clpr20220930

clpr20220930_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☒

For the quarterly period ended September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38010

CLIPPER REALTY INC.

(Exact name of Registrant as specified in its charter)

Maryland		47-4579660
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4611 12^th Avenue, Suite 1L

Brooklyn, New York 11219

(Address of principal executive offices) (Zip Code)

(718) 438-2804

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☒
Non-accelerated filer ☐		Smaller reporting company ☒
		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CLPR	New York Stock Exchange

As of November 9, 2022, there were 16,063,228 shares of the Registrant’s Common Stock outstanding.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

ITEM 1.	CONDENSED FINANCIAL STATEMENTS
	CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2022 (UNAUDITED) AND DECEMBER 31, 2021	3
	CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)	4
	CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE, SIX AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)	5
	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021 (UNAUDITED)	6
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29
ITEM 4.	CONTROLS AND PROCEDURES	30

PART II – OTHER INFORMATION		30

ITEM 1.	LEGAL PROCEEDINGS	30
ITEM 1A.	RISK FACTORS	30
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	30
ITEM 4.	MINE SAFETY DISCLOSURE	30
ITEM 6.	EXHIBITS	31
SIGNATURES		32

PART I – FINANCIAL INFORMATION

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q for Clipper Realty Inc. (the “Company”), including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” regarding the Company’s financial position, business strategy and the plans, objectives, expectations, or assumptions of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “believe,” “expect,” “intend,” “continue,” “potential,” “plan,” “goal” or other words that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which are generally not historical in nature. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks, contingencies and uncertainties include, but are not limited to, the following:

●

the continuing effects of the novel strain of coronavirus (“COVID-19”) pandemic, and measures intended to curb its spread, including its effect on our tenants’ ability or willingness to pay rents and on demand for housing in the New York metropolitan area;

●

the impact of the recent increase in inflation in the United States which could increase the cost of acquiring, replacing and operating our porperties

●

market and economic conditions affecting occupancy levels (including continued declines at one of our properties), rental rates, the overall market value of our properties, our access to capital and the cost of capital and our ability to refinance indebtedness;

●

economic or regulatory developments in New York City;

●

the single government tenant in our commercial buildings may suffer financial difficulty;

●

changes in rent stabilization regulations or claims by tenants in rent-stabilized units that their rents exceed specified maximum amounts under current regulations;

●

our ability to control operating costs to the degree anticipated;

●

the risk of damage to our properties, including from severe weather, natural disasters, climate change, and terrorist attacks;

●

risks related to financing, cost overruns, and fluctuations in occupancy rates and rents resulting from development or redevelopment activities and the risk that we may not be able to pursue or complete development or redevelopment activities or that such development or redevelopment activities may not be profitable;

●

concessions or significant capital expenditures that may be required to attract and retain tenants;

●

the relative illiquidity of real estate investments;

●

competition affecting our ability to engage in investment and development opportunities or attract or retain tenants;

●

unknown or contingent liabilities in properties acquired in formative and future transactions;

●

the possible effects of departure of key personnel in our management team on our investment opportunities and relationships with lenders and prospective business partners;

●

conflicts of interest faced by members of management relating to the acquisition of assets and the development of properties, which may not be resolved in our favor;

●

a transfer of a controlling interest in any of our properties that may obligate us to pay transfer tax based on the fair market value of the real property transferred;

●

the impact of the restatement of our financial statements and management’s recently identified material weakness in our internal control over financial reporting;

●

the need to establish litigation reserves, costs to defend litigation and unfavorable litigation settlements or judgments; and

●

other risks and risk factors or uncertainties identified from time to time in our filings with the SEC.

ITEM 1. CONDENSED FINANCIAL STATEMENTS

Clipper Realty Inc.

Consolidated Balance Sheets

(In thousands, except for share and per share data)

	September 30, 2022			December 31, 2021
	(unaudited)			(audited)
ASSETS
Investment in real estate
Land and improvements	$	540,859		$	540,859
Building and improvements		654,276			649,686
Tenant improvements		3,406			3,406
Furniture, fixtures and equipment		12,840			12,500
Real estate under development		134,775			97,301
Total investment in real estate		1,346,156			1,303,752
Accumulated depreciation		(178,043	)		(158,002	)
Investment in real estate, net		1,168,113			1,145,750
Cash and cash equivalents		19,987			34,524
Restricted cash		15,505			17,700
Tenant and other receivables, net of allowance for doubtful accounts of $172 and $7,905, respectively		5,151			10,260
Deferred rent		2,630			2,656
Deferred costs and intangible assets, net		6,740			7,126
Prepaid expenses and other assets		10,866			15,641
TOTAL ASSETS	$	1,228,992		$	1,233,657

LIABILITIES AND EQUITY
Liabilities:
Notes payable, net of unamortized loan costs of $10,545 and $12,898, respectively	$	1,156,709		$	1,131,154
Accounts payable and accrued liabilities		13,649			19,558
Security deposits		8,006			7,110
Below-market leases, net		27			53
Other liabilities		6,618			5,833
TOTAL LIABILITIES		1,185,009			1,163,708
Equity:
Preferred stock, $0.01 par value; 100,000 shares authorized (including 140 shares of 12.5% Series A cumulative non-voting preferred stock), zero shares issued and outstanding		—			—
Common stock, $0.01 par value; 500,000,000 shares authorized, 16,063,228 shares issued and outstanding		160			160
Additional paid-in-capital		88,610			88,089
Accumulated deficit		(72,099	)		(61,736	)
Total stockholders’ equity		16,671			26,513
Non-controlling interests		27,312			43,436
TOTAL EQUITY		43,983			69,949
TOTAL LIABILITIES AND EQUITY	$	1,228,992		$	1,233,657

See accompanying notes to these consolidated financial statements.

Clipper Realty Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
REVENUES
Residential rental income	$	23,108	$	21,341	$	67,167	$	64,518
Commercial rental income		9,692		9,290		29,570		27,435
TOTAL REVENUES		32,800		30,631		96,737		91,953

OPERATING EXPENSES
Property operating expenses		7,267		6,684

SEC Form 10-Q filed by Clipper Realty Inc.