Clipper Realty (CLPR) Q3 2025: New Leases Up 14% as Residential Strength Offsets Office Drag
Clipper Realty’s residential portfolio delivered record leasing spreads and near-full occupancy, counterbalancing headwinds from office and asset sales. The company’s ability to push rents and maintain high collection rates underscores the resilience of New York City multifamily, even as office and asset rotation weigh on reported results. Management’s focus remains on lease-up of new developments and resolving office property transitions, setting up a clearer earnings profile for 2026.
Summary
- Residential Outperformance: Record-high rents and 99% occupancy drive core property growth.
- Office and Asset Rotation Drag: Lost income from terminated leases and asset sales weighs on reported results.
- Development Lease-Up: Prospect House ramps to 60% leased, positioning for incremental NOI in coming quarters.
Performance Analysis
Clipper Realty’s Q3 headline results mask a diverging story between robust residential strength and transitional headwinds from office and asset sales. Core residential properties delivered a 7% revenue increase and an 8% NOI lift, driven by new lease rates up over 14% and renewal rates up 5% across the stabilized portfolio. Occupancy remains exceptional, with stabilized assets at or near 99% leased, and rent collections holding at approximately 95% despite lingering arrears at select properties.
On the other hand, reported revenue and AFFO (adjusted funds from operations, a REIT cash flow proxy) were flat to down, reflecting the loss of income from the sale of 10 West 65th Street and the termination of a major New York City lease at 250 Livingston Street. The initial lease-up at Prospect House, a new Brooklyn development, contributed incremental revenue but was not yet accretive due to ramp-up costs and interest expense. Operating expenses rose modestly, mainly tied to payroll for repairs, maintenance, and capital projects, but were offset by higher rental income at ongoing properties.
- Residential Leasing Power: New leases exceeded prior rents by over 14% portfolio-wide, with renewals up 5%.
- Stabilized Asset Resilience: Occupancy at stabilized properties remained at or above 98%, supporting cash flow stability.
- Transitional Office Drag: Office lease termination and asset sale removed $2.9 million in revenue, impacting quarter-over-quarter comparability.
Despite headline softness, underlying multifamily fundamentals remain robust, with management signaling continued pricing power and minimal supply risk in New York City.
Executive Commentary
"I am pleased to report that our residential properties continue to perform very well due to continuing high residential rental demand, excellent cash flow, overall rents are generally at all-time highs, and continue to increase and we are nearly fully leased."
David Bichester, Co-Chairman and Chief Executive Officer
"Our results this quarter versus last year reflect three unusual items, namely the termination of the New York City lease at the 250 Livingston Street property on August 23, 2025, the initial lease-up results at Prospect House placed in service August 1, reflecting an excess of expenses over revenue and the absence of results from the 10 West 65th Street property sold in May 2025."
Larry Kreider, Chief Financial Officer
Strategic Positioning
1. Residential Portfolio: Pricing Power and Supply Constraints
Clipper’s residential segment, the company’s core cash flow engine, continues to benefit from constrained New York City supply and regulatory barriers to new development. All stabilized residential assets are 99% leased and achieving record rents, with new lease rates up double digits. Management expects this dynamic to persist as new supply remains limited and demand for rental housing stays elevated, reinforcing the company’s pricing power and occupancy stability.
2. Development Pipeline: Lease-Up and Stabilization
Clipper is actively leasing up Prospect House, a newly delivered Brooklyn development with 160,000 square feet of residential space. The project is 60% leased, with free market rents above $88 per foot, and is expected to contribute to NOI as occupancy ramps. Pacific House, a prior ground-up project, is now stabilized and cash flow positive, demonstrating management’s ability to execute on development and lease-up cycles.
3. Office and Asset Rotation: Transition Period
The loss of income from the 250 Livingston Street lease termination and the sale of 10 West 65th Street has temporarily compressed reported earnings. Management is engaged in negotiations to bring office assets back to cash flow and is redeploying capital toward higher-yielding multifamily opportunities. This transition phase is expected to be temporary, with the portfolio mix increasingly weighted toward stabilized, high-occupancy residential assets.
Key Considerations
This quarter’s results highlight Clipper Realty’s strategic reliance on New York City multifamily fundamentals, while navigating a period of office and asset repositioning. Investors should weigh the durability of residential demand against the temporary drag from office transitions and development lease-ups.
Key Considerations:
- Multifamily Resilience: Strong rent growth and high occupancy in stabilized assets support long-term cash flow visibility.
- Development Ramp-Up: Lease-up of new projects like Prospect House will be a swing factor for incremental NOI in 2026.
- Office Uncertainty: The outcome of ongoing negotiations at 141 and 250 Livingston could affect near-term earnings stability.
- Capital Allocation Discipline: Proceeds from asset sales and refinancing are being directed toward high-return multifamily projects.
Risks
Key risks remain around the pace of lease-up at new developments and the ability to re-tenant or monetize office properties. Regulatory changes, property tax regime shifts, or a reversal in New York City rental demand could also impact future rent growth and occupancy. Interest rate volatility and refinancing risk, while partially mitigated by a largely fixed-rate debt structure, remain areas to monitor given sector-wide pressures.
Forward Outlook
For Q4 2025, Clipper Realty expects:
- Continued strength in residential leasing and rent growth across stabilized properties.
- Incremental NOI contribution as Prospect House approaches stabilization.
For full-year 2025, management maintained its dividend and signaled:
- Focus on full lease-up of Prospect House and resolution of office asset negotiations.
Management highlighted several factors that will influence future results:
- Residential demand remains robust with limited new supply in core markets.
- Office cash flow is expected to improve as negotiations progress and repositioning efforts bear fruit.
Takeaways
Clipper Realty’s Q3 underscores the durability of New York City multifamily cash flows, even as reported results reflect office and asset transitions.
- Residential Strength: Portfolio-wide rent increases and near-full occupancy provide a strong base for future earnings, with limited supply risk in core markets.
- Transition Headwinds: Office lease terminations and asset sales are a temporary drag, but management’s focus on residential growth and development lease-up should restore earnings momentum.
- 2026 Watchpoints: Investors should monitor the pace of lease-up at Prospect House and the resolution of office property negotiations as key drivers of next year’s cash flow trajectory.
Conclusion
Clipper Realty’s Q3 results reflect a business in transition, with residential fundamentals providing stability and upside while office and asset rotation create temporary noise in reported earnings. The core investment thesis remains intact: New York City multifamily assets with pricing power, high occupancy, and disciplined capital allocation.
Industry Read-Through
Clipper’s results reinforce the strength of New York City multifamily, where supply constraints and persistent demand continue to drive record rents and occupancy. The office segment’s drag highlights ongoing challenges for urban landlords with legacy commercial exposure, suggesting further bifurcation between multifamily and office asset performance. Investors in REITs with similar portfolios should expect continued pressure on office valuations, but multifamily owners with development capabilities and strong rent rolls are well positioned for 2026.