Clipper Realty Inc. Q1 FY2026 earnings call

Core Residential Portfolio Performance

• Overall stabilized residential portfolio is 99% leased, with rents at all-time record highs and continuing upward momentum
• New free market lease rents increased 7% year-over-year compared to prior rents, while renewal rents increased 5% year-over-year
• Rent collection for all free market residential properties hit approximately 100% of billings in Q1 2026
• Top individual property results: Tribeca (99% occupancy, $90/ft average overall rent, $92/ft new rent); Cloverhouse (99% occupancy, $90/ft average, $95/ft new rent); Pacific House (98% occupancy, $66/ft free market new rent); Aspen (>98% occupancy, 8% higher new rents vs prior leases)

Prospect House Development Update

• The ground-up Brooklyn development completed construction on time and on budget, placed in service in August 2025
• The property includes 160,000 residential rentable square feet across 240 units (70% free market, 30% affordable), plus 19,000 square feet of commercial space and 31 parking spots
• Prospect House is now fully leased, with current free market rents averaging $78 per square foot, and contributed $1.7 million in incremental residential revenue in Q1 2026

250 Livingston Street Update

• New York City vacated the property in mid-August 2025; Clipper notified the lender it would cease supporting ongoing operations and stopped making debt service, interest, and real estate tax payments
• Starting in May 2026, Clipper began receiving expense reimbursements for payments it previously made from the lender
• Management is currently negotiating a consent and cooperation agreement with the lender to facilitate a sale of the property or its debt, though no final agreement is guaranteed

Balance Sheet & Capital Update

• As of Q1 end, Clipper held $26.1 million in unrestricted cash and $28.6 million in restricted cash
• 89% of operating debt is fixed-rate, with an average interest rate of 3.87% and an average duration of 3.4 years
• All debt is non-recourse (with limited standard carve-outs), not cross-collateralized, and structured on an asset-by-asset basis for refinancing
• The company maintained its quarterly dividend at 9.5 cents per share, payable June 4, 2026 to shareholders of record May 26, 2026

Overall Q1 2026 total revenue was $38.1 million, a $1.3 million decrease from Q1 2025's $39.4 million. Net Operating Income (NOI) was $20.1 million, a $1.6 million decrease from last year's $21.7 million. Adjusted Fund from Operations (AFFO) was $2.3 million, a $5.7 million decrease from Q1 2025's $8.0 million.

1. Residential Segment: Revenue increased by $2.7 million (9%) year-over-year. This includes a $2.0 million increase from ongoing stabilized residential properties, a $1.7 million increase from the Prospect House development lease-up, partially offset by a $1.1 million decrease from the sold 10 West 65th Street property. NOI from ongoing stabilized residential properties increased 10% ($1.8 million) YoY, and AFFO from ongoing stabilized residential properties increased 18% ($1.2 million) YoY. The residential segment contributed 71% of total Q1 2026 revenue.

2. Office Segment: Revenue decreased by $4.0 million year-over-year, driven by a $4.2 million decrease after the New York City lease termination at 250 Livingston Street, partially offset by a $0.2 million increase from new retail leases at Tribeca House and Aspen. The 250 Livingston Street exit drove a $5.8 million YoY decrease in consolidated NOI and a $5.8 million YoY decrease in consolidated AFFO. The office segment contributed 29% of total Q1 2026 revenue.

Management did not issue formal quantitative full-year guidance, but provided the following qualitative forward-looking statements:

• Management expects strong residential rental demand to continue for the foreseeable future, constrained by limited new rental housing supply in New York City that discourages new development
• The company remains focused on optimizing occupancy, rental pricing, and operating expenses across its existing portfolio to support long-term growth
• Management is actively evaluating all options for potential refinancing of the Flatbush Gardens mortgage ahead of its 2027 interest rate reset
• The firm continues to pursue full capitalization of the Scott Street House property and evaluate new strategic opportunities as they arise

• Potential regulatory risk: New York's proposed rent freeze act could impact rental revenue growth for rent-regulated properties including Flatbush Gardens
• Uncertainty around 250 Livingston Street: There is no guarantee that the ongoing negotiations with the lender for a consent and cooperation agreement (to sell the property or debt) will result in a finalized agreement
• Lease-up risk: Prospect House is still in the early stages of stabilized operations, and current quarterly results reflect full expenses offset only by limited, growing revenue, which negatively impacts near-term consolidated earnings
• Litigation costs: Q1 2026 results included one-time settlement costs for litigation related to historical payroll practices across the company's portfolio, pressuring short-term earnings
• Interest rate risk: 11% of the company's operating debt is floating-rate, exposing the firm to interest rate volatility in the current market environment

Q: How is the Flatbush Gardens property performing operationally, how will it navigate potential upcoming rent regulation, can you comment on CapEx funding and plans to refinance the mortgage ahead of its 2027 interest rate reset? / A: Management states Flatbush Gardens is performing in line with pre-established plans aligned with its current regulatory structure. The firm is already evaluating all possible refinancing options ahead of the 2027 reset, but no final decision has been reached, and updates will be provided once a conclusion is made. Public supplemental filings already share the property's current Net Operating Income, which reflects its strong performance.

Q: There is an estimated $7.2 million in default fees related to 250 Livingston Street. Does Clipper plan to pay this in cash in the next two quarters, and are there any other outstanding fees to disclose? / A: As previously stated, Clipper has notified the lender it is no longer funding 250 Livingston Street's operations, and is not currently making any payments including default fees or interest. The firm is negotiating a potential agreement for a sale of the debt or property, and no cash has been paid out for these fees to date.