Company: CLPR
Filing Date: 2025-02-04
Form Type: 424B5
Source: 0001437749-25-002637
Chunk: 57

Company: Clipper Realty Inc.
Filing Date: 2025-02-04
Form: 424B5
Chunk 57
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 its parent REIT, such as intercompany loans, or the REIT’s tenants that are not conducted on an arm’s length basis. We intend to scrutinize all of our transactions with our TRSs and to conduct such transactions on an arm’s-length basis; however, we cannot assure you that we will be successful in avoiding this excise tax.

Rent that we receive from a TRS will qualify as “rents from real property” as long as (1) at least 90% of the leased space in the property is leased to persons other than TRSs and related-party tenants and (2) the amount paid by the TRS to rent space at the property is substantially comparable to rents paid by other tenants of the property for comparable space, as described in further detail below under “—Gross Income Tests—Rents from Real Property.” If we lease space to a TRS in the future, we will seek to comply with these requirements.

Gross Income Tests

We must satisfy two gross income tests annually to qualify as a REIT. First, at least 75% of our gross income for each taxable year must consist of defined types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income. Qualifying income for purposes of the 75% gross income test generally includes:

| ● | rents from real property; |

| ● | interest on debt secured by mortgages on real property or on interests in real property; |

| ● | dividends or other distributions on, and gain from the sale of, shares in other REITs; |

| ● | gain from the sale of real estate assets, other than: |

| ● | property held primarily for sale to customers in the ordinary course of business, and |

| ● | debt instruments issued by “publicly offered REITs” (i.e., REITs that are required to file annual and periodic reports with the Securities and Exchange Commission under the Exchange Act), unless the debt instrument is secured by real property or an interest in real property; |

| ● | income derived from the operation, and gain from the sale, of foreclosure property; |

| ● | amounts (other than amounts the determination of which depends in whole or in part on the income or profits of any person) received or accrued as consideration for entering into agreements to make loans secured by mortgages on real property or interests in real property or to purchase or lease real property (including interests in real property and interests in mortgages