Mar 12, 2020
Operator
Good afternoon, ladies and gentlemen, and welcome to the Clipper Realty 4Q 2019 Earnings Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Michael Frenz. Sir, the floor is yours.
Michael Frenz
Good afternoon and thank you for joining us for the Fourth Quarter 2019 Clipper Realty Inc. Earnings Conference Call.
Participating with me in today's call are David Bistricer, Co-Chairman of the Board and Chief Executive Officer; and J.J. 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 2019 annual report on Form 10-K which is accessible at www.sec.gov and our website.
As a reminder, the forward-looking statements speak only as of the date of this call March 12, 2020 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 annual report on 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.
David Bistricer
Thank you, Michael. Good afternoon, and welcome to the Fourth Quarter 2019 Earnings Call of Clipper Realty.
I'm pleased to provide an update on our business, including recent highlights and milestones. I will then turn the call over to J.J., who will discuss property level activity, including leasing performance and capital projects.
Finally, Michael will speak about our quarterly financial performance. We will then take your questions.
I want to congratulate the entire team for a very strong performance. We are announcing record quarterly and annual revenues, record annual income from operations, record quarterly annual NOI and record annual AFFO all significant achievements considering some of the recent industry headwinds.
Our portfolio is 98% leased. Turning to some recent developments.
We are extremely proud that our Clover House property has completed its stellar lease-up the building was 98% leased at the end of February. As a reminder, the growth is fully amortized 158 unit stream, market residential building brought online in August of last year.
The attractiveness of the property its amenities, its location to one of the most desirable neighborhoods in all of New York City, and its proximity to Manhattan continues to drive resident demand. We are on track with the redevelopment of our recent 1010 Pacific Street acquisition which is located in Prospect Heights Brooklyn about one mile from the Atlantic Terminal and Barclays Center hub.
As mentioned previously, we estimate that the project will close to $85 million in totality, take two years to complete and develop to 6.5% stabilized cap rate. J.J.
will provide some further details on the project shortly. In our office portfolio, we are steadily approaching important lease rolls at 250 Livingston Street and 141 Livingston properties.
A new lease with the city at 250 Livingston Street we expected to initially add approximately $5 million to the property's annual NOI beginning in August. At 141 Livingston Street, the rent will increase 25% at the end of 2020, which will add $2.1 million of profits to annual NOI.
Together, this lease rolls are expected to add an incremental $7.1 million of annual NOI to our portfolio representing an 11% increase in our portfolio run rate. We look forward to building a multi-decade partnership in the city in the years ahead.
At our Flatbush Gardens property, we are progressing on the Europe review procedure approval process, which will take another several months. We anticipate that an approval will add significant floor renovations to the complex meaningfully expanding the size of the property, adding significant value and allowing us to begin development.
However, there is no assurance that the application will be fully or partially improved also as submitted. I would like to provide an update on Tribeca House 421-g litigation.
As previously disclosed, the Court of -- new Court of Appeals ruled in June that apartments and buildings receiving 421-g tax benefits are not subject to luxury deregulation issuing in order to overturn the previous unanimous Appellate Division decision. On December 17, the Appellate Division granted a full stay of the special reference hearing regarding the calculation and potential rental, which are the standing appeal.
We do not believe that the order will have any material impact on our business. Lastly, I would like to comment on our fourth quarter results.
We are very proud to report record quarterly revenue of $30.6 million, record NOI of $16.9 million, a strong AFFO of $5.3 million, all of which reflect continued robust leasing performance and expense management. Michael will further provide additional details.
I will now turn over the call to J.J. who will provide an update on operations.
J.J. Bistricer
Thank you. We continue to leverage our strong operating performance, driving ongoing cash flow improvements through efficient leasing, focused expense management and targeted capital investment.
We are delighted to complete the lease-up of Clover House being 98% leased and accomplishing it during the generally slow full winter leasing season is a testament to our leasing team's efforts and inherent appeal of the fully renovated property and neighborhood. In-place rents are in the $70-plus per square foot range.
We are well-positioned to leverage the strong occupancy and future rent discussions and look forward to Clover House's ongoing contribution to overall portfolio growth. At 1010 Pacific Street, we are moving ahead with development.
The existing warehouse structure on-site is in the process of being demolished. We have filed plans to the new building and we are working through the associated regulatory processes.
We expect to develop a nine-storey fully amenitized multifamily rental building including indoor parking with approximately 119,000 rentable square feet and 175 total residential units, 70% of which will be free market and 30% affordable. As mentioned previously, the property is eligible for a 35-year, 421(a) tax abatement due to the affordable component.
We will continue to provide updates as we proceed and are excited to add this asset to our portfolio. Tribeca House continues to perform very well.
We increased residential revenue by 6% in 2019 over 2018, driven by occupancy and rent per square foot gains during the year. The property is 99.8% leased at the end of February maintaining its exceptionally high occupancy trends through the winter.
The results confirm yet again that Tribeca House is a go-to destination for young concession of families who want to live in downtown Manhattan, offering a luxury experience and more attractive price point compared to the surrounding neighborhood. Our confidence in the property's overall growth trajectory is driven by three factors; one, full occupancy; two, very tight apartment turnaround times that strengthen our rent negotiations; and three, significant remaining upside potential between our current $71 per square foot blended rents and enabled comparable $80 per square foot rents.
Near term, we are excited to enter the spring and early summer leasing season, our most active time of the year. At Flatbush Gardens in Brooklyn the complex continues to benefit from extremely high demand and is 98% leased at the end of February, continuing the full occupancy trend over the last several quarters with accompanying rent growth.
We increased revenue by 7% in 2019 over 2018 reaping the benefits of this exceptionally high occupancy and rents per square foot gain during the year. The complex is a multiyear upgraded community field continued to attract a broad spectrum of residents.
Importantly, our focus on expense management drove a 140 basis point improvement in NOI margin at the property during the year. As mentioned on prior earnings calls, the June 2019 rent stabilization loss somewhat tempers the property's future rent growth trajectory.
However rents have continued to increase, future renewals will move in tandem with annual rent guideline board increases and preferential unit vacancies still offer the ability to increase the new rent up to the maximum legal limit. Flatbush Gardens remains a very significant part of our portfolio and growth story with the FAR expansion project and incremental value opportunity.
I will now turn the call over to Michael who will discuss our financial results.
Michael Frenz
Thank you J.J. Our fourth quarter and full year results demonstrate the robust leasing trends and operational efficiencies highlighted by David and J.J.
For the fourth quarter we achieved record revenues of $30.6 million, an increase of $2.7 million or 9.8% compared to the same period in 2018. We achieved record NOI of $16.9 million, a 9.4% increase compared to the same period in 2018 and AFFO of $5.3 million or $0.12 per share.
For full year 2019, we achieved record revenues of $116.2 million, an increase of $6.2 million or 5.6% compared to 2018. We achieved record annual NOI of $62.8 million, a 4.7% increase compared to 2018 and record annual AFFO of $22 million or $0.50 per share, an 11.2% increase compared to 2018.
Focusing on the fourth quarter, the year-over-year total revenue increase was primarily attributable to improvements at Flatbush Gardens and Tribeca House and a fully online Clover House. Flatbush and Tribeca residential revenues grew 4% and 7.9% year-on-year respectively, both properties were approximately 98% leased at the end of the year.
Clover House generated $1.4 million of revenue during the quarter and as mentioned earlier the property was 98% leased at the end of February. On the expense side, key fourth quarter year-over-year changes were as follows: real estate taxes and insurance increased by approximately $1 million in the fourth quarter year-over-year due to property tax increases across the portfolio and general insurance industry cost increases.
Cash, general and administrative expenses increased by $691,000 in the fourth quarter primarily due to bringing Clover House online and nonrecurring litigation-related expenses. Excluding these expenses cash G&A decreased by $188,000 year-over-year.
Interest expense increased by $1.8 million in the fourth quarter due to the recognition of interest expense in connection with bringing Clover House online and higher interest costs resulting from recent refinancings of the 250 Livingston Street property. Turning to CapEx, we incurred $5.7 million of capital expenditures in the fourth quarter, a 56% decrease from recent quarters.
The drop primarily resulted from the completion of the Clover House renovation. Lastly, today we are announcing a dividend $0.095 per share for the fourth quarter.
The dividend will be paid on March 31 to shareholders of record on March 24. Let me now turn the call back over to David for concluding remarks.
David Bistricer
Thank you, Michael. We are very pleased with our results for the fourth quarter and full year 2019.
Our portfolio continues to perform well. We enthusiastically look forward to a myriad of growth opportunities including Clover House, the upcoming office lease rolls and 1010 Pacific Street redevelopment.
We remain well positioned to execute on our strategic initiatives and drive value for our shareholders. With that, I would like to open up the line for questions.
Operator
Thank you. Ladies and gentlemen, the floor is now open for questions.
[Operator Instructions] And it looks like your first question is coming from Craig Kucera. Craig, your line is live.
Craig Kucera
Yes. Thanks.
Hey, guys. So let's talk about your G&A expense, nice to see it trending down.
Obviously, you had the litigation cost, but sort of on a normalized basis. Can you talk about your expectations for 2020?
Are they going to be reasonably flat? Or how are you thinking about that?
Michael Frenz
Sure. I think it's a good question.
As you know, Craig, over the last couple of years our cash G&A is sort of -- it's been between kind of $6 million to $6.5 million to $7 million. As we sit here today, I think, we will continue that trend for full year.
In 2019, our cash G&A was roughly $7 million. So, again, I think, it's pretty flat.
We're focused on it obviously and expect that to continue.
Craig Kucera
Okay, great. And as far as the litigation, kind of, are there next steps there?
Or kind of how should we think about how that's going to play out going forward?
David Bistricer
Are you talking about the 421-a litigation?
Craig Kucera
Yes. Yes.
David Bistricer
Basically, the heavy lifting of that litigation is over. I mean, again, as we said -- I said in my remarks and we said this on all the previous calls, we were like 40-some-odd plaintiffs in that case.
Half of them or more than half on don't live in the building anymore. Nobody else has joined the case.
And our analysis of the cases and impacts the company, I would say, not material at all. I think the next thing that's going to happen is, the judge's opinion -- decision that was upheld recently is very, very poor and unclear as far as how it gets decided or calculated.
That's going back now for some more motion practice on that and that's going to get flushed out, I guess, in the next several months.
Craig Kucera
Okay. I appreciate the color.
I guess one more for me. Now that the Clover House has stabilized, do you anticipate being able to push rents pretty aggressively at that property as leases turn out over the next year or so?
David Bistricer
I think, again, we need to thank the leasing team and the management team in an excellent job in bringing very quickly up to 97% occupancy. They did that, obviously, they didn't want to raise the rents to the max-max and it was like in the low to mid-70s.
Now, as the leases roll, I think, we'll see some increases more closer to -- as we said in our comments, up to 70s low-80s.
Craig Kucera
Okay, great. Thanks guys.
David Bistricer
Thanks.
Operator
[Operator Instructions] Okay. We appear to have no further questions in queue at the moment.
Michael Frenz
Great. I would like to thank everybody for joining us today and we look forward to speaking to you at the end of the first quarter.
David Bistricer
Thank you for coming. And talk to you next time.
Bye-bye.
Operator
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.