Good afternoon, everyone, and thank you for joining Clipper Realty's First Quarter 2020 Earnings Call. I would now like to introduce your host, Michael Frenz. Michael, please go ahead.

Good afternoon, and thank you for joining us for the First Quarter 2020 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 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 quarterly report on Form 10-Q posted today and the company's 2019 annual report on Form 10-K, which are both accessible at www.sec.gov and our website. As a reminder, the forward-looking statements speak only as of the date of this call, May 11, 2020, 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 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, Michael. We are very pleased with our results. Our portfolio performed very well and remains durable during the pandemic. We will continue to take necessary steps to navigate through the current challenges, further strengthened by additional liquidity provided by the Flatbush Gardens refinancing. We enthusiastically look forward to capitalizing on a myriad of growth opportunities, including the upcoming office lease rolls, the potential expansion of Flatbush Gardens, and the 1010 Pacific Street redevelopment. We remain well positioned to execute our strategic initiatives and create value. I would also like to emphasize that the refinancing of Flatbush Gardens was an enormous liquidity event for the company. All our debt stands on its own under the collateral. None of the mortgages are collateralized. All the debt is independent. The next time we'll have to refinance the property, other than for the Clover House, will not take place until 2027. Our properties have remained open and operational throughout the pandemic. Our portfolio is 98% leased. We are taking the necessary steps to keep our tenants safe, in compliance with state and local shelter-in-place orders, and we continue to provide typical services to our residents. Under difficult circumstances, our business has remained durable. We expect our properties in New York City markets to remain desirable to a broad range of tenants, and our operations to return to a more normal state over time. We are extremely pleased with the operations of the company. We repaid the existing $246 million loan on the property of Flatbush Gardens that was due in March 2028. The original interest rate was 3.5% and it was replaced with an interest rate of 3.8%. The net proceeds of $78 million before reserves increased our cash position. Importantly, we have no debt maturities of any kind up to 2027. Our company is well positioned from a liquidity perspective. Turning to a couple of highlights from the past quarter, Clover House, which was brought online last August, is 99% leased, validating our view that the renovation of the property, its amenities, and its location in one of the most desirable neighborhoods of all in New York City, would drive and maintain exceptional residential demand. We are proceeding with the redevelopment of our recent 1010 Pacific Street acquisition located in Prospect Heights, Brooklyn, about 1 mile from the Atlantic Terminal Barclays Center Hub. As previously discussed, we estimate that the project will cost $85 million in total, take 2 years to complete and develop to a 6.5% stabilized cap rate. J.J. will provide further updates on the project. In our office portfolio, the lease roll of 250 Livingston Street property will occur in August, at which time our new lease with the City is expected to initially add approximately $5 million to the property's annual NOI. At the 141 Livingston Street property, the rent will increase 25% at the end of 2020, which will add $2.1 million to the property's annual NOI. Together, these lease rolls are expected to add an incremental $7.1 million of annual NOI to our portfolio, representing a 10% increase on our portfolio run rate. At our Flatbush Gardens property, we are progressing with the ULURP process, albeit it's slowed down because of the pandemic crisis, but we expect to get that back on track after the City Planning Office opens up fully. There's no assurance, however, that the application will be fully or partially approved as submitted. I would like to provide an update on the Tribeca House 421-g litigation. As previously disclosed, the New York City Court of Appeals ruled in June 2019, that the apartments and buildings receiving 421-g tax benefits are not subject to luxury deregulation, issuing an order to overturn the previous unanimous Appellate Division decision. On January 7, the Appellate Division granted a full stay of the special referee's hearing regarding the calculation of potential rent overcharges during the rent pending appeal, which is currently expected to be argued during the September 2020 term. We do not believe that the order will have a material impact on our business. Lastly, I would like to comment on our first quarter results. We are very proud to report record quarterly revenue of $30.9 million, record quarterly NOI of $17.1 million, and strong AFFO of $5.6 million, all of which reflect robust leasing performance and expense management. Michael will provide further details on our financial performance shortly. I will now turn the call to J.J., who will provide an update on operations and our response to the pandemic.

Thank you. I would like to begin by reiterating our deep gratitude to both our employees and residents during this challenging time. Our colleagues have worked tirelessly to assist our tenants and communities, maintaining as much of a sense of normalcy as possible. We have taken significant steps to keep our residents and employees safe, in compliance with the government-mandated orders, including requiring all of our employees and service providers who enter our buildings to wear compliant personal protective equipment and practice social distancing. Our properties remain open and operational, providing permitted regular services to our tenants. We are utilizing technology as appropriate to conduct operations at all levels. For example, our property management teams are using technological resources to limit in-person contact, while continuing to provide essential maintenance services and address resident service needs. Our leasing team is able to interact remotely with prospective tenants to guide them through the process. Our collections have been strong. In April, our collections were 94% of our collections in March prior to the impact of COVID-19. In situations where tenants notify us that they cannot meet their rent obligations due to the pandemic, we may review potential alternative payment arrangements on a case-by-case basis. Turning to the first quarter, we continue to leverage our strong position and operating performance, driving ongoing cash flow improvements through efficient leasing and focused expense management. We are very proud that our portfolio is 98% leased. Our leasing performance at Clover House has been very strong. The property is 99% leased, and the average rent of $71 per square foot is a new record. We are well positioned moving forward with the exceptional occupancy providing leverage to future rent discussions. At 1010 Pacific Street, we are proceeding with development. The existing warehouse structure on site has been demolished. We have filed plans for the new building and are working through the associated regulatory processes. We expect to develop a 9-story, fully amenitized, multifamily rental building, including indoor parking with approximately 119,000 rentable square feet and 175 total residential units, 70% of which will be free market and 30% affordable. Significantly, the property is eligible for a 35-year 421(a) tax abatement due to the affordable component. We will provide further updates as we get closer to commencing construction. Tribeca House continues its strong performance. We increased residential revenue by 4.5% in the first quarter over Q1 last year, driven by occupancy and rent per square foot gains. The property was 99.6% leased at the end of March, building on its exceptionally high occupancy trend through the winter. Importantly, we have delivered these recent improvements with limited investment in the property. Tribeca House's luxury level experience at a more attractive price point compared to the surrounding neighborhood augurs well for the property's overall growth trajectory. With full occupancy, tight apartment turnaround times strengthen rent negotiations and significant remaining upside potential between our current $71 per square foot rent and the neighborhood's comparable $80 per square foot rents, Tribeca House is well positioned for the future. At Flatbush Gardens in Brooklyn, the complex continues to benefit from extremely high demand and was 97.2% leased at the end of March, continuing an exceptional occupancy trend over the last several quarters with accompanying rent growth. The rent per square foot of $24.95 at the end of the first quarter is a new record for the property. We increased residential revenue by 3.2% in the first quarter over Q1 last year. Importantly, our focus on expense management drove in excess of a 500 basis point improvement in NOI margin at the property during the first quarter compared to Q1 last year. As mentioned in prior earnings calls, the June '19 rent stabilization law somewhat tempers the property's future rent growth trajectory. However, rents have continued to increase, future renewals will move in tandem with annual rent guideline board increases, and preferential unit vacancies still offer the ability to increase the new rent up to the maximum legal limit. Flatbush Gardens remains a very significant part of our portfolio and growth story, with the FAR expansion project and incremental value opportunity. I will now turn the call over to Michael, who will discuss our financial results.

Thank you, J.J. Our first quarter results demonstrate the strong leasing and operational efficiencies highlighted by David and J.J. For the first quarter, we achieved record revenues of $30.9 million, an increase of $3.2 million or 11.7% compared to the same period in 2019. We achieved record NOI of $17.1 million in the quarter, a 16.3% increase compared to the same period in 2019; and AFFO of $5.6 million or $0.13 per share, a 5.8% increase compared to the same period in 2019. The year-over-year total revenue increase was primarily attributable to rental rate improvements at Flatbush Gardens and Tribeca House, a fully leased Clover House, and the completion of the renovation and re-leasing of approximately 50% of the units at 10 West 65th Street during the second quarter last year. As J.J. noted, Flatbush and Tribeca residential revenues grew 3.2% and 4.5% year-on-year, respectively. Clover House generated $1.7 million of revenue during the first quarter and has rapidly approached full occupancy. On the expense side, key year-over-year changes were as follows: property operating expenses decreased by $0.4 million in the first quarter year-on-year, primarily driven by lower legal and utilities expenses. Real estate taxes and insurance increased by approximately $1.1 million in the first quarter due to property tax increases across the portfolio and general insurance industry cost increases. Cash, general, and administrative expenses, excluding nonrecurring litigation-related costs and a one-time adjustment related to our CFO transition last year, increased modestly by approximately $200,000 in the first quarter. Interest expense increased by $1.5 million in the first quarter, primarily due to the recognition of interest in connection with bringing Clover House online. As a reminder, we finance our portfolio on an asset-by-asset basis. Our debt is nonrecourse, and it is not cross-collateralized. We have no debt maturities on any operating properties, including Clover House until 2027. As David mentioned earlier on the call, we did announce a refinancing of our Flatbush Gardens property. We refinanced it with a $329 million, 12-year secured first mortgage loan with New York Community Bank, the property's current lender. The loan bears interest at 3.125% and requires interest-only payments for the first 7 years, which is expected to initially reduce annual debt service by $3 million. With the proceeds, the company repaid the existing $246 million loan on the property due March 2028, which bore interest at 3.5% through February 2023 and was scheduled to commence principal amortization in September 2020. Net remaining proceeds of $77.8 million before reserves increased the company's cash position. I note that in connection with the refinancing, an independent appraisal commissioned by the lender valued the property at $475 million. Turning to CapEx, we incurred $6.1 million of capital expenditures in the first quarter, a similar amount to the fourth quarter and an approximate 50% decrease from the average spend for the first 3 quarters of 2019. This decrease was primarily driven by the completion of the Clover House renovation. Lastly, today, we are announcing a dividend of $0.095 per share for the first quarter, the same amount as last quarter. The dividend will be paid on May 29 to shareholders of record on May 22. Let me now turn the call back over to David for concluding remarks.

Thank you, Michael. We are very pleased with our operations. Our portfolio has performed very well and remains so throughout the pandemic. We will continue to take the necessary steps to navigate through the current challenges, further strengthened by the additional liquidity provided by the refinancing. We enthusiastically look forward to capitalizing on a myriad of growth opportunities, including the upcoming office lease rolls, the potential expansion of Flatbush Gardens, and the 1010 Pacific Street redevelopment. We remain well positioned to execute on our strategic initiatives and create value. We hope everyone stays safe and healthy. With that, I would like to open up the floor for any questions.

And it looks like your first question is coming from Buck Horne.

Congrats on the results, the relatively strong April collections, all things considered, and the refinancing. A lot of progress, although announced. Let me start with the April collections, if I could. And specifically, maybe if we can drill down at Flatbush and how that performed versus the rest of the portfolio, what percentage of Flatbush residents came to you or applied for some sort of hardship or relief? And how are you working with those residents in particular?

Yes. So as I mentioned in my remarks, we're taking this on a case-by-case basis. We believe that workforce housing is taking somewhat of a bigger effect due to this pandemic. We're being cognizant of that, and we're working with each individual on an individual case basis to see what we can do to help them get through this crisis. We're not doing anything in a global manner. It's being done on a case-by-case basis, and we're telling all residents if they have something to discuss with us about deferring payments or something of that nature. If it makes sense and if it's valid, we will try to cooperate and give them that relief.

And, Buck, to your initial question, I think in terms of the collections, again, we're over 90% in collections in April. And as you can imagine, that's pretty much across the board here. I understand the question with Flatbush Gardens, but as a point of reference, Flatbush in April was roughly 88% or 89% collected. So again, I think we had a very strong performance across the board. So far, it's continuing to progress here into the first 10 or so days of May.

Okay. Yes. So that was you think - you jumped in my next question, just to clarify, make sure I understood it, so through the first - are you saying through the first 10 days of May that your portfolio is over 90% collected and Flatbush is pretty similar to that so far?

No. What I was trying to say. The numbers I gave were for April, again, 90-plus percent across the board. Flatbush was 88% or 89% in April. In May, the indications so far are looking pretty good, though it's still early. We don't have final numbers yet, but we'll keep folks updated.

Okay. Great. And maybe just with this - again, the refinancing, congratulations on that. That's a huge liquidity event. Is the plan just to hold it through the duration of what's to come with the pandemic? Do you have any other plans redevelopment wise? Or have you considered share repurchases? I don't know what the thought process on leverage is at this point, but any thoughts on what to do with the excess cash right now?

Right now, it's going to sit tight. We want to see how this pandemic plays itself out. It's very unpredictable, as you can see what's going on with this pandemic. We thought it was a very astute move to take advantage of this money because it reduces the amount of debt service and interest costs and pushes out the maturity date of that particular property. We think that was important to do. We're going to wait and see how this plays out and see what opportunities will present themselves in the future.

And Buck, as you can imagine as well. Our portfolio is operating and, aside from 1010 Pacific, everything else is fully operational. Our future CapEx spend is pretty minimal requirements right now, but we are essential projects that must be done to keep properties safe and fully maintained. As we move forward on 1010 Pacific—which is really the only CapEx requirement at this point—we will put a permanent loan in place as we move into development, but otherwise, it's fairly limited.

Okay. If I can sneak one more in, just a quick update on 1010 Pacific. Do you think what's going on in the city and just either delays permitting wise or construction wise, is the timeline on 1010 Pacific moving out yet? Or are you still confident in the construction costs to build and hitting your initial underwriting targets? Any change on that front?

We believe the timeline will be steady. There won't be any push out. The city has been permitting properties, especially those with affordable components. As we mentioned on the call, the demolition is nearly completed, and we believe there might be a decrease in some of the construction costs due to this pandemic.

Your next question is coming from Yehuda Katz.

And certainly, congratulations on the refinancing. That's a massive liquidity event for the company. Just as we look at 1010 Pacific and embarking on an $85 million development, I wanted to clarify what the realized yield on the last two redevelopments you guys did, Clover House and 10 West 61st Street, were. What were the unlevered yields? And were those on target with what you expected when you embarked on those projects?

Michael?

I think on Clover House, we developed that to roughly a 5% yield. As we mentioned before, we had a lot of renovation CapEx until we realized the potential for the property. It took a little longer than planned, but we currently have it operating effectively at 99% leased. On 10 West 65th, we're still evaluating, but it had 76,000 rentable square feet plus 52,000 square feet of air rights. We’ll deal with that as soon as the time is right.

Great. So I guess just a follow-up on the 5% number on Clover House. Can you bridge the purchase price of 87.5, how much CapEx that project took up from start to finish, and what NOI number you see as a stabilized yield?

CapEx roughly turned out to be around $30 million in final costs. Right now, we're projecting a run rate basis in the range of $5.5 million to $6 million for NOI.

Your next question is coming from Liz Bow.

When do you expect a resolution on the Tribeca House lawsuit? And can you clarify your September 2020 comment?

It's hard to predict. We are currently sitting with an arbitrator who is supposed to figure out what the new rents will be. We don't believe that this will be material to our results, but there's no way of telling how long the court will take.

Your next question is coming from David Boyer.

My question relates to the CARES Act. Has the company been able to benefit from any of the government subsidy programs?

We have decided not to make ourselves available for that act based on counsel's advice. We clarified that it's not for public companies, so we decided not to proceed.

Got it. And a quick follow-up regarding the current share pricing at a record low. Are any insiders considering increasing their position?

I would rather not comment on what insiders are going to do at this point. Any actions taken by insiders will be filed appropriately.

Your next question is coming from Nathan Glick.

I know Buck asked about the cash plan. You mentioned hunkering down. With 1010 Pacific, there are cash obligations there as well. So how do you view the return on investment there relative to possibly buying back shares? Have you thought about spending that cash potentially?

We may decide to do that. We just closed on this refinancing late Friday. We haven't determined it yet. The cash is not earmarked for 1010 Pacific since the construction loan will cover that, and upon completion, we will refinance it.

So no cash needs to go into that silo, is that what you're saying?

Correct, we expect the majority of funding to come from the construction loans.

With existing cash on the balance sheet, what opportunities are available other than buying back shares?

We don't know yet. We believe this pandemic will create a lot of opportunities for us. We're waiting to see how everything shakes out. It's a bit too soon to tell where values will land and what opportunities will present themselves. We think by mid-year or the end of the year, we will have a better position to answer that.

As an investor, we would love to see you buy back shares as the return on investment at these prices could be significant. One last question on the Tribeca litigation. Could you quantify the range of potential outcomes?

We do not quantify because it's still subject to an arbitrator's calculations. But we think the effect on the company is not material. Initially, there were about 40 plaintiffs, and now about 20 have moved out and approximately 20 have joined the suit. The total could cap at about 75 individuals eligible to participate, but it won’t be a significantly meaningful number.

The lawsuit came about, or the decision came about last June. It's now nearly the one-year anniversary of the appeal order. We’ve had around 60 people joining the lawsuit in recent months. As for clarification, the lawsuit will be heard during the September 2020 term.

Your next question is coming from Craig Kucera.

I wanted to clarify, was the collections number for April across the entire portfolio or just multifamily? Some color there would be great.

As we said, it's about 90% collections across the entire portfolio.

The 90-plus percent collection rate includes the City, which is current with their payments as we would expect. These numbers for April were consistent across the portfolio.

Regarding modest retail exposure, can you discuss how you are working with those tenants? Are they requesting abatements or deferrals? Some color on how you're managing that process would be appreciated.

Yes. As everyone is aware, retailers are facing significant challenges right now. We're in a position where we need to wait and see what happens. We don’t have the ability to change anything for now due to government-mandated closures, but we hope to resume rent collections soon.

We have no further questions in queue.

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

Thanks, everyone.

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.