Clipper Realty stock downgraded by JMP amid tenant vacancy concern

On Thursday, Clipper Realty Inc . (NYSE:CLPR) stock received a downgrade from JMP Securities from Market Outperform to Market Perform. The adjustment followed news that a key tenant plans to leave, which was disclosed alongside the company's fourth-quarter 2023 results.

The real estate company reported a Core Funds From Operations (FFO) of $0.12 per share, falling short of the $0.14 per share projection. This shortfall was attributed to a decrease in Net Operating Income (NOI) from one of its properties, Flatbush Gardens, which may have been influenced by seasonal bad debt expenses.

The downgrade was further influenced by the announcement that The City of New York, a tenant at Clipper Realty's 250 Livingston property, intends to vacate when its lease concludes in August 2025.

This tenant also occupies another of Clipper Realty's office buildings, 141 Livingston, adding to the uncertainty regarding the company's office asset portfolio. These two properties are significant contributors to Clipper Realty's income, with 250 Livingston and 141 Livingston representing approximately 15% and 14% of the company's NOI, respectively.

JMP Securities highlighted the potential risks associated with the tenant's departure, including the material impact it could have on Clipper Realty's financials. The firm pointed out that the office assets are a substantial part of Clipper Realty's overall portfolio, which could be materially affected by the tenant's exit. Furthermore, the firm noted Clipper Realty's high leverage and lack of scale as additional concerns that may affect the company's valuation.

Given these factors, JMP Securities now views Clipper Realty's shares as fairly valued, prompting the change in rating. The company's recent performance and the prospective challenges ahead have been factored into this new assessment. The market will continue to monitor Clipper Realty's developments, especially as the lease expiration date approaches and the company responds to the potential vacancy.

In light of the recent downgrade by JMP Securities, investors may be seeking additional context to understand Clipper Realty Inc.'s (NYSE:CLPR) financial health and future prospects. According to real-time data from InvestingPro, Clipper Realty has a market capitalization of $191.56 million and a high Price / Book multiple of 70.12 as of the last twelve months ending Q4 2023. Despite the challenges highlighted, the company's revenue grew by 6.52% over the same period, with a gross profit margin of 54.73%, indicating a strong ability to generate income relative to its revenue.

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InvestingPro Tips suggest that while Clipper Realty has not been profitable over the last twelve months, analysts predict the company will turn a profit this year. Furthermore, the company pays a significant dividend to shareholders, boasting a dividend yield of 8.14% as of the latest data. This could be an attractive aspect for income-seeking investors. In addition, liquid assets exceed short term obligations, which may provide some financial flexibility in managing upcoming lease expirations.

For those considering a deeper dive into Clipper Realty's financials and future outlook, InvestingPro offers additional tips. There are five more InvestingPro Tips available for CLPR, which investors can access for comprehensive analysis. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With the next earnings date on May 8, 2024, investors will be closely watching for how the company plans to address the potential vacancy and its impact on future performance.

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