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 comments after the presentation. It is now my pleasure to turn the floor over to your host, Lawrence Sava, Corporate Controller. Sir, the floor is yours.

Good afternoon and thank you for joining us for the third 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; JJ Bistricer, Chief Operating Officer; and Larry Kreider, Chief Financial 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 2023 Annual Report on Form 10-K, which is accessible at www.sec.gov and on our website. As a reminder, the forward-looking statements speak only as of the date of this call, October 31, 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 and Form 10-Q posted today for a reconciliation of those non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will turn our call over to Larry Kreider, our Chief Financial Officer, as Mr. Bistricer has laryngitis.

Thank you, Lawrence. Good afternoon and welcome to the third 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 Lawrence Sava 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 once again, 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 third quarter, new leases exceeded prior rents by over 9.5% across the entire market-based portfolio led by Tribeca House property in Manhattan and the Clover House property in Brooklyn where new leases were over $95 and $87 per square foot, and overall rents were over $82 and $85 per square foot, all compared to roughly $63 per square foot at the end of December 2021. Results at our stabilized property at Flatbush Gardens are also strong and improving. We are expeditiously fulfilling our commitments for property improvements, tenant assistance, and higher wages supported by the full abatement of real estate taxes and enhanced Recoveries under Article 11 of the Private Housing Finance Law with New York City's Housing and Preservation Department that began in July 2023. Operationally, we are very pleased with our ground-up development projects. Pacific House at 1010 Pacific Street in Brooklyn, after a year of full operation, is fully stabilized and is contributing to cash flow. It is now 100% leased and yielding the projected 7% cap rate. At the nearby Dean Street ground-up development, construction is proceeding ahead of schedule. We completed the superstructure ahead of schedule and expect to complete construction in time for the 2025 leasing season utilizing the $123 million construction loan we entered last year. We bought the land in 2021 and 2022 on which to build a nine-story fully amenitized residential building with 160,000 residential rentable square feet, 240 total units, 70% free market and 30% affordable, and 8,500 square feet of commercial rental space. At our 250 Livingston Street property, where as previously disclosed, New York City notified us of their intention to vacate in August 2025. We are seeking solutions and pursuing opportunities supported by cash flows from our other properties. Of course, we will keep you informed of our progress regularly. At our other New York City property 141 Livingston Street, we are actively negotiating a five-year extension to our current lease that expires December 2025, but we cannot assure that this will be completed. Also, as announced last quarter, we have begun the process of recycling properties in our portfolio to maximize performance and improve cash flow. As such, we continue to market some of our properties, including our 10 West 65th Street property which, while potentially resulting in some loss compared to book value, would allow us to achieve better overall returns going forward. No definitive agreements as yet, and we will announce properly when done. As to the high interest rate environment, we believe the higher rates create higher demand for our rental product, and we are also bolstered by the relatively long duration of debt at our properties. Our operating debt is 91% fixed at an average rate of 3.87% at an average duration of 4.9 years. It is non-recourse, subject to limited standard carve-outs that are not cross-collateralized. We finance our portfolio on an asset-by-asset basis. Regarding our third quarter results, we are reporting record quarterly revenue of $37.6 million, NOI of $21.8 million, and AFFO of $7.8 million as a result of the strong leasing and cost reductions I just mentioned. These results represent improvements over the third quarter of last year as JJ and Lawrence will further detail. I will now turn the call over to JJ, who will provide an update on operations.

Thank you, Larry. I am pleased to report that our residential leasing at all our properties is very strong and continues to improve. At the end of the third quarter, our residential properties were 99% leased, and rents were at record levels, still recording increases over previous levels. Overall new lease and renewal rental rates in the third quarter exceeded previous rents by over 9.5% and 5.6% 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. At the end of September, Tribeca House had leased occupancy of nearly 100%, rent per square foot over $82 and new rents over $95 per square foot. The Clover House property has leased occupancy of 97%, average rents of $85 and new leases of $87 per square foot. Our recently completed Pacific House property, consisting of a blend of free market and rent-stabilized tenants, has leased occupancy of 97%, 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 continued to perform at record levels, with average lease occupancy above 98% and new rents and renewals 11% higher compared to previous leases. Lastly, at our workforce housing 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 on June 29 last year. Using the full abatement of real estate taxes beginning last July, we are completing the capital projects we committed to and dealing with maintenance issues expeditiously. We have begun to meaningfully obtain the enhanced reimbursement under Section 610 of the Private Housing Finance Law for tenants receiving assistance as we fill vacancies with only homes residents and new leases with assisted tenants. These benefits should steadily increase over the next couple of years and facilitate profitable improvements to the property. We are also getting increases on non-assisted tenants, where increases have been permitted under the Rent Guidelines Board for the last couple of years at the 3% level per annum. As a result, together with the Section 610 benefits for assisted tenants, overall average rents for the property have risen to $29.07 per square foot at the end of the quarter. Rent collections across our portfolio remain strong. The overall collection rate in the third quarter on all residential properties was 95%, and collections at Flatbush Gardens, which had been at a historically high 97% level for the last two quarters without the benefit of ERAP payments as in prior years, dipped to 90% in the third quarter as we work with New York City and collection procedures for assisted tenants. Additionally, we are responsibly and steadily working through the court system to minimize arrears. Looking ahead, we remain focused on optimizing occupancy, pricing, and expense across the business, expeditiously completing our development projects, and fully implementing the Article 11 transaction to best position ourselves for growth. I will now turn the call over to Lawrence who will discuss our financial results. Thank you.

Thank you, JJ. For the third quarter, we achieved record results in three measures important to us. Revenue increased to $37.6 million from $35.1 million last year, an increase of $2.5 million or 7.1%. NOI increased to $21.8 million from $20 million last year, an increase of $1.8 million or 9%, and AFFO increased to $7.8 million from $6.3 million, an increase of $1.5 million or 24%. For the third quarter, residential revenue increased to $27.8 million by $2.3 million. This increase was due to strong leasing for all properties as previously discussed. Occupancy and rental rates were at all-time highs in the quarter. The revenue was partially offset by increased bad debt resulting from lower collection rates at Flatbush Gardens that JJ mentioned earlier this year. 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 $551,000 year-on-year, substantially all at Flatbush Gardens due to prevailing wage requirements under the Article 11 agreement. We also experienced slightly higher utility costs and legal costs related to collection activities, partially offset by lower repairs and maintenance costs. Real estate taxes and insurance increased by $188,000 in the third quarter year-on-year due to routine increases in real estate taxes at properties other than Flatbush Gardens, which had its taxes fully abated in July 2023. Insurance costs for the new fiscal year were flat. General and administrative costs increased nominally by $30,000 in the quarter year-over-year. Interest expense increased by $313,000 in the third quarter year-on-year due to additional $20 million of borrowings at the 1010 Pacific Street property in the third quarter of last year. With regard to our balance sheet, we have $18.6 million of unrestricted cash and $17.5 million of restricted cash. In the third quarter, we had no new debt activity other than a draw under the Dean Street property construction loan we closed in the third quarter of 2023. Today, we are announcing a dividend of $0.095 per share for the third quarter, the same amount as last quarter. The dividend will be paid on November 27, 2024, for shareholders of record on November 13, 2024. Let me now turn the call over to Larry for concluding remarks.

Thank you, Lawrence. We remain focused on efficiently operating our portfolio. We expect our current operating improvements to continue through 2024 to 2025. We look forward to optimizing the Flatbush Gardens property under the Article 11 transaction, 953 Dean Street developments, and other growth opportunities managing the New York City leasing issues at Livingston Street properties and to capitalizing on any possibilities that may present themselves. I would now like to open the line up to questions.

Thank you. The first question comes from Buck Horne with Raymond James. Please proceed.

Hi, good afternoon, guys. Can we start with the bad debt issue with Flatbush? Is there an event that's going on at Flatbush that would cause that collection rate to drop so precipitously there to 90%? Have you seen events like that in the past where it's gone down to that level?

No, not particularly. I think it appears to be a temporary issue where we negotiate our procedures with New York City and we think it should reverse itself shortly.

So this is negotiation for reimbursement directly with the city? Or are these tenants?

Yes. It's really just with the city. It's really just procedural we believe, for the most part.

Okay. All right. Thanks. Then let's dive a little bit further on the Livingston buildings and the status there, believe in the 10-Q, it says at least for the 250 Livingston property, you intend to establish a cash management account for that revenue, I guess, shortly. Does that mean in the fourth quarter? What's the timing for establishing the cash management account?

I would say fourth quarter.

Okay. And should - would that mean for accounting purposes, the revenue and NOI of 250 Livingston would get taken out of the consolidated results?

No, it really would not. It would not change the accounting for - on the income statement. What it will change is a little bit on the cash flow, monies will instead of going into operating cash accounts, would go into the restricted cash accounts, restricted. So it's - yes. So there's no real change to the profitability based on entering into these DACA arrangements.

Okay. So for the purposes of your reported AFFO or cash flow metrics, you would not change the way you're currently doing it?

Yes, it wouldn't show up. It would kind of - it wouldn't even show up in the cash flow because now the cash flow statement is for both operating cash and restricted cash. I don't know if you were aware of that change that was made a couple of years ago. But you will see it may be down at the bottom of the cash flow statement, you'll see a more enhanced growth of restricted cash versus the operating cash.

Okay. And on 141 Livingston, it sounds like you guys have an issue with the special servicer. I was wondering if you could just give us an update or your - what your take on the situation where the special servicer is and what their interpretation of the loan agreement is on 141 Livingston?

Well, briefly, the 10-Q is remarkably up-to-date because we just got this notice on Monday of this week. But basically, our take is we're disputing their interpretation of the agreement, which would require us to begin establishing an escrow account of that builds up to $10 million by the end of next year, over in '18, but that would have begun from July. The way we read the agreement is that the escrow account is not required.

Right. So I guess you guys are going to not make that - the payment as demanded? Or I guess, is there an arbitration that goes to?

We're not quite sure what the next steps are. We think we can negotiate a proper solution. We're - I guess, we're now working with the special servicer who we feel we'll be in a better position to interpret the agreement properly.

Okay. And so now there's a special servicer involved. Does that mean there's - I guess, this - I guess, not quite the same type of cash management account 250 Livingston is getting, but it - it's a different escrow account, I guess. Is that the interpretation there?

Yes. Exactly. For some reason, this loan was structured a little differently.

Okay. All right, guys. Thanks. Appreciate the color. Thanks. Good luck.

Thank you. It appears there are no further questions. I will now hand it back to management for any closing comments.

Okay. Thank you for joining us today, and we look forward to speaking to 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.