be on that? Or alternatively what it might be on a cap rate basis?

Look I would like to say couple of things. Number one, the rental increase is slightly over time here based on the prior numbers. A key situation here is that, as you know, when we initially took the building or purchased the building from Touro, these units that we're talking about were effectively used for college situation, dorm-style units, right? What we've done with this renovation is to turn these units into a full-scale apartments that will appeal to a broader range of folks. So again, we have the initial rents, which are – generate similar to what we had before. But I think the key point is moving forward, given what we've done to the apartments and the location to building, this sets us up really well to start to accelerate rent growth. So it's a good start for us to be good renovation, and we're happy to get it done quickly, so we can start moving the ball forward.

All right. You took the $50 million loan in the second quarter. Have you identified the use of proceeds for that? Is that just for general working capital? Or are you looking to continue to grow the portfolio?

Looking to grow the portfolio, obviously, company looking at different suggestions. And it's you know for general funds with no specific fund for it, was a good rate. It was a good considerable loan and that we look to do that from time to time.

Got it. And one more for me, I guess, with the ULURP that was filed, was that filed ahead of the legislation? And if so, does it change the way you think about potentially going down the path with expanding FAR at Flatbush Gardens?

As the legislation and the FAR are really are 2 different things. Because legislation is to rent-stabilized units. This ULURP will probably have an affordable portion to it, any ULURP that is 1716 toward the City and the 30% affordable unit component to it that this will have. So those will actually be regulated by various different levels of income by AMI's, it's a subject to obviously negotiations with the City. But the rest of the units will not be themselves stabilized because the buildings will be new. And obviously, we have still lot to be negotiated with the City on it. My take on it is, it's going – when it all gets done, it will be a brand-new project. So it'll be a much more – much larger and much nicer place to be, and the City is being very cooperative right now. This is the first step in the process, a lot of discussions have been going on heretofore, but we still have a lot of wood to chop yet to get it done.

Okay, thank you.

You’re welcome.

You have no further questions in queue at this time.

Thanks. Thank you for joining us today. We look forward to speaking with you again soon.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.