Good afternoon, ladies and gentlemen, and welcome to the Clipper Realty Third Quarter 2022 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 Larry Kreider. Sir, the floor is yours.

Good afternoon, and thank you for joining us for the third quarter 2022 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 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 2021 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, November 9, 2022 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-Q 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.

Thank you, Larry. Good afternoon, and welcome to the third quarter 2022 earnings call for Clipper Realty. I will provide an update on our business performance, including recent highlights and milestones, as well as our company's progress. I will then turn the call over to J.J., who will discuss property-level activity, including leasing performance. Finally, Larry will speak about our quarterly performance, financial performance. We will then take your questions. We see positive operational trends as we look forward. Residential leasing activity continues to rapidly improve despite the recent headline news on inflation and interest rate increases. Rental demand on our properties has been very strong all year, as New York City has largely reopened, people seek to relocate back to the city and employees increasingly return to their offices. At the end of the third quarter, our properties were 99% leased and new leases at all our properties are exceeding pre-pandemic levels. At the Tribeca House property, where new leases in the third quarter exceeded $83 per square foot, more than 23% better than the previous rents consistent with our trend in the previous quarter, causing the average of all leases to increase to a record $71 per square foot from $67 per square foot at the end of June, $65 per square foot at the end of March and $63 per square foot at the end of December. As Flatbush Gardens, new leases on units not yet at the legal limit averaged $39 per foot versus an overall lease rate of $25.66 at the end of September. With respect to interest rate increases, we believe we are buttressed by the relatively strong duration of debt on our operating properties, of which 95% is fixed at 3.72% with an average duration of 6.87 years and is non-recourse subject to…

Thank you. New residential leasing activity that began towards last year continues to improve. At the end of the third quarter, all our residential properties, occupancy and rent levels per square foot are exceeding pre-pandemic levels. As I will detail shortly, combined for all properties, new lease rental rates in the third quarter exceeded previous rent by over 23% and renewal rental rate exceeded previous rent by over 9%. We are experiencing strong rental demand at our Tribeca House property, while lease occupancy has averaged 98%. Over the last 12 months, we have increased average rent per square foot to $71 per square foot from $60 over that same period. In the last nine months, rents on new leases have risen to over $83 per square foot, representing an increase of 27% over previous rents and rents on renewals have increased 16% over previous rents. Further, we expect rent per square foot to continue to grow steadily through next year as a result of turnover of one – our one and two year leases entered into last year in response to pandemic conditions. We also continue to make progress on new leases and retail properties at the Tribeca House property. We have entered into four new smaller leases this year at substantially higher rates, renewed our garage lease and firmed up our gym lease. We are also moving ahead to lease up the last remaining retail spaces vacated during the pandemic. At the Flatbush Gardens complex in Brooklyn, in the third quarter, we are focused on leasing the units vacated in the pandemics since mid-2020. Since the beginning of the year, we have increased leased occupancy to nearly 99%, while new leases averaged nearly $32 per square foot, approximately 7% higher than the units previously rented and $38 per square…

Thank you, J.J. For the third quarter, revenues increased by $2.2 million to a record $32.8 million from $30.6 million last year third quarter. On a comparable basis, revenue from actual billings increased by $3 million to $33 million, excluding the bad debt expense, which is now deducted directly from revenue this year due to our adoption of a new leasing accounting standard as explained in our 10-Q. NOI this quarter increased $1.4 million to another record $17.4 million from $16.1 million last year third quarter. AFFO increased by $1 million to $5.0 million this quarter from $4.0 million last year third quarter. The revenue increase was primarily due to higher residential rental rates in all properties, higher occupancy at all properties, especially at the Flatbush Gardens property, new commercial tenants at the Tribeca House property and increased escalation billings at the 141 Livingston Street property. Bad debt expense netted against revenue this year was $800,000 versus $200,000 last year where it was added and included to operating expenses. On the expense side, key year-over-year changes were as follows: property operating expenses were $800,000 higher than last year, excluding the $200,000 charge for bad debt expense in last year's third quarter. This was due primarily to increased utility, repairs and supplies cost at the Flatbush Gardens property. Real estate taxes and insurance increased by approximately $400,000 in the third quarter year-on-year due to increased real estate taxes of $600,000, partially offset by reduced insurance cost of $200,000. Interest expense decreased $300,000 in the third quarter year-on-year due to additional capitalization of interest associated with the 1010 Pacific Street and 953 Dean Street development properties. With regard to the balance sheet, as David mentioned earlier, we have $20 million of unrestricted cash and $15 million of restricted cash. We are funding our development of our 1010 Pacific Street and Dean Street acquisitions substantially with construction financing. We finance our portfolio on an asset-by-asset basis and our debt is non-recourse, subject to limited standard carve-outs and is not cross-collateralized. We have no debt maturities on any operating properties until 2027 with an average overall duration of 6.87 years. Today, we are announcing a dividend of $0.095 per share for the third quarter, the same amount as last quarter. The dividend will be paid on November 25 to shareholders of record on November 21. Let me now turn the call back over to David for concluding remarks.

Thank you, Larry. We remain focused on efficiently operating our portfolio. We look to our current operating improvements to continue to accelerate to the next quarter and into 2023. We look forward to capitalizing on a myriad of growth opportunities, including 1010 Pacific and 953 Dean Street, developments and other possibilities that may present themselves. I will now open the line for questions.

[Operator Instructions] And the first question is coming from Craig Kucera with B. Riley Securities. Craig, your line is live.

Yeah. Thanks guys. Most of my questions were covered in your opening commentary. So thank you for that. But I do want to follow up that I did see a news story that you had listed Flatbush Gardens for sale. Can you comment on that and your expectations there? And if that's true, kind of what your expected use of proceeds would be?

We can really not comment on it. It's too early to tell. We will keep the market posted as it develops. Right now, there is nothing really to report other than we've listed the property and attempt to see what is there. We said that we believe that we have a focus now on newer developments. We think our talents and experience in the market can do us better in that environment. And that's what we're segueing into. And as of now, there's nothing more to report, that there's no news about that effort yet.

Fair enough. And are you looking to potentially dispose of any other assets or just that?

That's the one that we're looking to trade at the moment.

Okay. Thanks. Appreciate your time.

Sure.

[Operator Instructions] Okay. We currently have no questions in queue.

Thank you for joining us today. We look forward to speaking with you again soon. Stay well. Have a good evening, pleasant evening.

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.