Clipper Realty Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 15, 2022. This is an annual report, not a standalone fourth-quarter report. Clipper Realty is a REIT owning and operating multifamily, office and retail properties concentrated in Manhattan and Brooklyn. Seven properties generated revenue during 2021; two additional properties were under development or planned for redevelopment.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Total revenue | $122.7 million | $122.9 million | Down 0.1% |
| Residential rental revenue | $85.8 million | $90.5 million | Down 5.3% |
| Commercial rental revenue | $37.0 million | $32.3 million | Up 14.4%, mainly from the 250 Livingston lease |
| Income from operations | $24.2 million | $32.1 million | Down 24.8% |
| Net loss | $(20.0) million | $(12.2) million | Loss widened |
| Net loss attributable to common stockholders / diluted loss per share | $(7.6) million / $(0.51) | $(4.9) million / $(0.31) | Loss per share widened |
| Operating cash flow | $10.8 million | $16.0 million | Down $5.2 million |
| FFO / AFFO | $5.7 million / $15.6 million | $11.4 million / $16.8 million | Both declined; non-GAAP measures |
| NOI / Adjusted EBITDA | $63.5 million / $55.8 million | $63.6 million / $56.4 million | Broadly flat; non-GAAP measures |
At year-end, cash and cash equivalents were $34.5 million, restricted cash was $17.7 million, and debt was $1,144.1 million gross ($1,131.2 million net of unamortized issuance costs). Debt was property-level; the filing reports no corporate debt. Debt increased from $1,089.7 million gross at year-end 2020. The weighted-average interest rate was approximately 3.8%. The company reported no loan defaults.
Investing cash outflow was $77.9 million, including $35.5 million of capital projects and $40.5 million toward the Dean Street acquisition. Financing cash flow was $30.3 million; distributions paid were $16.8 million. Scheduled 2022 principal and interest payments were $75.5 million. Management said cash on hand and operating cash flow, together with additional mortgage financing, should be sufficient for operations and obligations over the next 12 months, while noting no assurance it can refinance debt on favorable terms or at all.
Changes, outlook and material items
- Residential revenue fell amid lower Tribeca House rents following pandemic-era leasing and reduced Flatbush Gardens occupancy. Flatbush Gardens occupancy decreased from 94.7% to 92.3%; Tribeca House occupancy recovered from 89.7% to 97.8%, though year-end rent per square foot remained below 2019 levels.
- Commercial revenue rose with a new lease at 250 Livingston Street. The 141 Livingston Street City of New York lease also had a 25% rent increase beginning in December 2020. City agencies accounted for approximately 22% of portfolio annualized rent.
- Portfolio occupancy was 95% at year-end. Rent collection was 96.6% for full-year 2021 and 98.0% in the fourth quarter. Management described operations as durable and expected New York City properties to remain attractive, but provided no specific earnings or distribution guidance.
- Operating expenses rose 4.7%, including higher real estate taxes and insurance and depreciation; property operating expenses declined. Interest expense increased to $41.3 million.
- A $2.7 million litigation charge was recorded for estimated rent overcharges, interest and plaintiffs’ legal costs in disputes involving rent stabilization at Tribeca House. The estimate followed March 4, 2022 court decisions; additional tenant claims remain a risk.
- COVID-19 continued to pose rent-collection, occupancy and leasing risks. Other material exposures include New York rent regulation, geographic concentration, inflationary cost pressures, and refinancing and interest-rate risk. A 1% change in rates on $51.1 million of variable-rate debt was estimated to affect annual net income by about $0.5 million; no interest-rate caps were in place at year-end.
- Two redevelopment projects, 1010 Pacific Street and Dean Street, are expected to add residential units, including affordable units. Dean Street had $30 million of debt maturing December 22, 2022, with extension options; the company intended to refinance it with a construction loan, without assurance of success.
- Commercial lease exposure is concentrated in 2025: the lease-expiration schedule shows 84.9% of annualized commercial and retail rent expiring that year. The City advised it may vacate 250 Livingston Street in 2025, despite a lease term extending to 2030 with termination options.
Most important facts for investors to verify
- Refinancing plan and maturity terms for the Dean Street loan, and funding needs for both redevelopment projects.
- Whether the City of New York renews or vacates space at 250 Livingston Street, and the leasing outcome for other 2025 expirations.
- Final costs and any further claims arising from the Tribeca House rent-stabilization litigation; the filing records a $2.7 million estimate.
- Collection trends, occupancy and rent growth at Flatbush Gardens and other residential properties, including the effects of rent regulations.
- Cash available for debt service, capital spending and distributions given declining operating cash flow and substantial leverage.
- The filing’s forward-looking statements refer to a financial-statement restatement and a recently identified material weakness, while its controls section says management concluded internal control was effective as of year-end. The provided filing text does not clearly explain this reference; verify the related disclosure and any remediation details.