# EDGAR Filing Document

**Accession Number:** 0001649096
**File Stem:** 0001437749-23-006928
**Filing Date:** 2023-3
**Character Count:** 32031
**Document Hash:** 82b8dc37cc6d875453923c020f9648c8
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-23-006928.hdr.sgml**: 20230316

**ACCESSION NUMBER**: 0001437749-23-006928

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 15

**CONFORMED PERIOD OF REPORT**: 20230316

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230316

**DATE AS OF CHANGE**: 20230316

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Clipper Realty Inc.
- **CENTRAL INDEX KEY:** 0001649096
- **STANDARD INDUSTRIAL CLASSIFICATION:** REAL ESTATE INVESTMENT TRUSTS [6798]
- **IRS NUMBER:** 474579660
- **STATE OF INCORPORATION:** MD
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38010
- **FILM NUMBER:** 23739573

**BUSINESS ADDRESS:**
- **STREET 1:** 4611 12TH AVENUE, SUITE 1L
- **CITY:** BROOKLYN
- **STATE:** NY
- **ZIP:** 11219
- **BUSINESS PHONE:** 718-438-2804

**MAIL ADDRESS:**
- **STREET 1:** 4611 12TH AVENUE, SUITE 1L
- **CITY:** BROOKLYN
- **STATE:** NY
- **ZIP:** 11219

clpr20230314_8k.htm

------

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

**FORM **8-K**

**CURRENT REPORT**

**PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES EXCHANGE ACT OF 1934**

**Date of Report (Date of earliest event reported):**

**March 16, 2023**

**CLIPPER REALTY INC.**

**(Exact Name of Registrant as Specified in Charter)**

---

| | | |
|:---|:---|:---|
| **Maryland** | **001-38010** | **47-4579660** |
| (State or Other | (Commission | (IRS Employer |
| Jurisdiction of | File Number) | Identification No.) |
| Incorporation) |  |  |

---

---

| | |
|:---|:---|
| **4611 12th Avenue, Suite 1L**<br> **Brooklyn**, **New York** | **11219** |
| (Address of Principal Executive offices) | (Zip Code) |

---

Registrant's telephone number, including area code: (718) 438-2804

**Former name or former address, if changed since last report: N/A**

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | CLPR | New York Stock Exchange |

---

------

**Item 2.02. Results of Operations and Financial Condition**

On March 16, 2023, Clipper Realty Inc. issued a press release announcing its financial results for the quarterly period ended December 31, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

*The information in this Form 8-K under Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed* "*filed*" *for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the* "*Exchange Act*"*), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific referencing in such filing.*

**Item 9.01 Financial Statements and Exhibits**

(d) Exhibits:

---

| | |
|:---|:---|
| **Exhibit**<br> **Number** | **Exhibit**<br> **Description** |
| 99.1 | [Press Release dated March 16, 2023, announcing financial results for the quarterly period ended December 31, 2022](ex_488834.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

------

**SIGNATURE**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | |
|:---|:---|
| **Clipper Realty Inc.** | **Clipper Realty Inc.** |
| (Registrant) | (Registrant) |
| By: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; /s/ David Bistricer |
| Name: | David Bistricer |
| Title: | Co-Chairman and Chief Executive Officer |

---

Date: March 16, 2023

------

**Exhibit Index**

---

| | |
|:---|:---|
| **Exhibit**<br> **Number** | **Exhibit**<br> **Description** |
| 99.1 | [Press Release dated March 16, 2023, announcing financial results for the quarterly period ended December 31, 2022](ex_488834.htm) |

---

## Exhibit 99.1

**Exhibit 99.1**

![c01.jpg](c01.jpg)

**Clipper Realty Inc. Announces Fourth Quarter 2022 Results**

NEW YORK, March 16, 2023 /Business Wire/ -- Clipper Realty Inc. (NYSE: CLPR) (the "Company"), a leading owner and operator of multifamily residential and commercial properties in the New York metropolitan area, today announced financial and operating results for the three months ended December 31, 2022.

**Highlights for the Three Months Ended December 31, 2022**

● Record quarterly revenues of $33.0 million for the fourth quarter of 2022

● Quarterly income from operations of $6.8 million for the fourth quarter of 2022

● Net operating income ("NOI") <sup>1</sup> of $17.1 million for the fourth quarter of 2022

● Quarterly net loss of $3.4 million for the fourth quarter of 2022

● Quarterly adjusted funds from operations ("AFFO")<sup>1</sup> of $4.7 million for the fourth quarter of 2022

● Declared a dividend of $0.095 per share for the fourth quarter of 2022

David Bistricer, Co-Chairman and Chief Executive Officer, commented,

"We continue to see strong demand for our New York City and Brooklyn based rental properties. Our revenue, occupancy, rent levels, new leases and renewals continue to exceed pre-pandemic levels. In the fourth quarter, we recorded record revenue of $33.0 million, NOI of $17.1 million and leased occupancy of 98.8% and our overall collection rate remains high at 96.2%, despite the reduction in state and local government pandemic related tenant support programs. We have a strong liquidity position with $30.7 million of cash on the balance sheet, consisting of $18.2 million of unrestricted cash and $12.5 million of restricted cash, and substantially all debt at our operating properties is fixed rate, none maturing until 2027. Additionally, we have substantially completed our 1010 Pacific Street development property on budget and have begun leasing in the fourth quarter for move-ins in the first half of 2023. Additionally, we have refinanced our construction loan with a new fixed rate loan that gives us potential for additional liquidity as the building fills up. We remain committed to executing our strategic initiatives to create long-term value."

**Financial Results**

For the fourth quarter of 2022, revenues increased by $2.2 million, or 7.3%, to $33.0 million and $3.4 million, or 11.0% to $34.2 million excluding the effects of the new accounting standard discussed below. This compares to revenue of $30.8 million for the fourth quarter of 2021. Excluding the effects of the new accounting standard, residential revenue increased by $3.0 million, or 14.2%, due to higher rental rates and occupancy at all our properties; commercial income increased $0.4 million, or 4.3%, due to new commercial leases signed during 2022 and higher escalation billings at the 141 Livingston St property. Revenue in the fourth quarter of 2022 reflects implementation of a new accounting standard effective 2022 by which adjustments to receivables for collectability were made to revenue in the amount of $1.2 million; in the fourth quarter of 2021, such adjustments were made to operating expenses in the amount of a $0.4 million recovery.

For the fourth quarter of 2022, net loss was $3.4 million, or $0.10 per share compared to net loss of $6.2 million, or $0.16 per share, for the fourth quarter of 2021. The change was primarily attributable to the Company recording a charge of $2.7 million for the settlement of claims of tenant overcharges at the Tribeca House property during the fourth quarter of 2021, as well as our increased revenue discussed above partially offset by increased bad debt reserve, property operating costs, real estate taxes and general and administrative costs.

------

<sup>1</sup> NOI and AFFO are non-GAAP financial measures. For a definition of these financial measures and a reconciliation of such measures to the most comparable GAAP measures, see "Reconciliation of Non-GAAP Measures" at the end of this release.

------

For the fourth quarter of 2022, AFFO was $4.7 million, or $0.11 per share, compared to $4.4 million, or $0.10 per share, for the fourth quarter of 2021. As discussed above, the change was primarily attributable to our increased revenue discussed above being mostly offset by increased bad debt reserve, property operating costs, real estate taxes and general and administrative costs.

**Balance Sheet**

At December 31, 2022, notes payable (excluding unamortized loan costs) was $1,171.2 million, compared to $1,144.1 million at December 31, 2021. The increase primarily was due to borrowings to develop the 1010 Pacific Street property and complete the 953 Dean Street property acquisition partially offset by scheduled principal amortization payments.

**1010 Pacific Refinance**

On February 10, 2023 the Company refinanced its 1010 Pacific construction loan with a mortgage loan with Valley National Bank providing for maximum borrowings of $80 million. The loan provided initial funding of $60 million and a further $20 million subject to achievement of certain financial targets. The loan has a term of five years and an initial annual interest rate of 5.7% subject to reduction by up to 25 basis points upon achievement of certain financial targets. The loan is interest only for the first two years and principal and interest thereafter based on a 30-year amortization schedule.

**Dividend**

The Company today declared a third quarter dividend of $0.095 per share, the same amount as last quarter, to shareholders of record on March 27, 2023, payable April 5, 2023.

**Conference Call and Supplemental Material**

The Company will host a conference call on March 16, 2023, at 5:00 PM Eastern Time to discuss the fourth quarter 2022 results and provide a business update. The conference call can be accessed by dialing (800) 346-7359 or (973) 528-0008, conference entry code 880524. A replay of the call will be available from March 16, 2023, following the call, through March 30, 2023, by dialing (800) 332-6854 or (973) 528-0005, replay conference ID 880524. Supplemental data to this press release can be found under the "Quarterly Earnings" navigation tab on the "Investors" page of our website at <u>www.clipperrealty.com</u>. The Company's filings with the Securities and Exchange Commission (the "SEC") are filed at <u>www.sec.gov</u> under Clipper Realty Inc.

**About Clipper Realty Inc.**

Clipper Realty Inc. (NYSE: CLPR) is a self-administered and self-managed real estate company that acquires, owns, manages, operates and repositions multifamily residential and commercial properties in the New York metropolitan area, with a portfolio in Manhattan and Brooklyn. For more information on the Company, please visit <u>www.clipperrealty.com</u>.

------

**Forward-Looking Statements**

Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include estimates concerning capital projects and the success of specific properties. Our forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "intend," "anticipate," "potential," "plan" or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this press release speak only as of the date of this press release.

We disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties (including uncertainties regarding the ongoing impact of the COVID-19 pandemic, and measures intended to curb its spread, on our business, our tenants and the economy generally), most of which are difficult to predict and many of which are beyond our control and which may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. For a discussion of these and other important factors that could affect our actual results, please refer to our filings with the SEC, including the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2022, and other reports filed from time to time with the SEC.

Contact Information:

Lawrence Kreider

Chief Financial Officer

(718) 438-2804 x2231

larry@clipperrealty.com

------

---

| |
|:---|
| **Clipper Realty Inc.**  |
| **Consolidated Balance Sheets**  |
| **(In thousands, except for share and per share data)**  |

---

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
| **ASSETS** |  |  |
| Investment in real estate |  |  |
| &nbsp;&nbsp;&nbsp; Land and improvements | $540859 | $540859 |
| &nbsp;&nbsp;&nbsp; Building and improvements | 656460 | 649686 |
| &nbsp;&nbsp;&nbsp; Tenant improvements | 3406 | 3406 |
| &nbsp;&nbsp;&nbsp; Furniture, fixtures and equipment | 12878 | 12500 |
| &nbsp;&nbsp;&nbsp; Real estate under development | 142287 | 97301 |
| Total investment in real estate | 1355890 | 1303752 |
| &nbsp;&nbsp;&nbsp; Accumulated depreciation | (184781) | (158002) |
| Investment in real estate, net | 1171109 | 1145750 |
| Cash and cash equivalents | 18152 | 34524 |
| Restricted cash | 12514 | 17700 |
|  Tenant and other receivables, net of allowance for doubtful accounts of $321 and $7,905, respectively | 5005 | 10260 |
| Deferred rent | 2573 | 2656 |
| Deferred costs and intangible assets, net | 6624 | 7126 |
| Prepaid expenses and other assets | 13654 | 15641 |
| **TOTAL ASSETS** | $**1229631** | $**1233657** |
| **LIABILITIES AND EQUITY** |  |  |
| Liabilities: |  |  |
|  Notes payable, net of unamortized loan costs of $9,650 and $12,898, respectively | $1161588 | $1131154 |
| Accounts payable and accrued liabilities | 17094 | 19558 |
| Security deposits | 7940 | 7110 |
| Below-market leases, net | 18 | 53 |
| Other liabilities | 5812 | 5833 |
| **TOTAL LIABILITIES** | **1192452** | **1163708** |
| Equity: |  |  |
|  Preferred stock, $0.01 par value; 100,000 shares authorized (including 140 shares of 12.5% Series A cumulative non-voting preferred stock), zero shares issued and outstanding |  |  |
|  Common stock, $0.01 par value; 500,000,000 shares authorized, 16,063,228 shares issued and outstanding | 160 | 160 |
| Additional paid-in-capital | 88829 | 88089 |
| Accumulated deficit | (74895) | (61736) |
| Total stockholders' equity | 14094 | 26513 |
| Non-controlling interests | 23085 | 43436 |
| **TOTAL EQUITY** | **37179** | **69949** |
| **TOTAL LIABILITIES AND EQUITY** | $**1229631** | $**1233657** |

---

------

---

| |
|:---|
| **Clipper Realty Inc.**  |
| **Consolidated Statements of Operations**  |
| **(In thousands, except per share data)**  |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | (unaudited) | (unaudited) |  |  |
| **REVENUES** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Residential rental income | $23095 | $21253 | $90262 | $85771 |
| &nbsp;&nbsp;&nbsp; Commercial rental income | 9914 | 9523 | 39484 | 36958 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **TOTAL REVENUES** | **33009** | **30776** | **129746** | **122729** |
| **OPERATING EXPENSES** |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Property operating expenses | 7572 | 6449 | 29306 | 28997 |
| &nbsp;&nbsp;&nbsp; Real estate taxes and insurance | 8492 | 7922 | 32561 | 30449 |
| &nbsp;&nbsp;&nbsp; General and administrative | 3404 | 2791 | 12752 | 10570 |
| &nbsp;&nbsp;&nbsp; Transaction pursuit costs |  |  | 506 | 60 |
| &nbsp;&nbsp;&nbsp; Depreciation and amortization | 6764 | 6794 | 26985 | 25762 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **TOTAL OPERATING EXPENSES** | **26232** | **23956** | **102110** | **95838** |
| Litigation settlement and other |  | (2730) |  | (2730) |
| **INCOME FROM OPERATIONS** | **6777** | **4090** | **27636** | **24161** |
| Interest expense, net | (10131) | (10325) | (40207) | (41284) |
| Loss on extinguishment of debt |  |  |  | (3034) |
| Gain on involuntary conversion |  |  |  | 139 |
| **Net loss** | **(3354)** | **(6235)** | **(12571)** | **(20018)** |
| Net loss attributable to non-controlling interests | 2084 | 3873 | 7807 | 12431 |
| **Net loss attributable to common stockholders** | $**(1270)** | $**(2362)** | $**(4764)** | $**(7587)** |
| Basic and diluted net loss per share | $(0.10) | $(0.16) | $(0.36) | $(0.51) |
| Weighted average common shares / OP units |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Common shares outstanding | 16063 | 16063 | 16063 | 16063 |
| &nbsp;&nbsp;&nbsp; OP units outstanding | 26317 | 26317 | 26317 | 26317 |
| &nbsp;&nbsp;&nbsp; Diluted shares outstanding | 42380 | 42380 | 42380 | 42380 |

---

------

---

| |
|:---|
| **Clipper Realty Inc.**  |
| **Consolidated Statements of Cash Flows**  |
| **(In thousands)**  |

---

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| **CASH FLOWS FROM OPERATING ACTIVITIES** |  |  |
| Net loss | $(12571) | $(20018) |
| *Adjustments to reconcile net loss to net cash provided by operating activities:* | | |
| Depreciation | 26779 | 25536 |
| Amortization of deferred financing costs | 1252 | 1247 |
| Amortization of deferred costs and intangible assets | 687 | 707 |
| Amortization of above- and below-market leases | (35) | (104) |
| Loss on extinguishment of debt |  | 3034 |
| Gain on involuntary conversion |  | (139) |
| Deferred rent | (163) | (202) |
| Stock-based compensation | 2920 | 2611 |
| Bad debt expense | (236) | 1850 |
| Transaction pursuit costs |  | 60 |
| *Changes in operating assets and liabilities:* | | |
| Tenant and other receivables | (310) | (5108) |
| Prepaid expenses, other assets and deferred costs | (214) | (2639) |
| Accounts payable and accrued liabilities | 1222 | 3456 |
| Security deposits | 830 | 127 |
| Other liabilities | (22) | 404 |
| **Net cash provided by operating activities** | **20139** | **10822** |
| **CASH FLOWS FROM INVESTING ACTIVITIES** |  |  |
| Additions to land, buildings and improvements | (45450) | (35531) |
| Insurance proceeds from involuntary conversion |  | 150 |
| Acquisition deposit | 2015 | (2015) |
| Cash paid in connection with acquisition of real estate | (8041) | (40548) |
| **Net cash used in investing activities** | **(51476** | **(77944** |
| **CASH FLOWS FROM FINANCING ACTIVITIES** |  |  |
| Payments of mortgage notes | (2191) | (97432) |
| Proceeds from mortgage notes | 29378 | 151764 |
| Dividends and distributions | (17073) | (16758) |
| Loan issuance and extinguishment costs | (335) | (7260) |
| **Net cash provided by financing activities** | **9779** | **30314** |
| Net decrease in cash and cash equivalents and restricted cash | (21558) | (36808) |
| Cash and cash equivalents and restricted cash - beginning of period | 52224 | 89032 |
| **Cash and cash equivalents and restricted cash - end of period** | $**30666** | $**52224** |
| Cash and cash equivalents and restricted cash - beginning of period: |  |  |
| Cash and cash equivalents | $34524 | $72058 |
| Restricted cash | 17700 | 16974 |
| Total cash and cash equivalents and restricted cash - beginning of period | $52224 | $89032 |
| Cash and cash equivalents and restricted cash - end of period: |  |  |
| Cash and cash equivalents | $18152 | $34524 |
| Restricted cash | 12514 | 17700 |
| Total cash and cash equivalents and restricted cash - end of period | $30666 | $52224 |
| Supplemental cash flow information: |  |  |
| Cash paid for interest, net of capitalized interest of $2069 and $1740 in 2022 and 2021, respectively | $38989 | $40227 |
| Non-cash interest capitalized to real estate under development | 2331 | 343 |
| Additions to investment in real estate included in accounts payable and accrued liabilities | 4882 | 8566 |

---

------

**Clipper Realty Inc.**

**Reconciliation of Non-GAAP Measures**

**(In thousands, except per share data)**

**(Unaudited)**

**Non-GAAP Financial Measures**

We disclose and discuss funds from operations ("FFO"), adjusted funds from operations ("AFFO"), adjusted earnings before interest, income taxes, depreciation and amortization ("Adjusted EBITDA") and net operating income ("NOI"), all of which meet the definition of "non-GAAP financial measures" set forth in Item 10(e) of Regulation S-K promulgated by the SEC.

While management and the investment community in general believe that presentation of these measures provides useful information to investors, neither FFO, AFFO, Adjusted EBITDA, nor NOI should be considered as an alternative to net income (loss) or income from operations as an indication of our performance. We believe that to understand our performance further, FFO, AFFO, Adjusted EBITDA, and NOI should be compared with our reported net income (loss) or income from operations and considered in addition to cash flows computed in accordance with GAAP, as presented in our consolidated financial statements.

***Funds From Operations and Adjusted Funds From Operations***

FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and impairment adjustments, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT.

AFFO is defined by us as FFO excluding amortization of identifiable intangibles incurred in property acquisitions, straight-line rent adjustments to revenue from long-term leases, amortization costs incurred in originating debt, interest rate cap mark-to-market adjustments, amortization of non-cash equity compensation, acquisition and other costs, transaction pursuit costs, loss on modification/extinguishment of debt, gain on involuntary conversion, gain on termination of lease and non-recurring litigation-related expenses, less recurring capital spending.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values have historically risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO useful in evaluating potential property acquisitions and measuring operating performance. We further consider AFFO useful in determining funds available for payment of distributions. Neither FFO nor AFFO represent net income or cash flows from operations computed in accordance with GAAP. You should not consider FFO and AFFO to be alternatives to net income (loss) as reliable measures of our operating performance; nor should you consider FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (computed in accordance with GAAP) as measures of liquidity.

Neither FFO nor AFFO measure whether cash flow is sufficient to fund all of our cash needs, including loan principal amortization, capital improvements and distributions to stockholders. FFO and AFFO do not represent cash flows from operating, investing or financing activities computed in accordance with GAAP. Further, FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO and AFFO.

------

The following table sets forth a reconciliation of FFO and AFFO for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **FFO** |  |  |  |  |
| Net loss | $(3354) | $(6235) | $(12571) | $(20018) |
| &nbsp;&nbsp;&nbsp; Real estate depreciation and amortization | 6764 | 6794 | 26985 | 25762 |
| **FFO** | $**3410** | $**559** | $**14414** | $**5744** |
| **AFFO** |  |  |  |  |
| FFO | $3410 | $559 | $14414 | $5744 |
| &nbsp;&nbsp;&nbsp; Amortization of real estate tax intangible | 121 | 120 | 481 | 481 |
| &nbsp;&nbsp;&nbsp; Amortization of above- and below-market leases | (9) | (8) | (35) | (104) |
| &nbsp;&nbsp;&nbsp; Straight-line rent adjustments | 57 | (77) | (163) | (202) |
| &nbsp;&nbsp;&nbsp; Amortization of debt origination costs | 313 | 313 | 1252 | 1247 |
| &nbsp;&nbsp;&nbsp; Amortization of LTIP awards | 856 | 665 | 2920 | 2611 |
| &nbsp;&nbsp;&nbsp; Transaction pursuit costs |  |  | 506 | 60 |
| &nbsp;&nbsp;&nbsp; Loss on extinguishment of debt |  |  |  | 3034 |
| &nbsp;&nbsp;&nbsp; Gain on involuntary conversion |  |  |  | (139) |
| &nbsp;&nbsp;&nbsp; Litigation settlement and other |  | 2730 |  | 2730 |
| &nbsp;&nbsp;&nbsp; Certain litigation-related expenses |  | 100 | 188 | 299 |
| &nbsp;&nbsp;&nbsp; Recurring capital spending | (50) | (46) | (326) | (205) |
| **AFFO** | $**4698** | $**4356** | $**19237** | $**15556** |
| *AFFO Per Share/Unit* | $*0.11* | $*0.10* | $*0.45* | $*0.37* |

---

***Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization***

We believe that Adjusted EBITDA is a useful measure of our operating performance. We define Adjusted EBITDA as net income (loss) before allocation to non-controlling interests, plus real estate depreciation and amortization, amortization of identifiable intangibles, straight-line rent adjustments to revenue from long-term leases, amortization of non-cash equity compensation, interest expense (net), acquisition and other costs, transaction pursuit costs, loss on modification/extinguishment of debt and non-recurring litigation-related expenses, less gain on involuntary conversion and gain on termination of lease.

We believe that this measure provides an operating perspective not immediately apparent from GAAP income from operations or net income (loss). We consider Adjusted EBITDA to be a meaningful financial measure of our core operating performance.

However, Adjusted EBITDA should only be used as an alternative measure of our financial performance. Further, other REITs may use different methodologies for calculating Adjusted EBITDA, and accordingly, our Adjusted EBITDA may not be comparable to that of other REITs.

The following table sets forth a reconciliation of Adjusted EBITDA for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **Adjusted EBITDA** |  |  |  |  |
| Net loss | $(3354) | $(6235) | $(12571) | $(20018) |
| &nbsp;&nbsp;&nbsp; Real estate depreciation and amortization | 6764 | 6794 | 26985 | 25762 |
| &nbsp;&nbsp;&nbsp; Amortization of real estate tax intangible | 121 | 120 | 481 | 481 |
| &nbsp;&nbsp;&nbsp; Amortization of above- and below-market leases | (9) | (8) | (35) | (104) |
| &nbsp;&nbsp;&nbsp; Straight-line rent adjustments | 57 | (77) | (163) | (202) |
| &nbsp;&nbsp;&nbsp; Amortization of LTIP awards | 856 | 665 | 2920 | 2611 |
| &nbsp;&nbsp;&nbsp; Interest expense, net | 10131 | 10326 | 40207 | 41284 |
| &nbsp;&nbsp;&nbsp; Transaction pursuit costs |  |  | 506 | 60 |
| &nbsp;&nbsp;&nbsp; Loss on extinguishment of debt |  |  |  | 3034 |
| &nbsp;&nbsp;&nbsp; Gain on involuntary conversion |  |  |  | (139) |
| &nbsp;&nbsp;&nbsp; Litigation settlement and other |  | 2730 |  | 2730 |
| &nbsp;&nbsp;&nbsp; Certain litigation-related expenses |  | 100 | 188 | 299 |
| **Adjusted EBITDA** | $**14566** | $**14415** | $**58518** | $**55798** |

---

------

***Net Operating Income***

We believe that NOI is a useful measure of our operating performance. We define NOI as income from operations plus real estate depreciation and amortization, general and administrative expenses, acquisition and other costs, transaction pursuit costs, amortization of identifiable intangibles and straight-line rent adjustments to revenue from long-term leases, less gain on termination of lease. We believe that this measure is widely recognized and provides an operating perspective not immediately apparent from GAAP income from operations or net income (loss). We use NOI to evaluate our performance because NOI allows us to evaluate the operating performance of our company by measuring the core operations of property performance and capturing trends in rental housing and property operating expenses. NOI is also a widely used metric in valuation of properties.

However, NOI should only be used as an alternative measure of our financial performance. Further, other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to that of other REITs.

The following table sets forth a reconciliation of NOI for the periods presented to income from operations, computed in accordance with GAAP (amounts in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
| **NOI** |  |  |  |  |
| Income from operations | $6777 | $4090 | $27636 | $24161 |
| &nbsp;&nbsp;&nbsp; Real estate depreciation and amortization | 6764 | 6794 | 26985 | 25762 |
| &nbsp;&nbsp;&nbsp; General and administrative expenses | 3404 | 2791 | 12752 | 10570 |
| &nbsp;&nbsp;&nbsp; Transaction pursuit costs |  |  | 506 | 60 |
| &nbsp;&nbsp;&nbsp; Amortization of real estate tax intangible | 121 | 120 | 481 | 481 |
| &nbsp;&nbsp;&nbsp; Amortization of above- and below-market leases | (9) | (8) | (35) | (104) |
| &nbsp;&nbsp;&nbsp; Straight-line rent adjustments | 57 | (77) | (163) | (202) |
| **NOI** | $**17114** | $**16440** | $**68162** | $**63458** |

---