Clipper Realty Inc. (CLPR) stock intrinsic value fair value estimate & owner earnings analysis

Clipper Realty owns eight rent-producing properties in Brooklyn and Manhattan: the Flatbush Gardens apartment complex (34.0% of 2025 revenue), the Tribeca House apartments (29.6%), the Brooklyn commercial buildings at 141 and 250 Livingston Street (10.9% and 8.1%), and the Aspen, Clover House, 1010 Pacific Street and Dean Street apartment buildings. Revenue was $153.2 million in 2025 versus $148.8 million in 2024. The company sold 10 West 65th Street in Manhattan in May 2025 for $45.5 million and recorded a $33.8 million impairment on it, which is most of the $52.3 million 2025 net loss. How we measured earnings. We start from operating cash flow, remove swings in receivables, payables and similar items, and subtract stock compensation and the capital spending needed just to keep the buildings running. Total capital spending ($20 million to $69 million a year since 2017) is far larger than upkeep because the company built 1010 Pacific Street (finished 2023) and Dean Street (finished 2025). Balance-sheet changes show spending on existing buildings of roughly $19.6 million in 2021, $7.2 million in 2022 and $10.8 million in 2024, about 9.4% of revenue on average, so we treat 10% of revenue as upkeep and the rest as growth spending. Per-share figures count the 16.1 million common shares plus the 26.3 million exchangeable Class B units held by the founding investors, about 42.5 million in total, because the cash flow belongs to both. On that basis owner earnings were $4.3 million ($0.10 per share) in 2025 and $11.3 million ($0.27) in 2024. The median for 2021 to 2025 is $0.10 per share; we use that window because the portfolio changed with the two new buildings. Interest capitalised into the Dean Street construction ($5.9 million in 2025) sat outside operating cash flow and now becomes an ordinary expense. Growth check. Owner earnings per share fell about 63% in 2025 ($0.267 to $0.100). We assume a smaller fall of about 46% in 2026 (roughly $4.3 million to $2.3 million), because operating cash flow in the first half of 2026 was $18.0 million against $15.0 million a year earlier. That first-half figure may be flattered by interest the company stopped paying on the 250 Livingston loan in October 2025, so we do not extrapolate it. What is going wrong. The City of New York left 250 Livingston Street on August 23, 2025; that lease paid about $15.4 million a year and the company has not been able to re-let the space. The $125 million loan on the building (3.63%, due 2029) is in default, the borrower said it will not keep funding the shortfall, and the company is negotiating a sale of the property with the lender. The City's lease at 141 Livingston Street (about $10.3 million a year) expired on December 27, 2025; the City is still paying the same rent while a previously agreed five-year extension is finalised, with no assurance it will be. The bigger issue is refinancing. Most of the $1.29 billion of mortgage debt carries low, older rates: Flatbush Gardens ($329 million) pays 3.125% until May 2027 and then moves to the prime rate plus 2.75% unless the company fixes it; Tribeca House ($360 million, 4.506%) matures in March 2028; Aspen ($57.7 million) in July 2028; Clover House ($82 million) in December 2029; 141 Livingston ($100 million) in March 2031. The Dean Street loans ($148 million, floating) come due in May 2027. When the company refinanced 1010 Pacific Street in October 2025 the new $84.5 million loan cost 5.73%. Replacing the older loans at that level adds roughly $18 to $19 million a year of interest, several times today's owner earnings. Base case, $2.40 per share. The company exits 250 Livingston Street (which we estimate contributed roughly $3 million to 2025 operating cash flow, so its exit lowers earnings) and the City stays at 141 Livingston Street at today's rent. Dean Street, 66.3% occupied at year-end 2025, fills to about 95%; the sister building 1010 Pacific Street reached 96.0% after finishing in 2023. Same-property income grows 3% a year for ten years and 1.5% a year for five more, then stops. Credit is limited to below what the business has shown: revenue grew about 4.7% a year from 2019 to 2025 and comparable residential rent rose 8.8% in 2025, though rent-stabilised units at Flatbush Gardens and Aspen are capped by state law. We left out any rent growth beyond year 15, any sale of buildings at better prices, and any market-driven upside. Refinancings are assumed at 5.75%. On these assumptions owner earnings are slightly positive in 2026 and 2027, negative from 2028 through 2032 (about $1 million to $4 million a year) as loans reset, turn positive in 2033, and level off around $12 million a year in the early 2040s. Bear case, $0. The City does not renew at 141 Livingston Street from 2027, which fits what happened at 250 Livingston Street. Dean Street only reaches about 85% occupancy, growth is 2% a year for ten years, and refinancing costs 6.75%. Modeled earnings would be negative by roughly $12 million to $27 million a year. The mortgages are secured by individual properties, and the company has already shown it will stop supporting a loan it cannot cover at 250 Livingston Street, so we value the bear case at zero rather than as a large negative number. The filings say the company and its operating partnership guarantee certain obligations on the 250 Livingston loan; we could not size that exposure, so it is not included. Bull case, $7.10. The City signs the agreed extension at 141 Livingston Street, Dean Street fills as fast as 1010 Pacific Street did, refinancing costs 5.25%, and same-property income grows 4% a year for ten years and 2% for five more, then stops. What could make us wrong. The result depends heavily on refinancing rates and on rent growth. A one-point change in refinancing rates moves annual interest by about $9 million on the older loans and changes the base value by roughly $3 per share, and a one-point change in the annual growth rate changes it by roughly $2 per share. The filings report results for commercial and residential properties as groups rather than building by building, so we could not confirm what 250 Livingston Street alone earned; the roughly $3 million contribution is our estimate. Margin-of-safety price. The margin-of-safety price is near $1.00, well under half of the $2.40 base value, because the business is heavily indebted, faces a multi-year refinancing wall, and has a bear case worth nothing. That price applies only if the two conditions above are met.