Clipper Realty(CLPR) - 2022 Q4 - Annual Report

Part I SUMMARY OF RISK FACTORS This section outlines the company's main risks, including New York City economic and regulatory developments, leasing challenges, capital expenditure needs, competition, high debt, REIT qualification difficulties, and related party conflicts. - All company properties are located in New York City, where adverse economic or regulatory developments could negatively impact performance, financial condition, cash flows, and dividend distribution ability[3][139][44] - The company may be unable to renew leases or lease vacant spaces on favorable terms, or at all, which could adversely affect its financial condition, operating results, and cash flows[3][51][140] - The company has been and may in the future be required to make rent or other concessions and/or significant capital expenditures to improve properties to retain and attract tenants, generate positive cash flow, or make real estate suitable for sale, which could adversely affect the company[3][26][140] - Competition may hinder the company's ability to attract or retain tenants or re-lease space, thereby adversely affecting its operating results and cash flows[4][65][152] - The company has a substantial amount of debt, which may limit its financial and operating activities and could adversely affect its future financing ability[4][264] - Failure to obtain or maintain REIT qualification would have a material adverse effect on the value of the company's common stock[4][274] ITEM 1. BUSINESS Clipper Realty Inc. is a self-administered and self-managed real estate company focused on acquiring, owning, managing, operating, and repositioning multifamily residential and commercial properties in the New York metropolitan area. - Clipper Realty Inc. is a self-administered and self-managed real estate company, focusing on the acquisition, ownership, management, operation, and repositioning of multifamily residential and commercial properties in the New York metropolitan area (Manhattan and Brooklyn)[144][386] - The company completed a private placement in August 2015 and elected to be treated as a Real Estate Investment Trust (REIT) for tax purposes beginning with the taxable year ended December 31, 2015[154][379] - The company completed its Initial Public Offering (IPO) in February 2017, generating net proceeds of approximately $78.7 million for investment in the operating partnership[14][380][598] - Company revenue primarily derives from rents from residential, commercial, and retail tenants, with approximately 70% from residents of apartment rental properties[16][400][394] - The company's primary business objectives are to enhance shareholder value through asset redevelopment, increasing existing below-market rents, and prudent acquisition strategies[17][156][168][32] - As of December 31, 2022, the company employed 147 individuals providing property management, maintenance, landscaping, construction management, and accounting services, with some employees covered by union collective bargaining agreements[59] ITEM 1A. RISK FACTORS This section details various risks that could adversely affect the company's business, operating results, and financial condition, covering real estate market, environmental regulations, operations, debt financing, REIT qualification, and common stock ownership. Risks Related to Real Estate Real estate risks primarily involve adverse impacts from New York City economic and market conditions, potentially leading to decreased occupancy, rental income, and asset values, with rent control regulations limiting the company's ability to raise rents. - Adverse market and economic conditions in New York City could negatively impact occupancy rates, rental income, rent collection, operating expenses, and the overall market value of assets, also impairing the company's ability to sell, recapitalize, or refinance assets[76][77][139] - Multifamily residential properties are subject to rent stabilization regulations, which limit the company's ability to increase rents and may lead to tenant claims of rent overcharges[41][42][151] - The company's reliance on a single government tenant in an office building could adversely affect the company (including operating results and cash flows) if New York City experiences fiscal difficulties[47][48][140] - The company engages in development and redevelopment activities, which may expose it to various risks, including adverse impacts on financial condition, cash flows, and operating results, such as unprofitable investments, cost overruns, and construction delays[55][82][151][24] - Real estate investments are relatively illiquid, which may limit the company's ability to respond quickly to economic or market changes[12][62][312] Environmental and Health & Safety Risks Company properties face compliance risks with federal, state, and local environmental and health and safety laws, including liabilities for hazardous substances, ADA compliance costs, and potential mold or indoor air quality issues. - As a real estate owner or operator, the company may be liable for costs and damages caused by the presence or release of hazardous substances (e.g., lead, asbestos, and PCBs), including investigation or remediation costs, natural resource damages, or third-party personal injury or property damage liability[89][101][102][172] - Company properties must comply with laws such as the Americans with Disabilities Act of 1990 (ADA), and non-compliance could result in fines or damages paid to private litigants, potentially incurring additional compliance costs[21][35][91][121] - Company properties may contain or foster hazardous mold or other indoor air quality issues, which could lead to liability for adverse health effects or property damage, or incur remediation costs[160][120] Operational Risks Operational risks include potential public scrutiny due to rent increases, litigation costs, the need to maintain effective internal financial reporting controls, and the significant influence of continuing investors and management's external business interests. - As rents increase and properties improve, the company may become a target for public scrutiny and investigations, potentially leading to negative publicity and requiring significant resources for defense, thereby adversely affecting operating results and dividend distribution ability[104][92] - As an accelerated filer, the company must comply with Section 404 of the Sarbanes-Oxley Act, and failure to maintain effective internal controls over financial reporting could lead to a loss of investor confidence in the accuracy and completeness of financial reports[114][130] - The company's continuing investors hold special voting shares, enabling them to significantly influence the board composition, management, and business operations, potentially delaying, deferring, or preventing a change in company control[116][132][142][210][219] - The company's charter explicitly permits its senior officers to compete with the company, and some executives have external business interests, which could lead to conflicts of interest and limit the company's ability to pursue certain investment opportunities[228][256][259][261][232] Risks Related to Our Indebtedness and Financing The company carries substantial debt, which may restrict its financial and operating activities and increase sensitivity to interest rate changes, with potential for insufficient cash flow or mortgage defaults. - As of December 31, 2022, the company had $1.1712 billion in total debt, all of which is property-level debt, potentially limiting its financial and operating activities and affecting its future financing ability[235][264] - Changes in interest rates could increase interest costs, adversely affecting the company's cash flows and the market price of its securities, especially with approximately $113.8 million in variable-rate debt[237][266] - The company's tax protection agreements require the operating partnership to maintain certain debt levels, which may lead the company to incur more or different types of debt than necessary for business operations[238][267][239] - The company may not have sufficient cash flow to pay debt service or common stock dividends at anticipated levels, which could limit its ability to meet REIT dividend requirements[240][269] - Mortgage debt obligations expose the company to the possibility of foreclosure, potentially leading to a loss of its investment in the mortgaged properties[13][241][270][242] Risks Related to Our Status as a REIT Failure to obtain or maintain REIT qualification would significantly harm the value of the company's common stock, as REIT status involves complex tax regulations and ongoing compliance tests. - Failure to obtain or maintain REIT qualification would have a material adverse effect on the value of the company's common stock, potentially preventing the company from deducting taxable income distributed to shareholders and subjecting it to corporate income tax[4][274][247][32] - Compliance with REIT requirements may force the company to forgo otherwise attractive opportunities or liquidate certain investments to satisfy asset and income tests[143][248][297] - REIT dividend requirements could adversely affect the company's liquidity and hinder the execution of its business plans, potentially requiring the company to sell assets or borrow when cash flow is insufficient[279][300] - The company's ability to provide certain services to tenants may be limited by REIT rules or must be provided through a taxable REIT subsidiary (TRS), which could increase costs or expose it to greater risks[282][302][283][303][304] Risks Related to Ownership of Our Common Stock The market price and trading volume of the company's common stock may fluctuate, leading to rapid shareholder losses, while charter restrictions on ownership and future stock issuances could impact liquidity and dilute existing ownership. - The market price and trading volume of the company's common stock may fluctuate, potentially leading to rapid and significant losses for shareholders, influenced by company performance, market interest rates, economic conditions, and negative publicity[284][306][307][308] - The company's charter generally restricts beneficial ownership by any person or entity to no more than 9.8% (by value or number of shares, whichever is more restrictive) of any class or series of common stock, which may prevent or delay a change of control[212][286] - Future sales of a substantial number of common shares or other securities convertible into common shares could dilute existing ownership and lead to a significant decrease in the market value of common stock[309][310][288] COVID-19 Pandemic Impact The COVID-19 pandemic and containment measures have had a significant adverse impact on the company's business, financial condition, liquidity, and operating results, including reduced tenant ability/willingness to pay rent and decreased housing demand. - The COVID-19 pandemic and its containment measures have had a continuing material adverse effect on the company's business, financial condition, liquidity, and operating results[83][84] - The pandemic led to a decrease in tenants' ability or willingness to pay rent and reduced housing demand in the New York metropolitan area, potentially resulting in further declines in occupancy and rental income[97][85] Natural Disasters & Terrorism Company properties face risks from natural disasters and terrorist attacks, potentially causing significant losses, with some losses possibly uninsured or too costly to insure, and New York City's status as a target could affect income and property values. - The company faces risks from natural disasters (e.g., severe weather, floods, and storms) that could cause significant damage to properties, with some losses potentially uninsured or too costly to insure[87][99][117] - New York City has been and may in the future be a target for terrorist attacks, which could lead to tenant relocation or decreased property demand, thereby affecting the company's income and property values[88][118] CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS This annual report contains forward-looking statements regarding future events or results, based on current expectations and assumptions, but actual outcomes may differ materially due to various risks and uncertainties. - This annual report contains forward-looking statements concerning beliefs, expectations, or intentions about future events or results, such as project timing and success, future production, revenue, profits, and capital expenditures[328] - These forward-looking statements are based on current expectations and assumptions but are subject to significant business, economic, competitive, regulatory, and other risks, contingencies, and uncertainties, where actual results may differ materially from those projected[328] - The company undertakes no obligation to update these statements unless required by law and advises investors not to place undue reliance on them[328] ITEM 2. PROPERTIES As of December 31, 2022, the company's portfolio included nine properties, totaling approximately 3.3 million square feet of leasable area (plus 270,000 square feet under development), with an overall occupancy rate of approximately 99%. - As of December 31, 2022, the company's property portfolio included nine properties, totaling approximately 3.3 million square feet of leasable area (with an additional 270,000 square feet under development), with an overall occupancy rate of approximately 99%[314] 2022年12月31日物业组合概览 | Property Type | Submarket | Year Built | Area (Square Feet) | Units | Occupancy Rate | Annualized Rental Income (Million USD) | Net Effective Rent per Square Foot | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Multifamily Residential | | | | | | | | | 50 Murray Street | Manhattan | 1964 | 396,224 | 390 | 99.2% | 27.7 | 71.21 | | 53 Park Place | Manhattan | 1921 | 86,288 | 116 | 99.1% | 6.3 | 76.29 | | Flatbush Gardens complex | Brooklyn | 1950 | 1,748,671 | 2,494 | 98.8% | 44.4 | 25.97 | | 250 Livingston Street | Brooklyn | 1920 | 26,819 | 36 | 94.4% | 1.4 | 54.63 | | Aspen | Manhattan | 2004 | 165,542 | 232 | 98.3% | 5.8 | 36.78 | | 10 West 65th Street | Manhattan | 1939 | 75,678 | 82 | 100.0% | 3.7 | 51.21 | | Clover House | Brooklyn | 1959 | 102,131 | 158 | 94.9% | 7.0 | 73.31 | | Commercial | | | | | | | | | 141 Livingston Street | Brooklyn | 1959 | 206,084 | 1 | 100.0% | 10.3 | 50.00 | | 250 Livingston Street | Brooklyn | 1920 | 342,496 | 1 | 100.0% | 15.4 | 44.93 | | Retail | | | | | | | | | 50 Murray Street (retail) | Manhattan | | 44,583 | 8 | 100.0% | 2.4 | 54.71 | | 50 Murray Street (parking) | Manhattan | | 24,200 | 1 | 100.0% | 1.4 | 57.85 | | 141 Livingston Street (parking/other) | Brooklyn | | 14,853 | 1 | 100.0% | 0.4 | 27.17 | | 250 Livingston Street (retail) | Brooklyn | | 990 | 1 | 100.0% | 0.1 | 125.83 | | 250 Livingston Street (parking) | Brooklyn | | — | — | — | 0.2 | — | | Aspen (retail) | Manhattan | | 12,429 | 5 | 100.0% | 0.6 | 49.97 | | Properties Under Development | | | | | | | | | 1010 Pacific Street | Brooklyn | | 115,444 | 175 | | | | | Dean Street | Brooklyn | | 154,468 | 242 | | | | 商业和零售租赁到期概览（2023年及以后） | Year | Number of Tenants | Total Area (Square Feet) | Annualized Rental Income (USD) | Percentage of Annualized Rental Income | | :--- | :--- | :--- | :--- | :--- | | 2023 | 2 | 10,839 | 762,500 | 2.5% | | 2024 | 1 | 1,597 | 76,800 | 0.3% | | 2025 | 3 | 550,275 | 25,756,016 | 84.1% | | 2026 | 1 | 510 | 18,360 | 0.1% | | 2027 | 3 | 42,068 | 1,686,672 | 5.5% | | 2028 | 1 | — | 55,200 | 0.2% | | 2029 | — | — | — | 0.0% | | 2030 | 1 | 990 | 93,043 | 0.3% | | 2031 | 1 | 540 | 160,680 | 0.5% | | 2032 | 2 | 4,606 | 306,996 | 1.0% | | Thereafter | 2 | 26,925 | 1,697,300 | 5.5% | | Total | 17 | 638,350 | 30,613,567 | 100.0% | ITEM 3. LEGAL PROCEEDINGS The company faces legal proceedings related to rent stabilization laws, particularly tenant claims at the Tribeca House property, and a settled investigation by the New York State Attorney General's Office. - The New York State Supreme Court ruled that 41 tenants at the Tribeca House property were entitled to rent overcharges due to tax abatements under rent stabilization laws, ordering the company to pay $1.2 million in overcharges and $0.4 million in attorney fees[682][715] - An investigation by the New York State Attorney General's Office into tenant applicant screening practices of Clipper Equity and its affiliates was settled in April 2022, with no impact on the company's financial condition or operating results[678][92] - Management believes, based on consultations with legal counsel, that the ultimate resolution of all legal proceedings and claims will not have a material adverse effect on the company's consolidated operating results, financial condition, or cash flows[677] ITEM 4. MINE SAFETY DISCLOSURE This section states that mine safety disclosure is not applicable to the company's business. - Mine safety disclosure is not applicable to the company[367] Part II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The company's common stock trades on the NYSE, with 5,629 registered shareholders as of February 17, 2023, and its dividend policy is influenced by REIT tax regulations and operating performance. - The company's common stock trades on the New York Stock Exchange (NYSE) under the symbol "CLPR," with trading commencing on February 10, 2017[368] - As of February 17, 2023, the company had 5,629 registered shareholders of its common stock[369] - The company does not guarantee quarterly cash dividends to common stockholders, and its dividend policy may change at any time, subject to operating results, liquidity, cash flows, financial condition, economic conditions, and debt repayment requirements[370][376] - U.S. federal income tax law requires REITs to distribute at least 90% of their taxable income annually, so the company expects to distribute most available cash, which may result in slower growth compared to companies that reinvest available cash to expand operations[375] - The company had no unregistered sales of equity securities or issuer purchases of equity securities during the reporting period[377][384] ITEM 6. RESERVED This section is reserved. - This section is reserved[385] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section discusses the company's financial condition and operating results as of December 31, 2022, highlighting post-pandemic recovery, revenue sources, market trends, key accounting policies, 2022 vs. 2021 performance, liquidity, capital resources, and non-GAAP financial measures. Overview of Our Company Clipper Realty Inc. is a self-administered and self-managed real estate company focused on acquiring, owning, managing, and repositioning multifamily residential and commercial properties in the New York metropolitan area. - Clipper Realty Inc. is a self-administered and self-managed real estate company, focusing on the acquisition, ownership, management, and repositioning of multifamily residential and commercial properties in the New York metropolitan area (Manhattan and Brooklyn)[386] - The company was formed in 2015 and elected to be treated as a Real Estate Investment Trust (REIT) for tax purposes beginning with the taxable year ended December 31, 2015[378][379] - As of December 31, 2022, the company's property portfolio included Tribeca House, Flatbush Gardens, Livingston Street properties, Aspen, Clover House, 10 West 65th Street, and properties under development at 1010 Pacific Street and Dean Street[382][388][397][398] COVID-19 Pandemic The company significantly recovered from the COVID-19 pandemic's impact in 2022, with quarterly revenue continuously growing to record highs, and residential property occupancy and rents exceeding pre-pandemic levels. - The company made substantial progress in 2022 recovering from the COVID-19 pandemic's impact, with fourth-quarter revenue reaching a record $33 million, up from $30.6 million in the fourth quarter of 2019[399] - As of December 31, 2022, residential property leased occupancy was 98.7%, and weighted average rent was $38.41 per square foot, both exceeding pre-pandemic levels from the fourth quarter of 2019 (97.7% and $36.47)[399] - For the full year 2022, residential rents for new tenants increased by over 20.7% compared to previous rents, and renewal rents increased by over 9.8%[399] How We Derive Our Revenue The company's revenue primarily comes from residential, commercial, and retail tenant rents, with approximately 70% from apartment rental properties, and profit growth is achieved by increasing rents and occupancy in existing properties and acquiring new ones. - Approximately 70% of the company's revenue is derived from residential rents from apartment rental properties, with the remainder from commercial and retail tenants[394] - The company primarily achieves profitable growth by increasing rents and occupancy in existing properties and acquiring new apartment communities[402] - Rent growth for Flatbush Gardens, Aspen, and parts of 10 West 65th Street properties is limited by New York City rent stabilization regulations, while Tribeca House, 250 Livingston Street, and Clover House properties are not subject to these restrictions[395] Trends In 2022, the New York metropolitan area rental market was strong, with increased demand and rental rates for the company's residential properties, while office property rental income remained unaffected by COVID-19. - In 2022, the New York metropolitan area rental market was strong, with increased demand and rental rates for the company's residential properties (e.g., Tribeca House, Aspen, Clover House), showing significant year-over-year average rent increases[189] - The company's office property rental income was unaffected by the COVID-19 pandemic, benefiting from long-term leases with New York City, such as the 25% rent increase at 141 Livingston Street at the end of 2020[189] - As of December 31, 2022, the company's weighted average interest rate was approximately 4.1%, which, despite recent increases, remains historically low[401] - The company's properties are concentrated in six neighborhoods across Manhattan and Brooklyn, New York City, making it susceptible to adverse local economic conditions such as changes in supply and demand, government regulations, and environmental risks[402] Significant Accounting Policies This section outlines the company's GAAP accounting policies, including valuation and depreciation of real estate investments, definitions of cash and restricted cash, allowance for doubtful accounts, amortization of deferred costs, revenue recognition principles, equity incentive accounting, REIT tax treatment, derivative financial instruments, and loss per share calculation. - The company values real estate investments at historical cost and assesses whether acquired real estate meets the definition of a business to determine if it should be accounted for as a business combination[191][412][617][630] - The company uses the straight-line method for asset depreciation and periodically reviews long-lived assets for impairment indicators[422][183][622][419][620] - Effective the first quarter of 2022, the company adopted ASC 842 "Leases," assessing rent revenue recognition and the collectibility of accounts receivable, and writing off uncollectible receivables[432][465][469][634] - The company has elected to be taxed as a REIT, generally not subject to federal corporate income tax on income distributed to shareholders, provided it meets various REIT qualification requirements[427][433][491] - The company recognizes all equity incentive awards as compensation expense over their vesting period based on their grant-date fair value[426][636] Results of Operations In 2022, total revenue increased by 5.7% to $129.7 million, driven by higher residential and commercial rents, while net loss decreased by 37.2% to $12.6 million, reflecting improved operating income and reduced non-recurring expenses. 2022年与2021年经营业绩对比（单位：千美元） | Metric | 2022 | 2021 | Change Amount | Percentage Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | | | | | | Residential Rental Revenue | 90,262 | 85,771 | 4,491 | 5.2% | | Commercial Rental Revenue | 39,484 | 36,958 | 2,526 | 6.8% | | Total Revenue | 129,746 | 122,729 | 7,017 | 5.7% | | Operating Expenses | | | | | | Property Operating Expenses | 29,306 | 28,997 | 309 | 1.1% | | Real Estate Taxes and Insurance | 32,561 | 30,449 | 2,112 | 6.9% | | General and Administrative Expenses | 12,752 | 10,570 | 2,182 | 20.6% | | Transaction Pursuit Costs | 506 | 60 | 446 | 743.3% | | Depreciation and Amortization | 26,985 | 25,762 | 1,223 | 4.7% | | Total Operating Expenses | 102,110 | 95,838 | 6,272 | 6.5% | | Litigation Settlement and Other | — | (2,730) | 2,730 | 100.0% | | Operating Income | 27,636 | 24,161 | 3,475 | 14.4% | | Interest Expense, Net | (40,207) | (41,284) | 1,077 | 2.6% | | Loss on Debt Modification/Extinguishment | — | (3,034) | 3,034 | 100.0% | | Gain on Involuntary Conversion | — | 139 | (139) | (100.0)% | | Net Loss | (12,571) | (20,018) | 7,447 | 37.2% | - Residential rental revenue increased by 5.2%, primarily due to higher rental rates at Tribeca House and increased occupancy at Flatbush Gardens, partially offset by $3.25 million in bad debt expense under ASC 842[443] - Commercial rental revenue increased by 6.8%, mainly due to the recovery of tenant income at Tribeca House, new lease commencements, and rent escalations at the 141 Livingston Street property[444] - General and administrative expenses increased by 20.6%, primarily due to higher executive compensation expenses[176] - Net loss decreased by 37.2%, primarily benefiting from increased operating income and reduced non-recurring litigation and debt-related losses in 2021[455] Liquidity and Capital Resources The company's short-term liquidity needs are met by operating cash flow and cash on hand, while long-term needs for acquisitions, renovations, and debt repayment are funded through equity issuance and long-term debt financing. - The company's short-term liquidity needs for operating expenses, recurring capital expenditures, property taxes and insurance, interest and scheduled debt principal payments, general and administrative expenses, and dividends to shareholders and unit holders are expected to be met by net cash flow from operations and cash on hand[451] - The company's long-term liquidity needs for funding additional property acquisitions, major renovation and upgrade projects, and repayment of maturing debt are expected to be met through public and private equity offerings and long-term secured and unsecured debt issuances[184] 2022年12月31日物业层面债务（单位：千美元） | Property | Maturity Date | Interest Rate | Balance as of December 31, 2022 | | :--- | :--- | :--- | :--- | | Flatbush Gardens, Brooklyn, NY | 2032/6/1 | 3.125% | 329,000 | | 250 Livingston Street, Brooklyn, NY | 2029/6/6 | 3.63% | 125,000 | | 141 Livingston Street, Brooklyn, NY | 2031/3/6 | 3.21% | 100,000 | | Tribeca House, Manhattan, NY | 2028/3/6 | 4.506% | 360,000 | | Aspen, Manhattan, NY | 2028/7/1 | 3.68% | 62,554 | | Clover House, Brooklyn, NY | 2029/12/1 | 3.53% | 82,000 | | 10 West 65th Street, Manhattan, NY | 2027/11/1 | SOFR + 2.50% | 32,222 | | 1010 Pacific Street, Brooklyn, NY | 2024/9/1 | LIBOR + 3.60% | 43,477 | | 953 Dean Street, Brooklyn, NY | 2023/6/22 | Prime + 1.60% | 36,985 | | Total | | | 1,171,238 | 2022年和2021年现金流量（单位：千美元） | Activity Type | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 20,139 | 10,822 | | Net Cash Used in Investing Activities | (51,476) | (77,944) | | Net Cash Provided by Financing Activities | 9,779 | 30,314 | - Net cash provided by operating activities in 2022 was $20.139 million, an increase from $10.822 million in 2021, primarily reflecting increased cash flows from operating assets and liabilities and improved operating performance[202] - Net cash used in investing activities in 2022 was $51.476 million, a decrease from $77.944 million in 2021, mainly due to reduced capital project expenditures and funding for the Dean Street property acquisition[203] - Net cash provided by financing activities in 2022 was $9.779 million, a significant decrease from $30.314 million in 2021, primarily due to increased loan draws for 1010 Pacific Street and the Dean Street acquisition, partially offset by amortization payments on operating properties[204] Inflation The U.S. economy is experiencing high inflation, increasing operating and interest expenses, and while short-term residential leases allow for rent increases, inflation may still outpace rent growth and increase development costs. - The U.S. economy is currently experiencing high inflation, leading to increased operating expenses (e.g., third-party vendor costs) and interest expenses on variable-rate debt[127][494] - Although the short-term nature of residential leases generally allows the company to offset inflationary impacts through rent increases, inflation may still outpace rent growth, adversely affecting the company[127][494] - Inflation could also increase construction costs for development projects, including materials, labor, and third-party contractor services[127] Non-GAAP Financial Measures The company discloses non-GAAP financial measures such as FFO, AFFO, Adjusted EBITDA, and NOI, which are considered useful supplementary information for evaluating core operating performance but are not substitutes for GAAP net income or operating income. - The company discloses and discusses non-GAAP financial measures such as FFO, AFFO, Adjusted EBITDA, and NOI, which are considered useful supplementary information by management and the investment community for evaluating the company's core operating performance[495][496][501][503] - FFO is defined as GAAP net income, excluding gains and losses from property sales and impairment adjustments, plus depreciation and amortization, and adjusted for unconsolidated partnerships and joint ventures[497] - AFFO is defined as FFO, excluding amortization of identifiable intangible assets incurred in property acquisitions, straight-line rent adjustments for long-term leases, amortization of debt issuance costs, interest rate cap mark-to-market adjustments, amortization of non-cash equity compensation, acquisition and other costs, loss on debt modification/extinguishment, gain on involuntary conversion, lease termination gains, and certain litigation-related expenses, minus recurring capital expenditures[498] FFO和AFFO与净亏损的调节表（单位：千美元） | Metric | 2022 | 2021 | | :--- | :--- | :--- | | FFO | | | | Net Loss | (12,571) | (20,018) | | Real Estate Depreciation and Amortization | 26,985 | 25,762 | | FFO | 14,414 | 5,744 | | AFFO | | | | FFO | 14,414 | 5,744 | | Real Estate Tax Intangible Amortization | 481 | 481 | | Above and Below Market Lease Amortization | (35) | (104) | | Straight-Line Rent Adjustment | (163) | (202) | | Amortization of Debt Issuance Costs | 1,252 | 1,247 | | Amortization of LTIP Awards | 2,920 | 2,611 | | Transaction Pursuit Costs | 506 | 60 | | Loss on Debt Modification/Extinguishment | — | 3,034 | | Gain on Involuntary Conversion | — | (139) | | Litigation Settlement and Other | — | 2,730 | | Certain Litigation-Related Expenses | 188 | 299 | | Recurring Capital Expenditures | (326) | (205) | | AFFO | 19,237 | 15,556 | Adjusted EBITDA与净亏损的调节表（单位：千美元） | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net Loss | (12,571) | (20,018) | | Real Estate Depreciation and Amortization | 26,985 | 25,762 | | Real Estate Tax Intangible Amortization | 481 | 481 | | Above and Below Market Lease Amortization | (35) | (104) | | Straight-Line Rent Adjustment | (163) | (202) | | Amortization of LTIP Awards | 2,920 | 2,611 | | Interest Expense, Net | 40,207 | 41,284 | | Transaction Pursuit Costs | 506 | 60 | | Loss on Debt Modification/Extinguishment | — | 3,034 | | Gain on Involuntary Conversion | — | (139) | | Litigation Settlement and Other | — | 2,730 | | Certain Litigation-Related Expenses | 188 | 299 | | Adjusted EBITDA | 58,518 | 55,798 | NOI与经营收入的调节表（单位：千美元） | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Operating Income | 27,636 | 24,161 | | Real Estate Depreciation and Amortization | 26,985 | 25,762 | | General and Administrative Expenses | 12,752 | 10,570 | | Transaction Pursuit Costs | 506 | 60 | | Real Estate Tax Intangible Amortization | 481 | 481 | | Above and Below Market Lease Amortization | (35) | (104) | | Straight-Line Rent Adjustment | (163) | (202) | | Litigation Settlement and Other | — | 2,730 | | NOI | 68,162 | 63,458 | Recent Accounting Pronouncements The company adopted ASU 2016-13 (Financial Instruments—Credit Losses) on January 1, 2022, with no material impact, and will apply temporary optional practical expedients for LIBOR transition under ASUs 2020-04 and 2021-01, also expecting no material impact. - The company adopted ASU 2016-13 (Financial Instruments—Credit Losses) on January 1, 2022, determining its adoption had no material impact on the consolidated financial statements[471] - The company will apply temporary optional practical expedients for transactions and derivative instruments affected by the LIBOR transition under the guidance of ASU 2020-04 and ASU 2021-01 (Reference Rate Reform), expecting no material impact on the consolidated financial statements[475][482] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company primarily faces interest rate fluctuation risk, with $112.7 million in variable-rate debt as of December 31, 2022, where a 1% change in interest rates would impact annual net income by approximately $1.1 million. - The company's primary market risk is interest rate fluctuation risk, influenced by government monetary policy, economic, and political factors[518] - As of December 31, 2022, the company had $112.7 million in variable-rate debt, where a 1% change in interest rates would impact annual net income by approximately $1.1 million[519] - As of December 31, 2022, the company had no interest rate caps on its outstanding debt[520] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section incorporates financial statements and supplementary data starting from page F-1 of this annual report. - Financial statements and supplementary data are incorporated starting from page F-1 of this annual report[521] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE This section states that there were no changes in or disagreements with accountants on accounting and financial disclosure. - There were no changes in or disagreements with accountants on accounting and financial disclosure[521] ITEM 9A. CONTROLS AND PROCEDURES As of December 31, 2022, company management assessed and determined its disclosure controls and procedures and internal controls over financial reporting to be effective, with an unqualified opinion from PKF O'Connor Davies, LLP. - As of December 31, 2022, company management (including the Chief Executive Officer and Chief Financial Officer) assessed and determined its disclosure controls and procedures to be effective[513] - Company management determined that its internal controls over financial reporting were effective as of December 31, 2022, and this was audited and received an unqualified opinion from independent registered public accounting firm PKF O'Connor Davies, LLP[523][524] - No material changes in the company's internal controls over financial reporting occurred during the reporting period[530] ITEM 9B. OTHER INFORMATION This section states that no other information needs to be disclosed. - This section states that no other information needs to be disclosed[531] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This section states that disclosure regarding foreign jurisdictions that prevent inspections is not applicable to the company. - Disclosure regarding foreign jurisdictions that prevent inspections is not applicable to the company[532] Part III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required for this section will be included in the company's proxy statement for the 2023 Annual Meeting of Shareholders, to be filed within 120 days after the fiscal year-end. - The information required for this section will be included in the company's proxy statement for the 2023 Annual Meeting of Shareholders, to be filed within 120 days after the fiscal year-end[529][537] ITEM 11. EXECUTIVE COMPENSATION The information required for this section will be included in the company's proxy statement for the 2023 Annual Meeting of Shareholders, to be filed within 120 days after the fiscal year-end. - The information required for this section will be included in the company's proxy statement for the 2023 Annual Meeting of Shareholders, to be filed within 120 days after the fiscal year-end[533] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS As of December 31, 2022, the company had 2,949,820 shares of common stock reserved for future issuance under the 2015 Omnibus Plan and 2015 Director Plan, with other required information in the 2023 proxy statement. 股权激励计划下授权发行的证券（截至2022年12月31日） | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | | | | | 2015 Omnibus Plan | 2,175,295 | — | 1,124,705 | | 2015 Director Plan | 774,525 | — | 425,475 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 2,949,820 | — | 1,550,180 | - Other required information will be included in the company's proxy statement for the 2023 Annual Meeting of Shareholders, to be filed within 120 days after the fiscal year-end[539] ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required for this section will be included in the company's proxy statement for the 2023 Annual Meeting of Shareholders, to be filed within 120 days after the fiscal year-end. - The information required for this section will be included in the company's proxy statement for the 2023 Annual Meeting of Shareholders, to be filed within 120 days after the fiscal year-end[540] ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required for this section will be included in the company's proxy statement for the 2023 Annual Meeting of Shareholders, to be filed within 120 days after the fiscal year-end. - The information required for this section will be included in the company's proxy statement for the 2023 Annual Meeting of Shareholders, to be filed within 120 days after the fiscal year-end[534] Part IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES This section lists the exhibits and financial statement schedules filed as part of this annual report, including corporate governance documents, employment agreements, incentive plans, and financial disclosures. - This annual report includes financial statements, financial statement schedules, and exhibits[536][551] - Exhibits include the company's certificate of incorporation, employment agreements, incentive plans, tax protection agreements, loan agreements, subsidiary list, auditor consent, and XBRL documents[542][543][553]