Good day, and welcome to the Clipper Realty Quarterly Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comment after the presentation. It’s now my pleasure to turn the floor over to your host, Larry Kreider. Sir, the floor is yours.

Thank you, John. Good afternoon and thank you for joining us for the second quarter 2024 Clipper Realty Inc., earnings conference call. Participating with me on today's call are David Bistricer, Co-Chairman of the Board and Chief Executive Officer; and JJ Bistricer, Chief Operating Officer. Please be aware the 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 2023 Annual Report on Form 10-K, which is accessible at www.sec.gov and our website. As a reminder, the forward-looking statements speak only as of the date of this call, August 1, 2024, 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 in Form 10-Q posted today for a 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, Larry. Good afternoon and welcome to the second quarter of 2024 earnings call for Clipper Realty. I will provide an update on our business performance and some new developments, after which JJ will discuss property-level activity, including leasing performance, and Larry will speak to our quarterly financial performance. We will then take your questions. I'm pleased to report that we are reporting record operating results, including record revenue, net operating income, and AFFO, based on excellent residential activity. Rental demand continues to be strong at all our properties. Overall rents are generally at all-time highs and continue to increase and we are nearly fully leased. In the second quarter, new leases exceeded prior rents by over 7% and crossed the entire market-based portfolio led by the Tribeca house property in Manhattan and the Clover House property in Brooklyn. There were new leases were over $84 and $90 per square foot, and overall rent levels were $81 and $84 per square foot, all compared to the $63 per square foot at the end of December 2021. The results of stabilized rent property at Flatbush Gardens, are also strong. Since last July, we have operated under the 40-year operating according to the Article 11 of the Private Housing Finance Law for New York City Housing Preservation Development, which eliminated real estate taxes at the property and provided for enhanced rental revenues, rental recovery use for assisted tenants, which are beginning to receive meaningful amounts. As a result, we are aggressively fulfilling our commitments for property improvements and assistance in higher wages. Operationally, we are very pleased with our new ground-up development at Pacific House, at 1010 Pacific’s in Brooklyn, after a year of full operation, it's fully stabilized and is contributing to cash flow. It is now 100% leased and…

Thank you. I'm pleased to report that our residential leasing at all our properties is very strong and continues to improve. At the end of the second quarter, our residential properties were over 99% leased and rents were at record levels and still recording increases over previous levels. Overall, new lease and renewal rental rates in the second quarter exceeded previous rent by over 7% at our residential properties. We expect leasing to remain strong in the foreseeable future as demand remains high and the overall rental housing supply remains constrained as widely publicized. As of the end of June, Tribeca House had leased occupancy of nearly 100% rent per square foot of $81 and new rent of $84 per square foot. The Clover House property had leased occupancy of 97% average rates of $84 a foot and new leases of $90 a foot. Our recently completed Pacific House property consisting of a blend of free market rent-stabilized tenants had leased occupancy of 97%, free market rents of $76 per square foot, and new free market rents of $76 per square foot. This property is now fully stabilized with operating cash flows achieving the projected 7% cap rate in the original underwriting. Our other residential properties at 10 West 65th Street, Aspen, and 250 Livingston Street continue to perform at record levels with average lease occupancy above 98% and new rents and renewals 11% higher compared to previous leases. Lastly, at the large Flatbush Gardens property, we continue to be pleased with our performance operating under the new Article 11 agreement made with the Housing Preservation Department of New York City in June of last year. Using the full abatement of real estate taxes beginning last July, we are completing the capital projects we committed, aggressively dealing with maintenance issues…

Thank you, JJ. For the second quarter, we achieved record results on three measures important to us. Revenues increased to $37.3 million from $34.5 million last year, an increase of $2.8 million or 8.1%. NOI increased to $21.1 million from $19.2 million last year, an increase of $1.9 million or 9.9% and AFFO increased to $7.1 million from $5.5 million, an increase of $1.6 million or 29%. For the second quarter, residential revenue increased to $27.7 million by $2.1 million. This increase was due to the strong leasing for all properties as previously discussed. Occupancy and rental rates were at all-time highs in the quarter. We further benefited in the quarter from $400,000 of Section 610 rents, which are now beginning to meaningfully contribute. We expect this revenue source to increase steadily over the next few years. Commercial revenue was flat in the quarter compared to last year. On the expense side, key year-over-year changes quarter-on-quarter were as follows: property operating expenses increased by $2.2 million year-on-year, $1.8 million at Flatbush Gardens working within the Article 11 agreement to fulfill so-called prevailing wage requirements to refurbish units for our new formerly homeless residents and to focus on general repairs and maintenance. Our utility gas expense also increased somewhat in the quarter from an underestimate in the first quarter. We expect expenses for refurbishment and repairs and maintenance expenses to decrease over time as we achieve the benefits of our capital spending. Real estate taxes and insurance decreased by $1.3 million in the second quarter year-on-year due to $1.8 million from the elimination of real estate taxes at Flatbush Gardens, partially off of a $400,000 for the routine increases in real estate taxes at the other properties and $100,000 for insurance cost increases. General and administrative expenses increased slightly by $63,000 in the second quarter year-on-year primarily due to higher legal fees. Interest expenses increased by $407,000 in the second quarter year on year due to the additional $20 million of borrowings at 1010 Pacific Street in the third quarter last year. With regard to our balance sheet, we have $20.3 million of unrestricted cash and $16.5 million of restricted cash. In the second quarter, we had no new debt activity other than draws under the Dean Street property construction loan, which closed in the third quarter of 2023. Today we are announcing a dividend of $0.095 per share for the second quarter the same amount as last quarter. The dividend will be paid on August 22nd, 2024 to shareholders of record on August 15th, 2024. Let me now turn the call back to David for concluding remarks.

Thank you, Larry. We remain focused on officially operating our portfolio. We look forward to the current operating improvements to continue to 2024 and '25. We look forward to optimizing Flatbush Gardens' Article 11 transaction on 953 Street developments and other growth opportunities. Managing the New York City leasing issues at Livingston Street properties and to capitalizing on other possibilities that may present themselves. I would now like to open the line for questions.

Thank you. The floor is now open for questions. [Operator Instructions]. And the first question comes from Buck Horne with Raymond James. Please proceed.

Hi, good afternoon, guys. Just kind of want to start with the office properties and kind of the situation there with the leasing arrangement or I guess with the notices provided by the City of New York there that there. Maybe, start with 250 Livingston, is my understanding that the -- correct me if I'm wrong, if the revenue and the cash flows from 250 Livingston are those going directly into an escrow account for the lender's benefit at this?

No, no, not at the closing plan.

Not at the closing time. Okay. I'm sorry, I couldn't hear that. Is there a point at which if that leases, I mean -- well, is there a risk at the revenues from that building east to flow to the company?

Yes.

Okay. All right. And is there any notice of -- and I know you're in the process of negotiating or negotiating that at least at 141 Livingston, but that cities already given notice at 250 that they're leaving? Have they provided any formal notice of their intention to leave 141 at this point?

Larry?

Well, no, the city -- well, maybe JJ, I'll take this one.

Yes, I'll take on this. On the contrary, they're actually looking for an extension. So when the midst of negotiating an extension with them, that's what we mentioned in the call that there's a conversation around the five-year extension.

Okay. If there is an extension, my understanding is that building may require some significant upgrades or CapEx to refurbish it for any potential new leasing or extension or a new tenant. What kind of CapEx requirements do you think would be needed to extend that lease?

The extension that the city is looking for is not a CapEx type of extension. It's pretty much as is.

Okay. And in terms of the thought process around marketing, 10 West 65th at this point, I guess, what is the need to sell that property at this point? Are you looking to raise liquidity for any other particular reasons?

There might be some better opportunities for the value in that property that we could achieve by selling it. So something we're looking at right now. So we're testing the market to see what kind of a price we might be able to achieve. And so several interested approaches. Once that thing is crystallized, obviously, we'll come back and invite the market at that. Right now, it's just in the preliminary stages of testing the market.

Okay. And is there any progress or thoughts on terms of extending or refinancing the mortgage on 1010 Pacific? I believe my notes are correct, that the mortgage is coming due in about a year's time. Any thoughts on refinancing 1010 Pacific?

1010 Pacific, I mean, when the mortgage is getting a little bit closer to maturity, obviously we would think about refinancing it and seeing what levels of interest are available at that time but I would say Freddie Mac or Freddie may mortgage or with existing lenders is something that we will look at a bit later on. As we do expect that the overall rental markets will fix as the fixed-term mortgages are about to decrease as is noted by the Fed.

All right. Thanks, guys. Good luck.

Thank you.

Thanks.

Okay. We have no further questions in queue. I'd like to turn the floor back to management for any closing remarks.

Thank you for joining us today and we look forward to speaking with you again soon. Good night.

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.