Detailed narrative
Residential Portfolio Performance Highlights
Clipper Realty's residential properties demonstrated strong performance in Q2 FY26, driven by high demand in New York City. Overall rents reached record levels, with new free market leases across the portfolio exceeding prior rents by over 13%. Stabilized properties achieved an impressive 99% overall leased occupancy, reflecting effective management and robust market conditions. Renewal rates for residential free market properties also saw a 6% increase.
Prospect House Development Stabilization
The initial lease-up phase for the Prospect House development at 953 Dean Street is now complete, with the property fully leased. This ground-up project in Brooklyn, which began in 2021-2022, was delivered on time and on budget. It features 240 residential units (70% free market, 30% affordable) and 19,000 square feet of commercial space, with free market rents achieving $78 per foot.
Despite its operational success, the property recorded a net loss of $1.4 million and negative AFFO of $0.2 million during its final lease-up period in Q2 FY26.
250 Livingston Street Divestiture Process
The 250 Livingston Street property, which became vacant after New York City's lease termination in August 2025, is currently undergoing a loan sale process. Clipper Realty has entered into a consent and cooperation agreement with the lender to market and sell the loan, placing the company in receivership for this asset.
The lender is covering all property expenses, and the company is awaiting the results of the loan auction. This situation significantly impacted the company's Q2 FY26 financial results.
Property-Specific Leasing Metrics
Key properties showed strong individual performance. Tribeca House reported 99% leased occupancy with overall rents of $92 per square foot and new rents at $97 per foot. Clover House achieved 98% occupancy, with average overall rents of $82 per foot and new leases at $95 per foot.
Pacific House maintained 99% leased occupancy, with free market new leases at $78 per foot. The Aspen property continued its strong trend with over 98% occupancy and new rents 11% higher than previous leases.
Commercial and Capital Expenditure Updates
In the commercial segment, Tribeca House secured a new lease for 2,063 square feet and renewed a long-term lease for 33,000 square feet for a fitness facility. At Flatbush Gardens, the company completed the 3-year capital spending requirements mandated by the Article 11 agreement with New York City.
The 141 Livingston Street property, fully occupied by the New York City Brooklyn Court House, is expected to finalize a 5-year lease effective 2027.
Financial Performance and Balance Sheet
For Q2 FY26, revenues were $38.6 million, a $0.4 million decrease year-over-year, primarily due to the 250 Livingston Street vacancy. The company reported a net loss of $6.3 million ($0.19 per share) and AFFO of $3.8 million ($0.09 per share), both negatively affected by the 250 Livingston situation.
Excluding this impact, other residential properties and 141 Livingston Street saw a $1.5 million increase in net income and a $1.4 million improvement in AFFO. The balance sheet shows $37.7 million in unrestricted cash and $24.9 million in restricted cash, with 88% of operating debt fixed at an average rate of 3.87%.