CLPR 10-K & 10-Q changes, risk factors and insider trading

WeOur dependdependency on two commercial leases with certain agencies of the City of New York (NYC), as a single government tenant in our office buildings, with one lease terminatinghaving terminated effective August 23, 20252025, and the other lease expiringhaving expired on December 27, 2025.2025 Ourand our inability to replace NYC as a tenant at rent rates comparable to the rates in the lease that terminatesterminated in August 2025 or to negotiateenter into a five-year extension of the lease expiringthat expired in December 2025 could cause a material adverse effect on us, including our financial condition, results of operations and cash flow.

Our rental revenue depends on entering into leases with and collecting rents from tenants. As of December 31, 2024,2025, Kings County Court, the Human Resources Administration, and the Department of Environmental Protection, all of which are agencies of the City of New York, leasedoccupied anall aggregate206,084 of 548,580rentable square feet at 141 Livingston Street and terminated its lease and vacated all 342,496 rentable square feet of commercial space at our 250 Livingston Street. The commercial officerental propertiesspace at 141 Livingston Streetis andoccupied 250subject Livingstonto Street,hold-over rent provisions in the rentslease fromthat whichexpired representedon December 27, 2025. Our commercial leases with the City of New York comprised approximately 18% and 22% of our total revenues for the year-endedyears ended December 31, 2024.2025 and 2024, respectively. We are also subject to covenants covering these leases in our loan agreements related to our commercial office properties located at 250 Livingston Street and 141 Livingston Street. Breaches of these covenants could result in defaults under the loan agreements.

As of February 23, 2024, The City of New York, a municipal corporation acting through the Department of Citywide Administrative Services ("NYC”), notified us of its intention to terminate its lease at 250 Livingston Street effective August 23, 2025.2025, and they vacated the space on that date. The lease generally providesprovided for rent payments in the amount of $15.4 million per annum. We mayhave bebeen unable to replace NYC as a tenanttenant, orand we may continue to be unable to replace it with other commercial tenants at comparable rent rates,rates or at all, may incur substantial costs to improve the vacated space or may have to offer significant inducements to fill the space, all of which may have an adverse effect on our financial condition, results of operations and cash flow. In connection with the termination of the 250 Livingston Street lease, pursuant to the terms of the loan agreement related to $125 million building mortgage, we have established a cash management account for the benefit of the lender, into which we will be obligated to deposit all revenue generated by the building at 250 Livingston Street. All amounts remaining in such cash management account after the lender’s allocations set forth in the loan agreement will be disbursed to us once the tenant cure conditions are satisfied under the loan agreement. As of February 14, 2025, we are required to deposit into such cash management account approximately $5.7 million upon demand by the lender. If we are unable to replace the NYC lease at comparable rents, we may not be able to cure the conditions listed in the loan agreement. If the excess cash is not released to us, it could impact our available cash to fund corporate operations and pay dividends and distributions to our stockholders.

TheIf 141we Livingstonare Street lease expires on December 27, 2025, and if NYC wereunable to decide not to renew or extend such lease on its stated termination date, pursuant tofinalize the terms of the lease,agreement, we would be at risk of not being able to replace NYC as a tenant, leasing the space below the current rates, incurring costs to improve the space or offer other inducements to fill the space, all of which may have an adverse effect on our financial condition, results of operations and cash flow. We and NYC are in the process of negotiating the terms of a five-year extension of the current lease upon its expiration in December 2025. There can be no assurance that the negotiations will conclude with an agreement.

If we are not able to extend or replace the NYC lease at our 141 Livingston Street property for a minimum of a five-year term, we will be required to either fund a reserve account in the amount of $10 million payable in equal monthly payments over the 18 months after lease expiration or deliver to the lender a letter of credit in the amount of $10 million On October 28, 2024, we received notice that, as of October 7, 2024, the servicing of the mortgage notes was transferred to a special servicer (the “"Special Servicer”) due to our alleged failure to make certain required payments under the loan agreement, including, but not limited to, the reserve deposit starting on July 7, 2024. The Special Servicer demanded that we pay (i) $2.2 million$2,200 of reserve payments into a reserve account immediately (for July-October 2024) and continued monthly payments of $555,555$555 for an additional 14 months, (ii) $1.2 million$1,200 of default interest and late charges through October 7, 2024, and (iii) an additional $10,417$10 per diem interest for each day thereafter.

On November 11, 2024, the Special Servicer notified the Borrower that, due to its alleged event of default under the Loan Agreement, as a result of the failure to make the payments described above, the mortgage notes have been accelerated, and all amounts under the loan agreement were due and payable. Such amounts include,included, but arewere not limited to, $100.0 million$100,000 principal amount of the mortgage notes, approximately $5.0 million$5,000 of default yield maintenance premium, $10.0 million$10,000 aggregate reserve deposit, and the above-described penalty default interest and penalties.

We believe that (i) we have made timely payments under the loan agreement, (ii) the servicer and the Special Servicer have misinterpreted the terms of the loan agreement requiring monthly reserve payments beginning on July 7, 2024, (iii) we have no current obligation to make such reserve payments under the loan agreement and (iv) we should not be obligated to pay the default interest and late charges. We and the Special Servicer have entered into a pre-negotiation agreement and as such are engaged in good faith discussions regarding the terms of the loan agreement related to the monthly reserve deposit, among other matters. However, if we are unable to resolve this matter in a manner favorable to us, the lender may also seek to exercise any of its other rights or remedies under the loan agreement.

On December 18, 2024, we received notice from the Special Servicer that due to its allegation that Clipperwe Realtyas (the “Guarantor”) did not maintain a net worth of not less than $100 million as of December 31, 2022 and 2023, respectively, as required under the loan agreement, we arewere in default on the loan. We replied to the Special Servicer disputing such calculation and alleging that the Special Servicer did not calculate net worth in a reasonable manner. We provided the Special Servicer with our own calculation of net worth that shows a net worth in excess of the required amount. We await a response from the Special Servicer.

On January 21, 2025, we received notice from the Special Servicer alleging that certain elements of our insurance on the building at 141 Livingston Street arewere not in compliance with the loan agreement requirements, including, but not limited to, due to a deductible in excess of what is permitted under the terms of the loan agreement and the use of an insurance carrier with a rating agency rating below that which is permitted under the terms of the loan agreement.

As of December 31, 2024,2025, our portfolio consisted of nineeight revenue generating properties, eight of which generated revenues in 2024 – the Tribeca House properties, the Flatbush Gardens complex, the 141 Livingston Street property, the 250 Livingston Street property, the Aspen property, the 10 West 65th Street property, the Clover House property and the 1010 Pacific Street property, and the Dean Street Property which accounted for 28.2%,29.6%, 31.3%,34.0%, 11.1%,10.9%, 12.1%,8.1%, 4.8%,5.1%, 2.7%,5.6.%, 5.5%4.2% and 4.3%,1.3%, respectively, of our portfolio’s total revenue for the year ended December 31, 2024.2025. On May 30, 2025, the Company completed the sale 10 West 65th Street property, which accounted for 1.2% of our revenue for the year-ended December 31, 2025. Our results of operations and cash available for distribution to our stockholders would be adversely affected if any of these properties were materially damaged or destroyed.

We may be unable to renew leases or lease currently vacant space or vacating space on favorable terms or at all as leases expire or terminate, which could adversely affect our financial condition, results of operations and cash flow.

As of December 31, 2024,2025, we had approximately 65,696163,541 rentable square feet of vacant residential space (excluding leases signed but not yet commenced) at our operating properties, and leases representing approximately 69%72% of the square footage of residential space at the operating properties have or will expire during the year ending December 31, 20252026 (including month-to-month leases). As of December 31, 2024,2025, we had no342,296 rentable square feet of vacant commercial space,space and a further 206,084 rentable square feet of commercial space that is subject to the holdover provisions in an expired lease, and approximately 13,00011,000 rentable square feet of vacant retail space. We cannot assure you that expiring leases will be renewed or tenants will not exercise any early termination options or that our properties will be re-leased at net effective rental rates equal to or above the current average net effective rental rates As of FebruaryAugust 23, 2024,2025, NYC notified us of its intention to terminatevacated its lease at 250 Livingston Street effective August 23, 2025.Street. As of that date, 342,496 of rentable square feet of commercial space will beis available.

Additionally, the 206,084 square foot lease with the City of New York (“NYC”) at 141 Livingston Street property will expireexpired at December 27, 2025. We and the NYC are negotiating the terms of a five-year extension of the currentexpired lease. There can be no assurance that the negotiations will conclude with an agreement. NYC currently occupies the space under the holdover provisions in expired lease.

We engage in development and redevelopment activities with respect to our properties as we believe market conditions dictate. For example, in 2023 we completed the development of the 1010 Pacific Street property and planin to2025 developwe completed the development of the Dean Street property as fully amenitized residential rental buildings.property. We are also reviewing the regulatory, architectural and financial considerations regarding a residential square footage expansion at Flatbush Gardens; such further development would require significant capital investment.

Any of these actions could result in the termination of such tenants’ leases with us and the loss of rental revenue attributable to the terminated leases. In these events, we cannot assure you that such tenants will renew those leases or not exercise early termination options or that we will be able to re-lease spaces on economically advantageous terms or at all. For example, the City of New York has advised us that it will vacatevacated the 250 Livingston Street property in August 2025. The loss of rental revenues from our tenants and our inability to replace such tenants may adversely affect us, including our profitability, our ability to meet our debt and other financial obligations and our ability to make distributions to our stockholders.

We are a party to various claims and routine litigation arising in the ordinary course of business and are subject to government oversight and actions. Some of these claims and actions or othersother litigation to which we may be subject from time to time may result in defense costs, settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance. Payment of any such costs, settlements, fines or judgments that are not insured could have an adverse effect on our financial position and results of operations. Adverse developments in existing litigation claims legal proceedings or government investigations involving us or new claims or investigations could require us to establish litigation reserves, enter into unfavorable settlements or satisfy judgments for monetary damages for amounts in excess of current reserves, which could adversely affect our financial results. In addition, certain litigation or the resolution of certain litigation or investigations may affect the availability or cost of some of our insurance coverage, which could adversely affect our results of operations and cash flow, expose us to increased risks that would be uninsured, and/or adversely affect our ability to attract officers and directors. See Note 7, “Commitments and Contingencies” of our consolidated financial statements included in Item 15 of this Annual Report on Form 10-K.

All of our properties are owned indirectly by subsidiaries, in particularparticular, our LLC subsidiaries, and substantially all of our operations are conducted by our Operating Partnership. As a result, we depend on distributions and other payments from our Operating Partnership and subsidiaries in order to satisfy our financial obligations and make payments to our investors. The ability of our subsidiaries to make such distributions and other payments depends on their earnings and cash flow and may be subject to statutory or contractual limitations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Property-Level Debt.” As an equity investor in our subsidiaries, our right to receive assets upon their liquidation or reorganization will be effectively subordinated to the claims of their creditors. To the extent that we are recognized as a creditor of such subsidiaries, our claims may still be subordinate to any security interest in, or other lien on, their assets and to any of such subsidiaries’ debt or other obligations that are senior to our claims.

We currently have, and expect to incur in the future, interest-bearing debt at rates that vary with market interest rates. As of December 31, 2024,2025, we had approximately $140.0$148.0 million of variable rate indebtedness outstanding, for our Dean Street development property and our 10 West 65th Street property, which constitutes approximately 11.0%11.5% of total outstanding indebtedness as of such date, and although we have experienced increasesdecreases in the interest rates on such indebtedness, whichrates hasare increasedsubject to fluctuations and any increase in rates would increase our interest expense and adversely impactedimpact our results of operations and cash flows. Continued increases in interest rates would further increase our interest expense and increase the cost of refinancing existing indebtedness and of issuing new debt. The effect of prolonged interest rate increases could negatively impact our ability to service our indebtedness, make distributions and make acquisitions and develop properties.

During 2024,2025, the Company’s residential properties continued to have elevated occupancy levels and experienced growth in rental rates, as a result of a robust rental market in the New York metro area. The average rental rate per square foot at the Tribeca House property at December 31, 20242025 was $82.52,$88.74, up from $77.70$82.52 at December 31, 2023.2024. At the Flatbush Garden property, average residential rent per square foot increased at December 31, 2024,2025, was $30.04,$32.20, up from $26.69$30.04 at December 31, 2023.2024. At the Clover House property, average residential rent per square foot at December 31, 2024,2025, was $85.91,$89.74, an increase from $80.93$85.91 at December 31, 2023. Urban office markets have also generally been negatively impacted as a result of the increase in remote working that began during the COVID-19 pandemic, leading to less demand for office space.2024.

AsSince ofAugust December23, 31, 2024,2025, the Company’s office properties had not been adversely affected from a rent perspective as a result of its long-term leases with the City of New York. However, As of February 23, 2024, the City of New York informed the Company of its intention to terminate the lease at 250 Livingston Street effectiveproperty Augusthas 23,been 2025.vacant. Additionally, asour we move forwardlease with the approaching expiration of the leaseNYC at 141 Livingston Streetexpired in December 2025, although NYC continues to occupy its office space and pays its rent in accordance with the terms of the expired lease. The Company and the City of New York are negotiating the terms of a five-year extension of their currentexpired lease.lease at 141 Livingston Street property. There can be no assurance that the negotiations will conclude with an agreement, and the Company is at risk of not replacing the City of New York as its tenant or not being able to replace it at comparable rents. See “- Liquidity and Capital Resources” below and Part I, Item 1A. Risk Factors.”

WeDuring derivethe year ended December 31, 2025, we derived approximately 74%78% of our revenues from rents received from residents in our apartment rental properties and the remainder from commercial and retail rental customers. We believe that we have expertise in operating, renovating and repositioning our properties. As we grow, we will likely add personnel as necessary to provide outstanding customer service to our residents in order to maintain or increase occupancy levels at our apartment communities and to preserve the ability to increase rents. This is likely to result in an increase in our operating and general and administrative expenses over time.

A majority of the leases at our apartment communities are for approximately one-year terms, which, in a rising market, generally enables us to seek increased rents upon renewal of existing leases or commencement of new leases. This may offset the potential adverse effect of inflation or deflation on rental revenue, although residents may leave without penalty at the end of their lease terms for any reason and, in a falling market, may require us to receive decreased rents upon renewal of existing leases or commencement of new leases. Our ability to seek increased rents at our Flatbush Gardens property, and our Aspen property and a portion of our 10 West 65th Street property is limited, however, as a result of the rent stabilization laws and regulations of New York City, including the Housing Stability and Tenant Protection Act of 2019 (“HSTP”), which was signed into law in New York in June 2019. These regulations generally limit rental increases that we can charge at our Flatbush Gardens property, our Aspen property and a portion of our Tribeca House and 10 West 65th Street property upon lease renewal; effective October 1, 2024,2025, such increases are 2.75%3.00% for a one-year lease and 5.25%4.50% for a two-year lease. The regulations also limit the maximum rent we can charge at our Flatbush Gardens property,property and our Aspen property and a portion of our 10 West 65th Street property on new leases. In addition to the HSTP regulation, at Flatbush Gardens the Company entered into a 40 year regulatory agreement under Article 11 of the Private Housing Finance Law with the New York City Department Housing Preservation and Development (the “Article 11 Agreement”). This agreement required us to commit to maintaining rents within existing area medium income groups. In exchange, the Company is eligible to receive incremental rental assistance under section 610 of the Private Housing Financing Law for tenants receiving government rental assistance. The Section 610 rental assistance is paid by the government the City of New York as incremental rent above and beyond the base rent paid by the tenant. At our Aspen property, the residential units are subject to regulations established by the HDC, under which there are no rental restrictions on approximately 55% of the units and low- and middle-income restrictions on approximately 45% of the units. There are no rent stabilization restrictions at our Tribeca House properties, our 250 Livingston Street property, our Clover House property and a portion of our 10 West 65th Street property. However, they may be impacted by the April 2024 New York “Good-Cause eviction” law. Additionally, our newest assets, our 1010 Pacific property and our Dean Street property are beneficiaries of a 421(a) Tax Incentive in which the properties received a 35-year tax abatement, partial in the final 10-year phase out period, in exchange for setting aside 30% of the units for affordable housing.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. A property’s value is impaired if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, a write-down is recorded and measured by the amount of the difference between the carrying value of the asset and the fair value of the asset. Management of the Company does not believe that any of its properties within the portfolio are impairedimpaired, other than the impairment of 10 West 65th Street described in note 10, as of December 31, 2024.2025. On May 30, 2025, the Company completed the sale of 10 West 65th Street in Manhattan, a 6-story residential building with approximately 76,000 square feet of residential rental GLA for gross proceeds of $45,500. The Company recorded a loss on impairment of long-lived assets of $33,780 in the year ended December 31, 2025 on 10 West 65th Street.

Tenant and other receivables are comprised of amounts due for monthly rents and other charges less allowance for doubtful accounts. AsIn describedaccordance more fully under Revenue Recognition below, in the first quarter of 2022 the Company adoptedwith Accounting Standards Codification (“"ASC”) 842 “Leases"Leases,” which replaced guidance under ASC 840 and provided for transition from balances at December 31, 2021. In accordance with ASC 842, the Company performsperformed a detailed review of amounts due from tenants to determine if accounts receivable balances and future lease payments were probable of collection, writeswrote off receivables not probable of collection and recordsrecorded a general reserve against revenues for receivables probable of collection for which a loss can be reasonably estimated. If management determines that the tenant receivable is not probable of collection it is written off against revenues. In addition, the Company records a general reserve under ASC 450.

Deferred lease costs consist of fees incurred to initiate and renew operating leases. Lease costs are being amortized using the straight-line method over the terms of the respective leases. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. These costs are amortized over the term of the financing and are recorded in interest expense in the combined financial statements. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financing transactions which do not close are expensed in the period the financing transaction is terminated.

The dollar amounts in the narrative disclosure below are in thousands, other than the base rent per square foot figures. The discussion below compares amounts in 2024,2025 to 2024 amounts, excluding 1010Dean Pacific,Street toand 202310 amounts.West 65th Street properties.

Revenue. Residential rental income increased to $103,422$115,122 for the year ended December 31, 2025, from $105,833 for the year ended December 31, 2024, from $96,602 for the year ended December 31, 2023, primarily, due to increases in rental rates. For example, base rent per square foot increased at the Tribeca House property to $88.74 at December 31, 2025, from $82.52 at December 31, 2024, from $77.70 at December 31, 2023 and base rent per square foot increased at the Clover House property to $89.74 at December 31, 2025, from $85.91 at December 31, 2024, fromand $80.93base rent per square foot increased at the Flatbush Gardens to $32.20 at December 31, 2023.2025, from $30.04 at December 31, 2024.

Commercial rental income increaseddecreased to $38,836$34,331 for the year ended December 31, 2025, from $38,888 for the year ended December 31, 2024, from $38,465 for the year ended December 31, 2023, primarily due to increased escalationdecreased billings at the 250 Livingston Street property.property as a result of the termination of the City of New York lease in August 2025.

Real estate taxes and insurance. Real estate taxes and insurance expenses decreasedincreased to $29,790$29,789 for the year ended December 31, 2025, from $28,670 for the year ended December 31, 2024, fromdue $31,591to higher real estate taxes at our Aspen and at both our Livingston Street office properties and overall higher insurance premiums for the yearrest ended December 31, 2023, due to the real estate tax exemption at Flatbush Gardens that began July 1, 2023, partially offset by increased property taxes and insurance acrossof the portfolio .

General and administrative. General and administrative expenses increased to $13,731$15,122 for the year ended December 31, 2025, from $13,762 for the year ended December 31, 2024, from $12,929 for the year ended December 31, 2023, primarily due to higher payrollLTIP costsamortization, partially offset by lower accountingprofessional fees in relation to the separation from our prior auditor in 2023.fees.

Interest expense, net. Interest expense, net, increased to $41,943$47,290 for the year ended December 31, 20242025 from $41,854$44,569 for the year ended December 31, 2023,2024, primarily due to lowerthe capitalizedaccrual of default interest as a result of completion of development ofon the 1010250 PacificLivingston propertyloan that is in the second quarter of 2023.default.

Loss on modification/extinguishment of debt. Loss on the extinguishment of debt in 20232025 consists of costs related to the earlyLoan terminationmodification of our construction loanagreement at 1010141 Pacific including the acceleration of the remaining unamortized loan costs from the prior loan.Livingston.

Net loss. As a result of the foregoing, net loss decreasedincreased to $5,205$11,824 for the year ended December 31, 2024,2025, from $13,083$4,706 for the year ended December 31, 2023.2024.

As of December 31, 2024,2025, we had $1,275.4 million$1,277,521 of indebtedness (net of unamortized issuance costs) secured by our properties, $19.9 million$30,815 of cash and cash equivalents, and $18.2 million$27,339 of restricted cash. See Note 4 “Notes Payable” of the accompanying “Notes to Consolidated Financial Statements” for a discussion of the Company’s property-level debt.

As of FebruaryAugust 23, 2024,2025, The City of New York, a municipal corporation acting through the Department of Citywide Administrative Services ("NYC”), notifiedvacated usthe ofspace itsit intention to terminate its leaseoccupied at 250 Livingston Street effective August 23, 2025.Street. The lease generally providesprovided for rent payments in the amount of $15,400$15.4 million per annum. We may be unable to replace NYC as a tenant or unable to replace it with other commercial tenants at comparable rent rates, may incur substantial costs to improve the vacated space or may have to offer significant inducements to fill the space, all of which may have an adverse effect on our financial condition, results of operations and cash flow. In connection with the termination of the 250 Livingston Street lease, pursuant to the terms of the loan agreement related to $125,000 building mortgage, we have established a cash management account for the benefit of the lender, into which we will be obligated to deposit all revenue generated by the building at 250 Livingston Street. All amounts remaining in such cash management account after the lender’s allocations set forth in the loan agreement will be disbursed to us once the tenant cure conditions are satisfied under the loan agreement. As of February 14, 2025, we are required to deposit into such cash management account approximately $5,684 upon demand by the lender. If we are unable to replace the NYC lease at comparable rents, we may not be able to cure the conditions listed in the loan agreement. If the excess cash is not released to us, it could impact our available cash to fund corporate operations and pay dividends and distributions to our stockholders.

TheIf 141we Livingstonare Street lease expires on December 27, 2025, and if NYC wereunable to decide not to renew or extend such lease on its stated termination date, pursuant tofinalize the terms of the lease,agreement, we would be at risk of not being able to replace NYC as a tenant, leasing the space below the current rates, incurring costs to improve the space or offer other inducements to fill the space, all of which may have an adverse effect on our financial condition, results of operations and cash flow. We and NYC are in the process of negotiating the terms of a five-year extension of the current lease upon its expiration in December 2025. There can be no assurance that the negotiations will conclude with an agreement.

If we are not able to extend or replace the NYC lease at our 141 Livingston Street property for a minimum of a five-year term, we will be required to either fund a reserve account in the amount of $10,000 payable in equal monthly payments over the 18 months after lease expiration or deliver to the lender a letter of credit in the amount of $10,000 On October 28, 2024, we received notice that, as of October 7, 2024, the servicing of the mortgage notes was transferred to a special servicer (the “"Special Servicer”) due to our alleged failure to make certain required payments under the loan agreement, including, but not limited to, the reserve deposit starting on July 7, 2024. The Special Servicer demanded that we pay (i) $2,200 of reserve payments into a reserve account immediately (for July-October 2024) and continued monthly payments of $555 for an additional 14 months, (ii) $1.2 million$1,200 of default interest and late charges through October 7, 2024, and (iii) an additional $10$10,417 per diem interest for each day thereafter (an additional $1,356 as of February 14, 2025).thereafter.

On November 11, 2024, the Special Servicer notified the Borrower that, due to its alleged event of default under the Loan Agreement, as a result of the failure to make the payments described above, the mortgage notes have been accelerated, and all amounts under the loan agreement were due and payable. Such amounts include,included, but arewere not limited to, $100,000 principal amount of the mortgage notes, approximately $5,000 of default yield maintenance premium, $10,000 aggregate reserve deposit, and the above-described penalty default interest and penalties.

We believe that (i) we have made timely payments under the loan agreement, (ii) the servicer and the Special Servicer have misinterpreted the terms of the loan agreement requiring monthly reserve payments beginning on July 7, 2024, (iii) we have no current obligation to make such reserve payments under the loan agreement and (iv) we should not be obligated to pay the default interest and late charges. We and the Special Servicer have entered into a pre-negotiation agreement and as such are engaged in good faith discussions regarding the terms of the loan agreement related to the monthly reserve deposit, among other matters. However, if we are unable to resolve this matter in a manner favorable to us, the lender may also seek to exercise any of its other rights or remedies under the loan agreement.

On December 18, 2024, we received notice from the Special Servicer that due to its allegation that Clipperwe Realtyas (the “Guarantor”) did not maintain a net worth of not less than $100,000$100 million as of December 31, 2022 and 2023, respectively, as required under the loan agreement, we arewere in default on the loan. We replied to the Special Servicer disputing such calculation and alleging that the Special Servicer did not calculate net worth in a reasonable manner. We provided the Special Servicer with our own calculation of net worth that shows a net worth in excess of the required amount. We await a response from the Special Servicer.

On January 21, 2025, we received notice from the Special Servicer alleging that certain elements of our insurance on the building at 141 Livingston Street arewere not in compliance with the loan agreement requirements, including, but not limited to, due to a deductible in excess of what is permitted under the terms of the loan agreement and the use of an insurance carrier with a rating agency rating below that which is permitted under the terms of the loan agreement.

The risk factors disclosed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, set forth information relating to various risks and uncertainties that could materially adversely affect our business, financial condition, liquidity, and operating results. Such risk factors continue to be relevant to an understanding of our business, financial condition, liquidity and operating results as of MarchJune 31,30, 2026, and there have been no material changes to those risk factors for the three months ended MarchJune 31,30, 2026 except for the following updates:

AsCertain agencies of February 23, 2024, Thethe City of New York,York a(“NYC”) municipalterminated corporationtheir actinglease throughand thevacated Departmentall 342,496 rentable square feet of Citywidecommercial Administrative Services ("NYC”), notified us of its intention to terminate its leasespace at our 250 Livingston Street property in Brooklyn, New York (the “Property”) effective August 23, 2025, and they vacated the space on that date.2025. The lease generally provided for rent payments in the amount of $15.4 million per annum.

Our subsidiary, 250 Livingston Owner LLC (“Borrower”), entered into the Loan Agreement, dated as of May 31, 2019 (the “Loan Agreement”), with Citi Real Estate Funding Inc., related to a loan in the principal amount of $125 million (the “Loan”). The Loan is evidenced by certain promissory notes (the “Notes”) and secured by our 250 Livingston Street property in Brooklyn, New York (the “Property”). We and our Operating Partnership serve as guarantors of certain obligations under the Loan. . See Note 4, Notes Payable, to Condensed Consolidated Financial Statements (Unaudited) included in Part I of this Form 10-Q for additional information related to Property and the Loan.

On March 25, 2026, the Lender filed a complaint against the Borrower, theus Companyas and the Company’sour subsidiary Clipper Realty L.P. due to the Borrower’s defaults under the Notes and the other Loan documents. The Plaintiff demanded, among other things, that a receiver be appointed to manage the Property and that the Property and the personal property within the Property be sold and the proceeds be applied to the satisfaction of indebtedness evidenced by the Notes and other Loan documents. On April 29, 2026, the court entered an order granting the Lender's demand to appoint a temporary receiver. Pursuant to the court order, the receiver is authorized to enter into the possession of the Property, to rent or lease any part of the premises, to collect and receive all rents and fees due and unpaid in connection with the premises, and the Companywe must turn over to the receiver all rents collected from and after the date of the court order..order.

We have been unable to replace the NYC as a tenant, and, evenEven if we entersuccessfully intoacquire the Consentloan and Cooperation Agreement withafter the Lender,Marketing Period is over , we may continue to be unable to replace the NYC with other commercial tenants at comparable rent rates or at all, may incur substantial costs to improve the vacated space or may have to offer significant inducements to fill the space, all of which may have an adverse effect on our financial condition, results of operations and cash flow.

As of MarchJune 31,30, 2026, the Company owned:

During the firstsecond quarter of 2026, the Company’s residential properties continued to have elevated occupancy levels and experienced growth in rental rates, as a result of a robust rental market in the New York metro area. The average rental rate per square foot at the Tribeca House property at MarchJune 31,30, 2026,2026 was $89.64,$91.88, up from $83.03$85.60 at MarchJune 31,30, 2025. At the Flatbush Gardens property, average residential rent per square foot at MarchJune 31,30, 20262026, was $32.67,$33.13, up from $30.80$31.27 at MarchJune 31,30, 2025. At the Clover House property, average residential rent per square foot at MarchJune 31,30, 20262026, was $90.44,$91.19, upan increase from $86.74$87.76 at MarchJune 31,30, 2025.

As of MarchJune 31,30, 2026, the Company’s office property 250 Livingston Street was vacant as the City of New York vacated as of August 23, 2025. The Company is currently seeking new tenants to replace the City of New York. However, there is no assurance that the Company will be able to replace the City of New York as its tenant or will be able to replace it at comparable rents. Until a new tenant is located, the Company expects to lose approximately $16,000 per annum in combined rental income and property tax and common area maintenance reimbursements and the property will not be able to fund its debt service. The Company’s defaults under the mortgage loan secured by our 250 Livingston Street property resulted in the appointment of a temporary receiver for that property, and the lender has the right at the end of the marketing period under the Consent and Cooperation Agreement (the “Agreement”) entered into with the lender to foreclose on the property or to take a deed to the property in lieu of foreclosure. As of August 6, 2026, the lender has not taken any such action. The Agreement also provides that the borrower under that mortgage loan has the right to submit an offer to purchase the loan.

Additionally, our lease with the City of New York at 141 Livingston expired in December 2025, although the City of New York continues to occupy its office space and pays its rent in accordance with the terms of the expired lease. The Company and the City of New York are negotiating the terms of a five-year extension of their expired lease. There can be no assurance that the negotiations will conclude with an agreement, and the Company is at risk of not replacing the City of New York as its tenant or not being able to replace it at comparable rents. See note 4 to condensed consolidated financial statements, “- Liquidity and Capital Resources” below and Part II, Item 1A. Risk Factors.”

Throughout the first three monthshalf of 2026 and all of 2025, we continued to benefit from relatively low interest rates on our debt. Our weighted average interest rate as of MarchJune 31,30, 2026, was approximately 4.2% per annum.

Income Statement for the Three Months Ended MarchJune 31,30, 2026 and 2025 (in thousands)

Revenue. Residential rental income increased to $30,201$29,909 for the three months ended MarchJune 31,30, 2026, from $28,120$28,363 for the three months ended MarchJune 31,30, 2025, primarily due to increases in rental rates and leased occupancy at all properties in 2026 andpartially slightlyoffset lowerby higher bad debt expense. For example, Thebase average rental raterent per square foot increased at the Tribeca House property to $91.88 at MarchJune 31,30, 2026, was $89.64, up from $83.03$85.60 at MarchJune 31,30, 2025.2025, At the Flatbush Gardens property, average residential rent per square footand at March 31, 2026 was $32.67, up from $30.80 at March 31, 2025. At the Clover House property, averageto residential rent per square foot$91.19 at MarchJune 31,30, 2026 was $90.44,2026, up from $86.74$87.76 at MarchJune 31,30, 2025.

Commercial rental income decreased to $6,206$6,324 for the three months ended MarchJune 31,30, 2026, from $10,205$9,979 for the three months ended MarchJune 31,30, 20252025, due to the City of New York exiting 250 Livingston on August 23, 2025.

Property operating expenses. Property operating expenses include property-level costs such as compensation costs for property-level personnel, repairs and maintenance, supplies, utilities and landscaping. Property operating expenses increaseddecreased to $10,027$9,089 for the three months ended MarchJune 31,30, 2026, from $9,911$9,446 for the three months ended MarchJune 31,30, 2025, primarily due to higherlower repairs and maintenance andat utilitiesthe expensesFlatbush Gardens property partially offset by lowerincreased payroll,water legaland sewer costs andat supplies.Tribeca House.

Real estate taxes and insurance. Real estate taxes and insurance expenses increased to $7,545$7,567 for the three months ended MarchJune 31,30, 2026, from $7,349$7,333 for the three months ended MarchJune 31,30, 2025, primarily due to slightly increased real estate taxes and insurance premiums across the portfolio.

General and administrative. General and administrative expenses increased to $3,947$4,094 for the three months ended MarchJune 31,30, 2026, from $3,707$3,732 for the three months ended MarchJune 31,30, 2025, primarily due to the accrual of various fees related to our default on the 250 Livingston building.

Depreciation and amortization. Depreciation and amortization expense decreasedincreased to $7,306$7,350 for the three months ended MarchJune 31,30, 2026, from $7,346$7,314 for the three months ended MarchJune 31,30, 2025.

Litigation Settlement and other. Litigation settlement and other increased to $3,600$209 for the three months ended MarchJune 31,30, 2026, from $0$26 for the three months ended MarchJune 31,30, 2025, due to the accrual of aadditional loss reserve on the Sanchez litigation case.

Interest expense, net. Interest expense, net, increased to $12,783$12,863 for the three months ended MarchJune 31,30, 2026, from $10,964$11,157 for the three months ended MarchJune 31,30, 20252025, primarily as a result of the Company accruing default interest on the 250 Livingston loan.

Net loss. As a result of the foregoing, net loss increased to $8,801$4,939 for the three months ended MarchJune 31,30, 2026, from $952$656 for the three months ended MarchJune 31,30, 2025.

As of MarchJune 31,30, 2026, we had $1,285,799$1,287,226 of indebtedness, net of unamortized issuance costs, secured by our properties, $26,083$37,702 of cash and cash equivalents, and $28,568$24,873 of restricted cash. See Note 4, “Notes Payable” of our consolidated financial statements for a discussion of the Company’s property-level debt.

Our short-term liquidity needs will primarily be to fund operating expenses, recurring capital expenditures, property taxes and insurance, interest and scheduled debt principal payments, general and administrative expenses, and distributions to stockholders and unit holders. We generally expect to meet our short-term liquidity requirements through net cash provided by operations and cash on hand, and we believe we will have sufficient resources to meet our short-term liquidity requirements Our principal long-term liquidity needs will primarily be to fund additional property acquisitions, major renovation and upgrading projects, and debt payments and retirements at maturity. We do not expect that net cash provided by operations will be sufficient to meet all of these long-term liquidity needs. We anticipate meeting our long-term liquidity requirements by using cash as an interim measure and funds from public and private equity offerings and long-term secured and unsecured debt offerings. The Company sold its property at 10 West 65th Street during the year ended December 31, 2025, and was able to net approximately $13,000 in proceeds from such sale. Additionally, the Company refinanced its existing construction loan at its Dean Street property with a maximum of $160,000 bridge loan, of which $141,750 was drawn at closing,closing. The Company subsequently borrowed an additional $6,250 was subsequently drawn$8,250 and the Company may potentially draw additional amounts that can be used for general corporate purposes.

In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. On FebruaryMay 24,5, 2026, the company declared dividends and distributions on our common shares, Class B LLC units and LTIP units totaling $4,712$4,690 paid on MarchJune 19,4, 2026. During the three months ended MarchJune 31,30, 2026 and 2025, we paid dividends and distributions on our common shares, Class B LLC units and LTIP units totaling $4,712$4,690 and $4,614, respectively.

Cash Flows for the ThreeSix Months Ended MarchJune 31,30, 2026 and 2025 (in thousands)

Cash flows provided by (used in) operating activities, investing activities and financing activities for the threesix months ended MarchJune 31,30, 2026 and 2025, were as follows:

Net cash flow provided by operating activities was $3,568$17,999 for the threesix months ended MarchJune 31,30, 2026, compared to $6,676$15,044 for the threesix months ended MarchJune 31,30, 2025, primarily due to thestrong Companyresidential havinglease lessincome cash collections at our commercial rental properties as a resultand the 250timing of payments on the 141 Livingston vacancy described above.lease.

Net cash used by investing activities was $1,925$(4,964), for the threesix months ended MarchJune 31,30, 2026, compared to $9,680$17,967 usedprovided for the threesix months ended MarchJune 31,30, 2025. The decrease was primarily due to decreasedproceeds from the sale of 10 west 65th Street during the six months ended June 30, 2025 and significantly greater capital spending at Prospect House property during the Deansix Streetmonth developmentended asJune it was completed in30, 2025.

Net cash used by financing activities was $5,146$8,614 for the threesix months ended MarchJune 31,30, 2026, compared to ($5,543)$10,225 provided by financing activitiesused for the threesix months ended MarchJune 31,30, 2025. Cash was used in the threesix months ended MarchJune 31,30, 2026, related primarily byto dividends and distributions of $4,712$9,402, additional borrowings of $2 million at 953 Dean Street property and loan amortization payments of $434.$1,008. Cash was providedused in the threesix months ended MarchJune 31,30, 2025, 2025 related primarily to the repayment of $31,438 mortgage loan in conjunction with sale of 10 West 65th Street property, $9,228 of dividend and distribution payments and $2,996 of loan issuance costs, partially offset by $6,371of borrowings$34,231 related to the Dean Street property development,borrowings partiallyon offsetthe by $578 ofconstruction loan amortization payments and loansubsequent issuance costs of $250refinance.

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that there have been no material changes to the items that we disclosed as our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the three monthsyear ended December 31, 2025.