Good morning, and thank you for joining us for the fourth quarter 2020 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; and JJ 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 2020 annual report on Form 10-K posted yesterday, 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 17, 2021, 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-K posted yesterday 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.

Thank you, Michael. Good morning, and welcome to the fourth quarter 2020 earnings call for Clipper Realty.

I will provide an update to our business performance, including recent highlights and milestones as well as how our company continues to respond to the COVID-19 pandemic. I will then turn the call over to JJ, who will discuss property-level activity, including leasing performance and measures taken in light of the pandemic.

Finally, Michael will speak about our quarterly financial performance. We will then take your questions.

I will begin by thanking the entire Clipper Realty team for their continued hard work and perseverance during these unprecedented times. We are grateful for their efforts over the past year under very challenging circumstances are proud of their ongoing dedication to our shareholders, residents, communities and our business.

Our properties have remained open and operational throughout the pandemic. We continued to take the necessary steps to make our tenants safe and in compliance with state and local orders.

During the fourth quarter and into the beginning of 2021, we have seen an increase in residential leasing activity as New York City and the economy in general continues to strengthen from the depths of the pandemic. We expect demand to accelerate, pricing continue to improve as New York City continues to open up and vaccinations proliferate.

At year end, the properties were 95% leased and approximate 200 basis points increase versus the end of the third quarter. We are confident in the resiliency of New York City.

We expect our properties in the city to remain desirable to a broad range of tenants and operations to continue to return to a more normal state overtime. Last month, we refinanced our 141 Livingston Street property with a $100 million, 10 years secured first mortgage loan with Citi Real Estate Funding Inc.

The loan bears interest at 3.21% interest-only for the entire term, which is expected to reduce annual debt service by $1.3 million. We repaid existing $74 million amortizing loan on the property that was due in 2028 and bore interest at 3.875% through May, 2023.

Net proceeds of approximately $23 million increased our cash position. We finance our portfolio on an asset by asset basis, no cost collateralization and our debt is non-recourse and non-cost collateralized except for standard carve-outs.

We have no debt maturities on any of our operating properties until 2027. Our property is well positioned from a liquidity perspective.

During the fourth quarter, we repurchased approximately 1.7 million shares of common stock at an average price of $5.70 per share under our $10 million repurchase growth program announced in August of 2020. We completed the repurchase program in November of last year.

Turning to our recent developments. We continue to proceed with the redevelopment of our 1010 Pacific Street acquisition located in Prospect Heights, Brooklyn, about one mile from the Atlantic Terminal Barclays Center Hub.

As previously discussed, we estimate the project will cost $85 million in total, take two years to complete and develop a 6.5% stabilized cap rate. JJ will provide a further update on the project shortly permits to commence construction are in hand and construction has commenced.

In our office portfolio, the city rent at 141 limits and properly increased 25% by the end of December, 2020. And we'll add $2.1 million to the property annual NOI.

Together with the expected additional $5 million of annual NOI result in these new lease at 250 Livingston Street property that commenced in August of 2020, these roles, how are expected to add an increase incremental $7.1 million of annual NOI to our portfolio representing an approximate 10% increase on a normalized run rate. I'd like to provide an update to the Tribeca House 421-g Kuzmich litigation.

As previously discussed, on October 29, 2020, the Appellate Division applied the Court of Appeals Regina ruling to this case. Holdings at the base date for the determination of rent overcharge is four years prior to 2016 filing of the Kuzmich complaint and overcharges.

If any are to be determined by comparing rents actually charged during the four-year period to the rent increases permitted by New York City Rent Guidelines Board. Although not eliminating rent overcharged liability altogether, this ruling is expected to limit our financial exposure in this regard.

The case will be remanded back to the lower courts, which will determine the amount of liability for rent overcharge, the attorney's fees. No court dates have been scheduled yet.

We do not believe that this litigation will have a material impact on our business as it pertains to the limited subsets of previous and existing tenants at the property. The vast majority of current tenants and all future movements are not impacted by the litigation as those units are free market.

Lastly, I'd like to comment on the fourth quarter results. We are reporting quarterly revenue of $30.3 million, NOI of $14.7 million and AFFO of $3 million.

Michael will provide further details on our financial performance. I will now turn the call over to JJ., who will provide an update on operations and our response to the pandemic.

Thank you. I begin by again extending our gratitude to the company's employees for their tireless efforts throughout this unprecedented period; we remain inspired by the ongoing commitment to our tenants and communities.

We continue to rigorously maintain protocols, keep our residents and employees safe in compliance with COVID related government mandated orders and to provide permitted regular services to our tenants. We have seen a marked increase in residential leasing activity beginning in the fourth quarter and continuing today.

At year end, most of our properties were at least in the mid- to high-90s percent range, a strong uptick from the approximate 90% level at the end of the third quarter. This rental demand strength has solidified in 2021 as New York City continues to emerge from the challenges of the pandemic.

Occupancy at Tribeca House increased to 90% at year-end from 80% at the end of the third quarter. We've seen further strengthening in the first few months of 2021.

We are working diligently to manage revenue at the property. Longer term, we believe that occupancy and rental rates at Tribeca House will return to pre-COVID levels given the assets quality and attractiveness from a pricing standpoint compared to the other luxury buildings in the surrounding neighborhood.

The Flatbush Gardens complex in Brooklyn held up well in the fourth quarter from a revenue standpoint. As it has throughout the pandemic, the property maintains high occupancy ending the quarter 95% leased.

Rent per square foot was a record $25.14 at the end of the quarter. As noted previously, we have reorganized certain operations at the property as part of an ongoing effort to manage our expense, which is expected to result in annual cost savings in excess of $800,000.

Flatbush Gardens is a key element of our portfolio and growth story with the FAR expansion project and incremental value opportunity. Rent collections have continued to remain strong during the pandemic.

Our collection rate in the fourth quarter was over 95%. We continue to work with tenants on a case-by-case basis when they notify us that they cannot meet their rent obligations as a result of the pandemic, including reviewing potential alternative payment arrangements.

On the development side, we are completing the necessary regulatory process at 1010 Pacific Street to construct a nine-story, a 119,000 rentable square foot fully amenitized, multifamily rental building with underground indoor parking. The property is expected to have 175 total units, 70% of which will be free market and 30% affordable and is eligible for a 35-year 421(a) tax abatement.

We are in the process of negotiating a construction loan for the project. Looking ahead, we remain focused on optimizing occupancy, pricing and expenses across the business to best position ourselves as New York City continues to emerge from the pandemic.

I will now turn over the call to Michael, who will discuss our financial results.

Thank you, JJ. For the fourth quarter, we achieved revenues of $30.3 million, compared to $30.6 million for the fourth quarter of 2019.

We achieved NOI of $14.7 million and AFFO of $3 million. A slight year-over-year revenue change was primarily attributable to a decline in leased occupancy and residential rental rate at the Tribeca House property partially offset by the commencement of the new office lease at the 250 Livingston Street property during the third quarter of 2020.

On the expense side, key year-over-year changes were as follows: property operating expenses increased by $0.8 million in the fourth quarter year-on-year, primarily driven by an increase in the provision for bad debt due to the impact of COVID-19. Real estate taxes and insurance increased by $0.4 million in the fourth quarter year-on-year due to property tax increases across the portfolio and general insurance industry cost increases.

Interest expense increased by $0.2 million in the fourth quarter year-on-year, primarily due to the refinancing of the Flatbush Gardens property in May 2020. As David mentioned earlier, we are well positioned from a liquidity perspective.

Pro forma for the 141 Livingston Street refinancing last month, we have $107 million of cash, consisting of $88 million of unrestricted cash and $19 million of restricted cash. We financed our portfolio on an asset-by-asset basis, our debt is not cross-collateralized and is non-recourse, subject to standard limited carve outs.

[ph] We have no debt maturities on any operating properties until 2027. Today, we are announcing a dividend of $0.095 per share for the fourth quarter, the same amount as last quarter.

The dividend will be paid on March 31st to shareholders of record on March 26th. Lastly, as previously disclosed our previously issued unaudited consolidated financial statements covering each of the first three quarters of 2020 require restatement.

Our previously reported AFFO adjusted EBITDA and NOI for each of the first three quarters of 2020 will not be impacted by the restatement. Our liquidity cash flows and cash position will also not be impacted by the restatement.

We will file amended Quarterly Reports on Form 10-Q for each of the first three quarters of 2020. Let me now turn the call back over to David for concluding remarks.

Thank you, Michael. We remain focused on efficiently, operating our portfolio throughout the pandemic, with the safety of our tenants and employees, our highest priority.

We continue to take the necessary steps to navigate through the current challenges, buttressed by a strong balance sheet. New York City has survived and thrived through challenging circumstances throughout history, and we expect the cities recovery from the pandemic to accelerate in 2021 and beyond.

We enthusiastically look forward to capitalizing on a myriad of growth opportunities, including 1010 Pacific Street redevelopment, and other developments that will present itself. We hope everyone stays safe and healthy.

With that, I would like to open up the line for questions.

Yes. Thanks.

Hi, this is Craig Kucera with B. Riley Securities.

Good morning, and thanks for taking my questions. Let's talk about the refinance you completed earlier this quarter.

You have now about $95 million in cash. You still got your restricted cash on top of that.

Can you give us a sense of what you plan on doing with the excess cash you have after this refinance? And I know you had the excess cash from last year's refinances as Flatbush as well.

Just some thoughts there would be helpful?

We don't have any specific plans at this moment in time; we continue to be on the lookout for opportunities as it presents itself. The company took advantage of these refinancing opportunities to extend the maturity days on interest only basis.

And we thought that it was a low interest environment, prudent to do it at the time. And we are pretty confident that the overtime opportunities that meet our investment criteria will present itself.

Got it. And now that you completed the 10 million share – $10 million share repurchase in the fourth quarter; is the board revisiting another authorization?

Not been discussed yet. As you know, the stock has gone up to $8 from $5 where we purchased the shares.

We haven't had any discussions yet about that. If we do and we make any decisions, obviously we'll announce it.

Got it. And can you give me some color on the refinance at 141 Livingston, what was the LTV, was that done on trailing or forward-looking NOI and any color there would be helpful?

I think it was approximately about 60% or 65% LTV was a CMBS alone.

And was that done on the revised lease?

Yes, sorry. Go ahead David.

Yes, it was.

Okay, great. And you had a – did a very good job of getting occupancy up very quickly from third quarter to fourth quarter in a number of your properties.

But at some you had to really reduce rents particularly like at a Clover House. And this is a two-part question, I guess, a, is the $50 or so that, that Clover House is that now – is that now market or did you kind of take some short-term pain to get that back-up to 99% occupancy?

And b, what are your expectations to begin pushing rents now that you have occupancy much closer to kind of traditionally where you operated with the exception of Tribeca?

Great question. The latter is true, we obviously, our strategy is, as my father always says, last rent is a smoke opportunity.

Can never get that back. So our position and strategy has always been to try to maximize the occupancy, it's great for when the tide changes and has to be able to increase rents slowly over time.

And we've kept the occupancy high. And now we're going to start seeing I think the rents will slowly creep back to where they were before the pandemic is.

There is a less amount of product around, there was a lot of cessation of construction going on and plans for construction. I think that'll help us.

And the properties are well maintained, well positioned. And during the pandemic, we just lowered the prices to capture the occupancy that we enjoyed.

But now we'll turn towards slowly starting to see those rents, get back to where they were.

I can let, JJ speak as well, but a particular, as it relates to Clover House, as David said, we took the opportunity to fill up the building into the fourth quarter there. In the first couple of months of this year, we started to see a creep back up.

I think Clover House is in the mid 50s already on rent per square foot. So again, we'll know more in the next kind of couple of weeks here and has become around to Q1.

Well, obviously I'll give you updated information, but we've already seen tick back up into the mid to higher 50s at Clover House.

Great. And as far as 1010 Pacific, I know your opening commentary, you said that you thought it would take about two years is that, two years from when you first began that project?

So we'll see that completed, at some point in 2022, or is that two years from today? Just given that, things have optically appeared to have slowed down a bit from spending on that project.

I think it's more like, it's hard to predict precisely, but area on the side of conservatism is probably two years from today.

Got it. And it looks like you didn't take a whole lot of bad debt expense here in the fourth quarter.

Just looking at your K versus prior Qs. Mike, do you feel like that's been largely washed out of Tennessee as we sit here in the first quarter?

No, I think, and again, we can go into more detail offline if you like, but we actually did take a decent amount of bad debt expense in the fourth quarter. It was roughly $1 million of bad debt in Q4 versus Q3 of mid-600,000.

So again, we continue to analyze it. We can sort of talk offline if you'd like about the calculation, but we're seeing strong lend collections, as we said, we're still in the mid 90s, but just, examining certain leases and whatnot.

And yes, we did take $1 million in the fourth quarter and we expect that to, start to creep down here as, stimulus payments come through and the economy continues to rebound. So hopefully here we're roughly at a peak level and we'll hopefully start to tick back down.

Okay, thanks. That's it for me.

Thank you.

Thank you for joining us today. We look forward to speaking with you again soon.

Stay safe.