Good day, ladies and gentlemen, and welcome to the Clipper Realty Fourth Quarter Earnings Call. At this time all participants are in a listen-only mode and the floor will be opened for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Lawrence Kreider. Sir, the floor is yours.

Thank you. Good afternoon and thank you for joining us for the fourth quarter 2021 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 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 2021 annual report on Form 10-K, which is accessible at our website. As a reminder, the forward-looking statements speak only as of the date of this call, March 15, 2022, 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-K 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, ladies and gentlemen, and welcome to the fourth quarter 2021 earnings call for Clipper Realty. I will provide an update on our business performance, including recent highlights and milestones as well as our company's progress. I will then turn the call over to JJ, who will discuss property-level activity, including leasing performance. Finally, Larry will speak about our quarterly financial performance. We will then take your questions. I begin again by extending our thanks to the entire Clipper team for their ongoing hard work and perseverance as we progress out of the pandemic and on to 2022. We remain grateful for their continued efforts and are proud of the dedication to our residents, community, and business. We continue to see positive operational trends as residential leasing activity improves, enhanced by both the city and the economy's recovery. We expect rental demand to remain strong and pricing to improve now that New York City has reopened. People are seeking to relocate back to the city, and employees are increasingly returning to their offices. At the end of the fourth quarter, our properties were 95% leased. New leases at our properties are reaching or exceeding pre-pandemic levels, including the Tribeca House property, where new lease rates in October exceeded $80 per foot, 10% better than pre-pandemic rates. Our balance sheet continues to be well-positioned from a liquidity perspective. We have approximately $53 million in cash, consisting of $35 million of unrestricted cash. We finance our portfolio on an asset-by-asset basis. Our debt is nonrecourse, subject to limited standard carve-outs, and is not cross-collateralized. We have no debt maturities on any operating properties until 2027. Turning to some recent developments, the ground-up development of 1010 Pacific acquisition is progressing very well and we are targeting substantial completion in the fourth quarter. The property is located in Prospect Heights, Brooklyn, about a mile from Atlantic Terminal and Barclays Center. As previously discussed, we estimate the project will cost $85 million to develop at a 6.5% stabilized cap rate. More than 95% of our construction contracts are signed and we are steadily drawing from the $52.5 million construction loan facility that will provide us with financing through completion. JJ will provide a further update on the project shortly. At the end of the year, we purchased 953 Dean Street in Brooklyn and intend to develop it from the ground up. When completed, the purchase of the land will cost approximately $48 million and there is acquisition financing of $40 million. We expect to build a 9-story, fully amenitized residential building with 160,000 residential rentable square feet and 240 units, 70% free market and 30% affordable, which will provide us with a 30-year 421 tax abatement and 8,500 square feet of commercial rental space. Our office portfolio at 141 and 250 Livingston is operating as expected, following a new lease entered at the end of 2020 and August 2020. Together, these renewed leases have added $7.1 million to net operating income annually compared to previous lease rates, an increase of over 10%. Regarding our fourth quarter results, we are reporting quarterly revenue of $30.8 million, net operating income of $16.4 million, and AFFO of $4.4 million. All these results represent improvements over the third quarter, as Larry will further detail. I will now turn the call over to JJ, who will provide an update on operations.

Thank you. I begin by again extending our thanks to the company's employees for their continued inspiring efforts as we progress out of this unprecedented period toward normality. We are grateful for the ongoing commitment to our tenants and communities. Our new residential leasing activity, which began towards the end of last year, continues to improve. At the end of the fourth quarter, all our residential properties were leased in the mid to high 90s percent range. New rental rates per square foot in January and February are reaching or exceeding pre-pandemic levels in all properties. For example, new leases in February at the Tribeca House were $83 per square foot; Flatbush Gardens, $32 per square foot; Aspen, $52 per square foot; Clover House, $73 per square foot; 10 West 65th Street, $59 per square foot. We continue to work our pandemic recovery strategy at our Tribeca House property to first optimize occupancy and then grow rental rates. Year-on-year, lease occupancy has increased to 98% from 89% in December last year, with average occupancy of 97% over the full year in 2021. As occupancy increased to the high 90% mark, we could then begin achieving higher rent per square foot, which now have reached in excess of $80 per square foot in February 2022, more than 15% higher than the pre-pandemic level and nearly double the rates in December 2020. As a result, average rent per square foot levels over the property have increased nearly $63 in December to $64 per square foot last week. We expect rent per square foot levels to continue to grow steadily higher as our one and two-year leases entered into last year and the year before turn over. Revenue at the Flatbush Gardens complex in Brooklyn held up well in the fourth quarter, nearly level with the third quarter. Throughout the pandemic, the property maintained leased occupancy between 92% and 93%, and rent per square foot remained steady at $25 per square foot throughout 2021, a near record level. We are taking steps to increase occupancy to the historically typical level above 95%. Lastly, we continue to benefit from the 2020 reorganization of the property's operations that created nearly $800,000 in annual savings. Rent collections across our portfolio remain strong despite the challenges of the pandemic. Our overall collection rate in the fourth quarter was 98%. In 2021, we filed for rent relief under the New York Emergency Rental Assistance Program, or ERAP, and received $2.5 million in the fourth quarter of 2021 and $240,000 this quarter so far. We understand the program is paused due to a lack of funding, but there may be some resumption depending on actions taken normally. We have also filed over $1 million of applications under the related Landlord Rental Assistance Program, or LRAP, relating to tenants who did not file for assistance under ERAP, if and when that program becomes operational for larger landlords. On the development side, we are advancing well on our construction at 1010 Pacific Street and are on target. We have finalized approximately 95% of our construction contracts and begun steadily drawing from our $52.5 million construction loan, which should provide us with funds throughout completion, targeted for the fourth quarter. All the important trades are engaged on-site and are moving efficiently toward trade finishes. The development is a 9-story, 119,000 rentable square foot, fully amenitized multifamily rental building with underground indoor parking. The property is expected to have 175 total units, 70% of which will be free market and 30% affordable and is eligible for a 35-year 421(a) tax abatement. Looking ahead, we remain focused on optimizing occupancy, pricing, and expenses across the business to best position ourselves as New York City continues the recovery from the pandemic. I will now turn the call over to Larry, who will discuss our financial results. Thank you.

Thank you, JJ. For the fourth quarter, we achieved revenues of $30.8 million, virtually level with last quarter and higher than the $30.3 million for last year's fourth quarter. For the same periods, we achieved NOI of $16.4 million and AFFO of $4.4 million this quarter, which increased approximately $0.3 million from the third quarter of this year and improved from NOI of $14.7 million and AFFO of $3 million in the fourth quarter last year. The year-over-year revenue increase was primarily due to increased occupancy and/or rental rates at the Tribeca House, Aspen, and Clover House properties, partially offset by lower occupancy at the Flatbush Gardens property as compared to the fourth quarter of 2020. At this point, we are achieving higher rates for new residential leases than before the pandemic, although the effect will take the next few quarters to evidence itself as leases executed at lower rates during the pandemic through the second quarter of 2021 take full term to roll off. In February 2022, as JJ has articulated, for example, at the Tribeca House property, new residential rental rates were above $80 per square foot, well above new leases at the beginning of last year, with similar increases at our other properties as well. On the expense side, key year-over-year changes were as follows: property operating expenses decreased by $1.5 million in the fourth quarter year-on-year, primarily driven by a decrease in the provision for bad debt, resulting primarily from the $2.5 million of ERAP funds received in the fourth quarter and an additional $240,000 in 2022, and a decrease in property-level staffing costs at Flatbush Gardens, resulting from the realignment of operating activities last year. Real estate taxes and insurance increased by approximately $700,000 in the fourth quarter year-on-year due to increased insurance costs across the portfolio and, to a lesser extent, annual real estate tax increases. Interest expense increased only slightly in the fourth quarter year-on-year, primarily due to the refinancing of the 141 Livingston Street property in February 2021. Regarding our balance sheet, as David mentioned earlier, we are well-positioned from a liquidity perspective. We have $52 million in cash, consisting of $34 million of unrestricted cash and $18 million of restricted cash. The development of the 1010 Pacific Street and Dean Street acquisitions will be largely financed with construction financing. We finance our portfolio on an asset-by-asset basis and our debt is nonrecourse, subject to limited standard carve-outs and is not cross-collateralized. We have no debt maturities on any operating properties until 2027. Today, we are announcing a dividend of $0.095 per share for the fourth quarter, the same amount as last quarter. The dividend will be paid on March 31st to shareholders of record on March 25th. Let me now turn the call back over to David for concluding remarks.

Thank you, Larry. We remain focused on efficiently operating our portfolio with the safety of our tenants and employees as our highest priority. We continue to take the necessary steps to navigate through the current challenges, supported by a strong balance sheet. We look for our continued operating improvements to accelerate through 2021 and beyond. We look forward to capitalizing on a myriad of growth opportunities, including 1010 Pacific Street and 953 Dean Street developments and other possibilities that may present themselves. I would now like to open up the line for questions.

Ladies and gentlemen, the floor is now open for questions. Your first question is coming from Craig Kucera with B. Riley. Your line is live.

Yes, yes. Thanks. Hi, guys.

Hi.

Hi. You've had some elevated litigation expenses for a while. And I'm just curious, will the settlement effectively end litigation? Or are you expecting any additional spending for the rest of the year?

We don't expect any additional litigation. What you were referring to is the 421-g litigation, which is now settled, and we don't expect any further issues.

Okay. Great. And with the new acquisition of land parcels on Dean, I'm curious, do you have a rough idea of what the total size of that project might wind up looking like as you continue to work on that for the next few years? Or is that still TBD?

It's still to be determined, but it's going to be very much in line with what we're doing at 1010. It's close by in proximity, basically the same type of construction regarding construction materials. It's a bit larger. So the size will be commensurate with that; however, the budget is a little low, but it will basically be the same plan.

Okay. And just one more for me. I haven't seen the supplement filed yet. Are you guys still planning on putting that out at some point in the near term?

It should be up now. We'll check on it, but yes, it's – of course, you…

Okay. That's fine.

We had a couple of hiccups, but yes, it's going to be posted; it should have been posted by now. I'm a little surprised that it's not actually.

Okay. Thanks. I'll keep my eyes open for that. I appreciate it.

Yes, yes, it will be out very shortly.

Thank you. We can go ahead. Go ahead.

Your next question is coming from Buck Horne with Raymond James. Your line is live.

Hi, good afternoon guys.

Good afternoon.

Just curious about Flatbush a little bit. Maybe you could just add a little bit of context around the occupancy level there and why it seems to be a little slow to recover relative to the rest of the portfolio and really the rest of the market there? Is there anything specific going on at the property and how you're targeting occupancy levels going forward? And just also curious about the strategy around the staffing decision.

No, it's not – it's a much larger property than anything else. It's 2,500 units. So it's over 4 times the size of our largest property in Tribeca. It takes a little longer to get it going, as you said, when leasing was pretty much slow during the pandemic, but we expect it to catch up with the other properties.

Okay. And on the Dean Street transaction, just a rough timeline that you would expect construction to start, when you would expect to be able to get completion at this point and any expectation for yield on cost at this stage?

Sure. We expect the cap rate to be about 6.5%, a little bit better than that. In Q3 2022, we should have all the approvals ready to break ground. It's a 24-month construction timeline, and we hope to do a little bit better than that. And again, it will be a 421(a) tax abatement qualified, with 70% free market, 30% affordable and a 35-year tax abatement. We think that this will yield very good results, quite close to 1010 Pacific, both in economic benefit to us and geographically. We feel that both of these projects will be very attractively designed and will be a good addition to our portfolio.

Okay, great. Thanks for the color. Thanks guys.

Thank you.

We have no further questions coming from the lines at this time.

Thank you very much, and we look forward to speaking to you again next quarter. Be well and stay well, everybody.

Thank you.

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