Clipper Realty: 8% Dividend Yield From Significantly Undervalued US Multifamily REIT, I'm Buying

Core Viewpoint - Clipper Realty (NYSE: CLPR) is considered a strong buy due to anticipated rate cuts and its current low valuation, trading at 7.1 times annualized fiscal 2024 second quarter FFO, with a stable dividend yield of 8% [1][5]. Financial Performance - Clipper Realty reported second-quarter revenue of $37.3 million, an increase of 8.1% compared to the previous year [1][4]. - The REIT declared a quarterly cash dividend of $0.095 per share, maintaining the same distribution as prior periods, resulting in an annualized dividend of $0.38 [1][9]. - The second-quarter FFO was $0.17 per share, exceeding consensus estimates by $0.03 and showing improvement from the previous year [1][5]. - Net income was negative at $0.06 per share, but this was an improvement of approximately $0.04 per share from the year-ago quarter [3][4]. Portfolio Composition and Challenges - Clipper Realty is not exclusively a multifamily REIT, as it owns two office properties that contribute to its revenue, which has led to a discount in its valuation [2][10]. - The REIT's revenue is significantly impacted by lease expirations, particularly with the City of New York, which accounted for about 21% of total revenue in the second quarter [2][10]. - The REIT's total gross leasable area (GLA) is approximately 3.5 million square feet, with nine properties located in Manhattan and Brooklyn [2]. Market Conditions and Future Outlook - The REIT is expected to benefit from upcoming Fed rate cuts, which could alleviate the burden of its $1.24 billion in total notes payable [7][10]. - Clipper Realty's free cash flow for the second quarter was $8.8 million, up from $6.3 million in the first quarter, indicating strong cash generation capabilities [5][6]. - The REIT's market cap is approximately $77.8 million, with shares trading at $4.84, reflecting a low valuation relative to its free cash flow [5][7].