UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☒

For the quarterly period ended ~~June~~September 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38010

CLIPPER REALTY INC.

(Exact name of Registrant as specified in its charter)

Maryland		47-4579660
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4611 12^th Avenue, Suite 1L

Brooklyn, New York 11219

(Address of principal executive offices) (Zip Code)

(718) 438-2804

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CLPR	New York Stock Exchange

As of April 22, 2021, there were 16,063,228 shares of the Registrant’s Common Stock outstanding.

On March 11, 2021, the Audit Committee of the Board of Directors of Clipper Realty Inc. (the “Company”), after discussion with management and its independent registered public accountants, concluded that the previously issued unaudited consolidated financial statements covering the Company’s fiscal quarters ended March 31, 2020, June 30, 2020, and September 30, 2020 (collectively, the “Restated Periods”), as included in its quarterly reports on Form 10-Q for the Restated Periods, required restatement and should no longer be relied upon as a result of the Company’s failure to take into account on a straight-line basis, rent increases that would become due under a commercial lease at the Company’s 141 Livingston Street property in the future years 2021-2025 once the lessee determined not to exercise its contractual right to terminate the lease as of year-end 2020. This Amendment No. 1 to the Company’s Quarterly Report on Form 10-Q (this “Form 10-Q/A”) for the three and ~~six~~nine months ended ~~June~~September 30, 2020, which was originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on ~~August 10,~~November 9, 2020 (the “Original Form 10-Q”), restates the Company’s unaudited consolidated financial statements for the quarterly period ended ~~June~~September 30, 2020, and amends the related Notes and disclosures thereto, including the Company’s controls and procedures. The impact of the correction of the error described below on the Company’s unaudited financial statements for the three and ~~six~~nine months ended ~~June~~September 30, 2020, is to increase revenue by approximately $0.4 million and ~~$0.9~~$1.3 million, respectively. In addition, the unaudited consolidated financial statements for the fiscal quarter ended June 30, 2020, contained an immaterial uncorrected misstatement related to a non-cash accrual for a contingent liability related to an outstanding legal case of approximately $0.1 million; the amount was previously recorded in the fiscal quarter ended September 30, 2020.

The following tables present the effect of the correction of the errors above on selected line items of our previously reported unaudited condensed consolidated financial statements for the three and ~~six~~nine months ended ~~June~~September 30, 2020 (in thousands).

	As Reported			Adjustment			Restated			As Reported			Adjustment			Restated
Balance Sheet (as of June 30, 2020):
Balance Sheet (as of September 30, 2020):
Deferred rent	$	881		$	858		$	1,739		$	673		$	1,287		$	1,960
Total Assets	$	1,230,449		$	858		$	1,231,307		$	1,222,881		$	1,287		$	1,224,168
Accounts payable and accrued liabilities	$	10,699		$	110		$	10,809
Total Liabilities	$	1,102,879		$	110		$	1,102,989
Total stockholders’ equity	$	51,497		$	302		$	51,799
Total stockholders�� equity										$	48,406		$	519		$	48,925
Non-controlling interests	$	76,073		$	446		$	76,519		$	71,693		$	768		$	72,461
Total Equity	$	127,570		$	748		$	128,318		$	120,099		$	1,287		$	121,386
Total Liabilities and Equity	$	1,230,449		$	858		$	1,231,307		$	1,222,881		$	1,287		$	1,224,168

Statements of Operations (for the three months ended June 30, 2020):
Statements of Operations (for the three months ended September 30, 2020):
Commercial rental income	$	7,050		$	429		$	7,479		$	7,663		$	429		$	8,092
Total Revenues	$	30,729		$	429		$	31,158		$	29,611		$	429		$	30,040
General and administrative	$	2,594		$	110		$	2,704		$	2,407		$	(110	)	$	2,297
Total Operating Expenses	$	22,112		$	110		$	22,222		$	23,671		$	(110	)	$	23,561
Income From Operations	$	8,617		$	319		$	8,936		$	6,778		$	539		$	7,317
Net loss	$	(5,505	)	$	319		$	(5,186	)	$	(3,429	)	$	539		$	(2,890	)
Basic and diluted net loss per share	$	(0.13	)	$	0.01		$	(0.12	)	$	(0.09	)	$	0.01		$	(0.08	)

Statements of Operations (for the six months ended June 30, 2020):
Statements of Operations (for the nine months ended September 30, 2020):
Commercial rental income	$	14,218		$	858		$	15,076		$	21,881		$	1,287		$	23,168
Total Revenues	$	61,615		$	858		$	62,473		$	91,226		$	1,287		$	92,513
General and administrative	$	4,917		$	110		$	5,027
Total Operating Expenses	$	44,016		$	110		$	44,126
Income From Operations	$	17,599		$	748		$	18,347		$	24,377		$	1,287		$	25,664
Net loss	$	(6,311	)	$	748		$	(5,563	)	$	(9,740	)	$	1,287		$	(8,453	)
Basic and diluted net loss per share	$	(0.15	)	$	0.02		$	(0.13	)	$	(0.24	)	$	0.03		$	(0.21	)

Statements of Changes in Equity (as of and for the three months ended March 31, 2020):
Net loss	$	(806	)	$	429		$	(377	)	$	(806	)	$	429		$	(377	)
Total stockholders’ equity	$	55,246		$	174		$	55,420		$	55,246		$	174		$	55,420
Non-controlling interests	$	81,613		$	255		$	81,868		$	81,613		$	255		$	81,868
Total Equity	$	136,859		$	429		$	137,288		$	136,859		$	429		$	137,288

Statements of Changes in Equity (as of and for the three months ended June 30, 2020):
Net loss	$	(5,505	)	$	319		$	(5,186	)	$	(5,505	)	$	319		$	(5,186	)
Total stockholders’ equity	$	51,497		$	302		$	51,799		$	51,497		$	302		$	51,799
Non-controlling interests	$	76,073		$	446		$	76,519		$	76,073		$	446		$	76,519
Total Equity	$	127,570		$	748		$	128,318		$	127,570		$	748		$	128,318

Statements of Cash Flows (for the six months ended June 30, 2020):
Statements of Changes in Equity (as of and for the three months ended September 30, 2020):
Net loss										$	(3,429	)	$	539		$	(2,890	)
Total stockholders’ equity										$	48,406		$	519		$	48,925
Non-controlling interests										$	71,693		$	768		$	72,461
Total Equity										$	120,099		$	1,287		$	121,386

Statements of Cash Flows (for the nine months ended September 30, 2020):
Net loss	$	(6,311	)	$	748		$	(5,563	)	$	(9,740	)	$	1,287		$	(8,453	)
Deferred rent	$	393		$	(858	)	$	(465	)	$	601		$	(1,287	)	$	(686	)
Accounts payable and accrued liabilities	$	(2,484	)	$	110		$	(2,374	)

See the Company’s Current Report on Form 8-K filed with the SEC on March 11, 2021, and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 16, 2021, for additional details.

The items amended in the Original Form 10-Q are listed under “Items Amended by this Filing” below. Other than the items listed under “Items Amended by this Filing”, disclosures in the Original Form 10-Q remain unchanged. However, for the convenience of the reader, this Form 10-Q/A restates in its entirety, as amended, the Company’s Original Form 10-Q. The Company has not modified or updated disclosures presented in the Original Form 10-Q, except as required to reflect the effects of the restatement. Accordingly, this Form 10-Q/A does not reflect events occurring after the filing of the Original Form 10-Q and no attempt has been made in this Form 10-Q/A to modify or update other disclosures as presented in the Original Form 10-Q, except as specifically referenced herein. Accordingly, this Form 10-Q/A should be read in conjunction with the Company’s filings with the SEC subsequent to the filing of the Original Form 10-Q.

The non-cash error resulted from the failure to take into account on a straight-line basis, rent increases that would become due under a commercial lease at the Company’s 141 Livingston Street property in the future years 2021-2025 once the lessee determined not to exercise its contractual right to terminate the lease as of year-end 2020. The error, in addition to the immaterial uncorrected misstatement noted above, resulted in an understatement of funds from operations (“FFO”) (as such non-GAAP financial measure is defined in the Original Form 10-Q) for the three and ~~six~~nine months ended ~~June~~September 30, 2020, of approximately ~~$0.3~~$0.5 million and ~~$0.7~~$1.3 million, respectively. The Company’s previously reported adjusted funds from operations (“AFFO”), adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and net operating income (“NOI”) (as such non-GAAP financial measures are defined in the Original Form 10-Q) for the three and ~~six~~nine months ended ~~June~~September 30, 2020, are not impacted by the errors; the Company’s liquidity, cash flows and cash position are also not impacted by the errors.

A summary of the restatement and its effects on the Company’s unaudited financial statements for the three and ~~six~~nine months ended ~~June~~September 30, 2020, included within this Form 10-Q/A, is presented in Note 2 in the accompanying unaudited Notes to condensed consolidated financial statements.

For a description of the recently identified material weakness in our internal control over financial reporting related to the error and restatement, see Part I, Item 4 of this Form 10-Q/A.

The following items included in the Original Form 10-Q are amended by this Form 10-Q/A:

The Company has also updated the “Cautionary Note Concerning Forward-Looking Statements” in Part I of this Form 10-Q/A, the signature page and the financial statements formatted in Inline Extensible Business Reporting Language (“Inline XBRL”) in Exhibits 101 and 104. As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by the Company’s Chief Executive Officer and Chief Financial Officer are filed as exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-Q/A.

The Company is concurrently filing an amended Quarterly Report on Form 10-Q/A for the three months ended March 31, 2020, and an amended Quarterly Report on Form 10-Q/A for the three and ~~nine~~six months ended ~~September~~June 30, 2020, to reflect the effects of the restatement therein.

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF ~~JUNE~~SEPTEMBER 30, 2020 (RESTATED) (UNAUDITED) AND DECEMBER 31, 2019	7
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2020 (RESTATED) AND 2019 (UNAUDITED)	8
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE, SIX AND ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2020 (RESTATED) AND 2019 (UNAUDITED)	9
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2020 (RESTATED) AND 2019 (UNAUDITED)	10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) (UNAUDITED)	11
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2829
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4. CONTROLS AND PROCEDURES	3839

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	3940
ITEM 1A. RISK FACTORS	4041
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	42
ITEM 4. MINE SAFETY DISCLOSURE	4243
ITEM 6. EXHIBITS	42 43
SIGNATURES	4344

All statements other than statements of historical fact included in this Amendment No. 1 to the Quarterly Report on Form 10-Q for Clipper Realty Inc. (the “Company”), including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” regarding the Company’s financial position, business strategy and the plans, objectives, expectations, or assumptions of management for future operations, are forward-looking statements. When used in this Amendment No. 1 to the Quarterly Report on Form 10-Q, words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “believe,” “expect,” “intend,” “continue,” “potential,” “plan,” “goal” or other words that convey the uncertainty of future events or outcomes are intended to identify forward-looking statements, which are generally not historical in nature. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks, contingencies and uncertainties include, but are not limited to, the following:

Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Reference is made to a more complete discussion of forward-looking statements and applicable risks contained under the captions “Cautionary Note Concerning Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 12, 2020, the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2020, filed with the SEC on April 28, 2021, the Company’s Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2020, filed with the SEC on April 28, 2021, and other reports filed from time to time with the SEC. Clipper Realty Inc. undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise.

		June 30, 2020			December 31, 2019			September 30, 2020			December 31, 2019
		(unaudited)						(unaudited)
		(restated)						(restated)
ASSETS
Investment in real estate
Land and improvements		$	540,859		$	540,859		$	540,859		$	540,859
Building and improvements			613,983			602,547			624,379			602,547
Tenant improvements			3,051			3,051			2,998			3,051
Furniture, fixtures and equipment			12,001			11,707			12,090			11,707
Real estate under development			34,331			31,787			35,176			31,787
Total investment in real estate			1,204,225			1,189,951			1,215,502			1,189,951
Accumulated depreciation			(120,474	)		(109,418	)		(126,270	)		(109,418	)
Investment in real estate, net			1,083,751			1,080,533			1,089,232			1,080,533
Cash and cash equivalents			88,253			42,500			82,856			42,500
Restricted cash			28,047			14,432			22,117			14,432
Tenant and other receivables, net of allowance for doubtful accounts of $4,309 and $3,361, respectively			7,847			4,187
Tenant and other receivables, net of allowance for doubtful accounts of $4,985 and $3,361, respectively									8,058			4,187
Deferred rent			1,739			1,274			1,960			1,274
Deferred costs and intangible assets, net			8,199			8,782			7,898			8,782
Prepaid expenses and other assets			13,471			14,499			12,047			14,499
TOTAL ASSETS		$	1,231,307		$	1,166,207		$	1,224,168		$	1,166,207

LIABILITIES AND EQUITY
Liabilities:
Notes payable, net of unamortized loan costs of $11,380 and $11,528, respectively		$	1,079,677		$	997,903
Notes payable, net of unamortized loan costs of $10,811 and $11,528, respectively								$	1,079,585		$	997,903
Accounts payable and accrued liabilities			10,809			13,029			11,757			13,029
Security deposits			7,576			7,570			7,079			7,570
Below-market leases, net			1,367			1,625			189			1,625
Other liabilities	��		3,560			4,297			4,172			4,297
TOTAL LIABILITIES			1,102,989			1,024,424			1,102,782			1,024,424
Equity:
Preferred stock, $0.01 par value; 100,000 shares authorized (including 140 shares of 12.5% Series A cumulative non-voting preferred stock), zero shares issued and outstanding			0			0			0			0
Common stock, $0.01 par value; 500,000,000 shares authorized, 17,814,672 shares issued and outstanding			178			178
Common stock, $0.01 par value; 500,000,000 shares authorized, 17,768,814 and 17,814,672 shares issued and outstanding, respectively									178			178
Additional paid-in-capital			93,626			93,431			93,612			93,431
Accumulated deficit			(42,005	)		(36,375	)		(44,865	)		(36,375	)
Total stockholders’ equity			51,799			57,234			48,925			57,234
Non-controlling interests			76,519			84,549			72,461			84,549
TOTAL EQUITY			128,318			141,783			121,386			141,783
TOTAL LIABILITIES AND EQUITY		$	1,231,307		$	1,166,207		$	1,224,168		$	1,166,207

	Six Months Ended June 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(restated)						(restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,563	)	$	(1,291	)	$	(8,453	)	$	(1,473	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		11,078			8,755			16,939			13,496
Amortization of deferred financing costs		608			928			910			1,263
Amortization of deferred costs and intangible assets		592			623			785			933
Amortization of above- and below-market leases		(228	)		(830	)		(358	)		(1,080	)
Loss on modification/extinguishment of debt		4,228			1,771			4,228			1,771
Gain on involuntary conversion		(85	)		0			(85	)		0
Gain on termination of lease								(838	)		0
Deferred rent		(465	)		816			(686	)		1,000
Stock-based compensation		693			860			1,249			1,185
Bad debt expense		899			0			1,558			0
Changes in operating assets and liabilities:
Tenant and other receivables		(4,559	)		222			(5,429	)		(1,399	)
Prepaid expenses, other assets and deferred costs		989			70			2,341			1,839
Accounts payable and accrued liabilities		(2,374	)		(1,781	)		(1,299	)		(1,369	)
Security deposits		6			398			(491	)		932
Other liabilities		(737	)		(98	)		(125	)		1,292
Net cash provided by operating activities		5,082			10,443			10,246			18,390

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings, and improvements		(13,622	)		(21,383	)		(24,885	)		(34,962	)
Insurance proceeds from involuntary conversion		111			0			111			0
Purchase of interest rate cap		(14	)		0			(14	)		0
Acquisition deposit								0			(1,550	)
Net cash used in investing activities		(13,525	)		(21,383	)		(24,788	)		(36,512	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock								(240	)		0
Payments of mortgage notes		(247,798	)		(76,416	)		(248,706	)		(77,127	)
Proceeds from mortgage notes		329,424			125,000			329,671			125,000
Dividends and distributions		(8,595	)		(8,538	)		(12,922	)		(12,813	)
Loan issuance and extinguishment costs		(5,220	)		(2,166	)		(5,220	)		(2,166	)
Net cash provided by financing activities		67,811			37,880			62,583			32,894

Net increase in cash and cash equivalents and restricted cash		59,368			26,940			48,041			14,772
Cash and cash equivalents and restricted cash - beginning of period		56,932			45,864			56,932			45,864
Cash and cash equivalents and restricted cash - end of period	$	116,300		$	72,804		$	104,973		$	60,636

Cash and cash equivalents and restricted cash – beginning of period:
Cash and cash equivalents	$	42,500		$	37,028		$	42,500		$	37,028
Restricted cash		14,432			8,836			14,432			8,836
Total cash and cash equivalents and restricted cash – beginning of period	$	56,932		$	45,864		$	56,932		$	45,864
											��
Cash and cash equivalents and restricted cash – end of period:
Cash and cash equivalents	$	88,253		$	56,349		$	82,856		$	43,552
Restricted cash		28,047			16,455			22,117			17,084
Total cash and cash equivalents and restricted cash – end of period	$	116,300		$	72,804		$	104,973		$	60,636

Supplemental cash flow information:
Cash paid for interest, net of capitalized interest of $679 and $3,761 in 2020 and 2019, respectively	$	19,482		$	17,193
Cash paid for interest, net of capitalized interest of $1,065 and $5,261 in 2020 and 2019, respectively							$	29,576		$	26,214
Non-cash interest capitalized to real estate under development		546			678			813			937
Additions to investment in real estate included in accounts payable and accrued liabilities		4,045			7,940			3,887			7,069

The unaudited condensed consolidated financial statements of Clipper Realty Inc. (the “Company” or “we”) and subsidiaries have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 12, 2020.

The financial information presented reflects all adjustments (consisting of normal recurring adjustments) which are, in our opinion, necessary for a fair presentation of the results of operations, cash flows and financial position for the interim periods presented. Certain reclassifications have been made to the prior period financial statements in order to conform to the current year presentation. These reclassifications did not have an impact on net income previously reported. These results are not necessarily indicative of a full year’s results of operations.

The Company was organized in the state of Maryland on July 7, 2015. On August 3, 2015, we completed certain formation transactions and the sale of shares of common stock in a private offering. We contributed the net proceeds of the private offering to Clipper Realty L.P., our operating partnership subsidiary (the “Operating Partnership”), in exchange for units in the Operating Partnership. The Operating Partnership in turn contributed such net proceeds to the limited liability companies (“LLCs”) that comprised the predecessor of the Company (the “Predecessor”) in exchange for Class A LLC units in such LLCs and became the managing member of such LLCs. The owners of the LLCs exchanged their interests for Class B LLC units and an equal number of special, non-economic, voting stock in the Company. The Class B LLC units, together with the special voting shares, are convertible into common shares of the Company on a one-for-one basis and are entitled to distributions.

On June 27, 2016, the Operating Partnership acquired the Aspen property at 1955 First Avenue in Manhattan, New York.

On February 9, 2017, the Company priced an initial public offering of 6,390,149 primary shares of its common stock (including the exercise of the over-allotment option, which closed on March 10, 2017) at a price of $13.50 per share (the “IPO”). The net proceeds of the IPO were approximately $78.7 million. We contributed the proceeds of the IPO to the Operating Partnership, in exchange for units in the Operating Partnership.

On May 9, 2017, the Company completed the purchase of 107 Columbia Heights (subsequently renovated and rebranded “Clover House”), a 158-unit apartment community located in Brooklyn Heights, New York.

On October 27, 2017, the Company completed the acquisition of an 82-unit residential property at 10 West 65th Street in the Upper West Side neighborhood of Manhattan, New York.

On November 8, 2019, the Company completed the acquisition of 1010 Pacific Street located in the Prospect Heights neighborhood of Brooklyn, New York; the Company plans to redevelop the property as a 175-unit residential building.

As of ~~June~~September 30, 2020, the properties owned by the Company consist of the following (collectively, the “Properties”):

During 2019, we entered into a joint venture in which we own a 50% interest through which we are paying certain legal and advisory expenses in connection with various rent laws and ordinances which govern certain of our properties. During the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company incurred $0.1 million and ~~$0.3~~$0.4 million, respectively, of such expenses, which are recorded as part of general and administrative in the Condensed Consolidated Statements of Operations, and the Company has fulfilled its commitment to the joint venture.

The operations of Clipper Realty Inc. and its consolidated subsidiaries are carried on primarily through the Operating Partnership. The Company has elected to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code (the “Code”). The Company is the sole general partner of the Operating Partnership and the Operating Partnership is the sole managing member of the LLCs that comprised the Predecessor.

At ~~June~~September 30, 2020, the Company’s interest, through the Operating Partnership, in the LLCs that own the properties generally entitles it to ~~40.4%~~40.3% of the aggregate cash distributions from, and the profits and losses of, the LLCs.

The Company determined that the Operating Partnership and the LLCs are variable interest entities (“VIEs”) and that the Company was the primary beneficiary. The assets and liabilities of these VIEs represented substantially all of the Company’s assets and liabilities.

2. Restatement of Previously Issued Unaudited Consolidated Financial Statements

On March 11, 2021, the Audit Committee of the Board of Directors of the Company, after discussion with management and its independent registered public accountants, concluded that the previously issued unaudited consolidated financial statements covering the Company’s fiscal quarters ended March 31, 2020, June 30, 2020, and September 30, 2020, required restatement and should no longer be relied upon.

These unaudited consolidated financial statements contained a non-cash error by failing to take into account on a straight-line basis, rent increases that would become due under a commercial lease at the Company’s 141 Livingston Street property in the future years 2021-2025 once the lessee determined not to exercise its contractual right to terminate the lease as of year-end 2020. The Company previously disclosed on October 17, 2019, that the lessee confirmed that it will continue its commercial lease at the 141 Livingston Street property through expiration at the end of 2025.

The impact of the correction of the error on the Company’s unaudited financial statements for the three and ~~six~~nine months ended ~~June~~September 30, 2020, is to increase revenue by approximately $0.4 million and ~~$0.9~~$1.3 million, respectively.

In addition, the unaudited consolidated financial statements for the fiscal quarter ended June 30, 2020, contained an immaterial uncorrected misstatement related to a non-cash accrual for a contingent liability related to an outstanding legal case of approximately $0.1 million; the amount was previously recorded in the fiscal quarter ended September 30, 2020.

The following table presents the effect of the correction of the errors above on selected line items of our previously reported consolidated balance sheet as of ~~June~~September 30, 2020 (in thousands).

The following table presents the effect of the correction of the errors above on selected line items of our previously reported consolidated statements of operations for the three months ended ~~June~~September 30, 2020 (in thousands).

The following table presents the effect of the correction of the errors above on selected line items of our previously reported consolidated statements of operations for the ~~six~~nine months ended ~~June~~September 30, 2020 (in thousands).

The following table presents the effect of the correction of the errors above on selected line items of our previously reported consolidated statements of changes in equity as of and for the three months ended March 31, 2020 (in thousands).

The following table presents the effect of the correction of the errors above on selected line items of our previously reported consolidated statements of ~~cash flows~~changes in equity as of and for the ~~six~~three months ended ~~June~~September 30, 2020 (in thousands).

The following table presents the effect of the correction of the errors above on selected line items of our previously reported consolidated statements of cash flows for the nine months ended September 30, 2020 (in thousands).

On April 9, 2019, the Company issued 1,917 primary shares of its common stock to one of our directors, in connection with the conversion of vested long-term incentive plan (“LTIP”) units on a one-for-one basis. The Company did not receive any proceeds from the issuance.

In August 2020, the Company’s board of directors (the “Board”) adopted a stock repurchase program to permit the repurchase of up to an aggregate of $10.0 million in outstanding shares of the Company’s common stock. Under the repurchase program, the Company may repurchase its common stock at any time, or from time to time. The Company anticipates funding for the program to come from available sources of liquidity, including cash on hand and future cash flow. The repurchase program permits shares to be repurchased in open market or private transactions, through block trades or otherwise. The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at the Company’s discretion, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses of capital and the Company’s financial performance. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity and other factors deemed appropriate by the Company. These factors may also affect the timing and amount of share repurchases. The repurchase program does not obligate the Company to repurchase any particular number of shares. During the three months ended September 30, 2020, the Company repurchased 45,858 shares of common stock under the repurchase program for a total purchase price of approximately $0.3 million. As of September 30, 2020, the value of shares that may still be purchased under the repurchase program is approximately $9.7 million.

At ~~June~~September 30, 2020, the Company had two reportable operating segments, Residential Rental Properties and Commercial Rental Properties. The Company’s chief operating decision maker may review operational and financial data on a property basis.

The accompanying consolidated financial statements of the Company are prepared in accordance with GAAP. The effect of all intercompany balances has been eliminated. The consolidated financial statements include the accounts of all entities in which the Company has a controlling interest. The ownership interests of other investors in these entities are recorded as non-controlling interest.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from these estimates.

Real estate assets held for investment are carried at historical cost and consist of land, buildings and improvements, furniture, fixtures and equipment. Expenditures for ordinary repair and maintenance costs are charged to expense as incurred. Expenditures for improvements, renovations, and replacements of real estate assets are capitalized and depreciated over their estimated useful lives if the expenditures qualify as betterment or the life of the related asset will be substantially extended beyond the original life expectancy.

In accordance with ASU 2017-01, "Business Combinations – Clarifying the Definition of a Business,” the Company evaluates each acquisition of real estate or in-substance real estate to determine if the integrated set of assets and activities acquired meets the definition of a business and needs to be accounted for as a business combination. If either of the following criteria is met, the integrated set of assets and activities acquired would not qualify as a business:

Generally, the Company expects that acquisitions of real estate or in-substance real estate will not meet the revised definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e., land, buildings and related intangible assets) or because the acquisition does not include a substantive process in the form of an acquired workforce or an acquired contract that cannot be replaced without significant cost, effort or delay.

Upon acquisition of real estate, the Company assesses the fair values of acquired tangible and intangible assets including land, buildings, tenant improvements, above-market and below-market leases, in-place leases and any other identified intangible assets and assumed liabilities. The Company allocates the purchase price to the assets acquired and liabilities assumed based on their relative fair values. In estimating fair value of tangible and intangible assets acquired, the Company assesses and considers fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates, estimates of replacement costs, net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

The Company records acquired above-market and below-market lease values initially based on the present value, using a discount rate which reflects the risks associated with the leases acquired based on the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed renewal options for the below-market leases. Other intangible assets acquired include amounts for in-place lease values and tenant relationship values (if any) that are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses.

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. In the event that the Company obtains proceeds through an insurance policy due to impairment, the proceeds are offset against the write-down in calculating gain/loss on disposal of assets. Management of the Company does not believe that any of its properties within the portfolio are impaired as of ~~June~~September 30, 2020.

For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the assets less estimated cost to sell is less than the carrying value of the assets. Properties classified as real estate held-for-sale generally represent properties that are actively marketed or contracted for sale with closing expected to occur within the next twelve months. Real estate held-for-sale is carried at the lower of cost, net of accumulated depreciation, or fair value less cost to sell, determined on an asset-by-asset basis. Expenditures for ordinary repair and maintenance costs on held-for-sale properties are charged to expense as incurred. Expenditures for improvements, renovations and replacements related to held-for-sale properties are capitalized at cost. Depreciation is not recorded on real estate held-for-sale.

If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balances of the related intangibles are written off. The tenant improvements and origination costs are amortized to expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual expiration date).

Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

The capitalized above-market lease values are amortized as a reduction to base rental revenue over the remaining terms of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases. The value of in-place leases is amortized to expense over the remaining initial terms of the respective leases.

Cash and cash equivalents are defined as cash on hand and in banks, plus all short-term investments with a maturity of three months or less when purchased. The Company maintains some of its cash in bank deposit accounts, which, at times, may exceed the federally insured limit. No losses have been experienced related to such accounts.

Restricted cash generally consists of escrows for future real estate taxes and insurance expenditures, repairs, ~~and~~ capital improvements, loan reserves and security deposits.

Tenant and other receivables are comprised of amounts due for monthly rents and other ~~charges.~~charges less allowance for doubtful accounts. The Company periodically performs a detailed review of amounts due from tenants to determine if accounts receivable balances are impaired based on factors affecting the collectability of those balances. If a tenant fails to make contractual payments beyond any allowance, the Company may recognize additional bad debt expense in future periods.

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 consolidated statements of operations. 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.

Comprehensive income (loss) is comprised of net loss adjusted for changes in unrealized gains and losses, reported in equity, for financial instruments required to be reported at fair value under GAAP. For the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, the Company did not own any financial instruments for which the change in value was not reported in net loss accordingly, ~~and~~ its comprehensive loss was its net loss as presented in the consolidated statements of operations.

Rental revenue for commercial leases is recognized on a straight-line basis over the terms of the respective leases. Deferred rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with lease agreements. Rental income attributable to residential leases and parking is recognized as earned, which is not materially different from the straight-line basis. Leases entered into by residents for apartment units are generally for one-year terms, renewable upon consent of both parties on an annual or monthly basis.

Reimbursements for operating expenses due from tenants pursuant to their lease agreements are recognized as revenue in the period the applicable expenses are incurred. These costs generally include real estate taxes, utilities, insurance, common area maintenance costs and other recoverable costs and are recorded as part of commercial rental income in the condensed consolidated statements of operations.

The Company accounts for stock-based compensation pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “Compensation — Stock Compensation.” As such, all equity-based awards are reflected as compensation expense in the Company’s consolidated statements of operations over their vesting period based on the fair value at the date of grant.

In April 2020, the Company granted 450,623 LTIP units with a weighted average grant date fair value of $4.75 per unit.

In June 2020, the Company granted 78,681 LTIP units with a weighted average grant date fair value of $8.10 per unit.

At ~~June~~September 30, 2020 and December 31, 2019, there were 1,410,371 and 881,067 LTIP units outstanding, respectively, with a weighted average grant date fair value of $9.90 and $12.70 per unit, respectively. As of ~~June~~September 30, 2020 and December 31, 2019, there was ~~$3.5~~$3.0 million and $1.4 million, respectively, of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under share incentive plans. As of ~~June~~September 30, 2020, the weighted average period over which the unrecognized compensation expense will be recorded is approximately ~~1.1 years.~~one year.

The Company elected to be taxed and to operate in a manner that will allow it to qualify as a REIT under the Code. To qualify as a REIT, the Company is required to distribute dividends equal to at least 90% of the REIT taxable income (computed without regard to the dividends paid deduction and net capital gains) to its stockholders, and meet the various other requirements imposed by the Code relating to matters such as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided the Company qualifies for taxation as a REIT, it is generally not subject to U.S. federal corporate-level income tax on the earnings distributed currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal and state income tax on its taxable income at regular corporate tax rates and any applicable alternative minimum tax. In addition, the Company may not be able to re-elect as a REIT for the four subsequent taxable years. The entities comprising the Predecessor are limited liability companies and are treated as pass-through entities for income tax purposes. Accordingly, 0 provision has been made for federal, state or local income or franchise taxes in the accompanying consolidated financial statements.

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act was enacted to provide economic relief to companies and individuals in response to the COVID-19 pandemic. Included in the CARES Act are tax provisions which increase allowable interest expense deductions for 2019 and 2020 and increase the ability for taxpayers to use net operating losses. While we do not expect these provisions to have a material impact on the Company’s taxable income or tax liabilities, we continue to analyze the provisions of the CARES Act and related guidance as it is published.

In accordance with FASB ASC Topic 740, the Company believes that it has appropriate support for the income tax positions taken and, as such, does not have any uncertain tax positions that, if successfully challenged, could result in a material impact on its or the Predecessor’s financial position or results of operations. The prior three years’ income tax returns are subject to review by the Internal Revenue Service.

FASB derivative and hedging guidance establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by FASB guidance, the Company records all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation.

Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecast transactions, are considered cash flow hedges. For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (loss) (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses the effectiveness of each hedging relationship by comparing the changes in the fair value or cash flows of the derivative hedging instrument with the changes in the fair value or cash flows of the designated hedged item or transaction. For derivatives not designated as hedges, changes in fair value would be recognized in earnings. As of ~~June~~September 30, 2020, the Company has no derivatives for which it applies hedge accounting.

Basic and diluted loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding. As of ~~June~~September 30, 2020 and 2019, the Company had unvested LTIP units which provide for non-forfeitable rights to dividend-equivalent payments. Accordingly, these unvested LTIP units are considered participating securities and are included in the computation of basic and diluted loss per share pursuant to the two-class method. The Company did not have dilutive securities as of ~~June~~September 30, 2020 or 2019.

The effect of the conversion of the 26,317 Class B LLC units outstanding is not reflected in the computation of basic and diluted loss per share, as the effect would be anti-dilutive. The net loss allocable to such units is reflected as non-controlling interests in the accompanying consolidated financial statements.

The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (unaudited):

In April 2020, FASB issued a Staff Q & A to provide interpretive guidance for lease concessions related to the effects of the COVID-19 pandemic. The Company did not provide any ~~such~~material concessions to its tenants as a result of COVID-19 during the three and ninemonths ended ~~June~~September 30, 2020; therefore, this guidance did not have a material effect on its consolidated financial statements. The Company continues to evaluate the effect that this guidance may have on its consolidated financial statements.

In March 2020, FASB issued ASU 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (Topic 848). ASU 2020-04 provides temporary optional expedients and exceptions to ease financial reporting burdens related to applying current GAAP to modifications of contracts, hedging relationships and other transactions in connection with the transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. ASU 2020-04 is effective beginning on March 12, 2020, and may be applied prospectively to such transactions through December 31, 2022. We will apply ASU 2020-04 prospectively as and when we enter into transactions to which this guidance applies.

In March 2019, FASB issued ASU 2019-01, “Leases (Topic 842), Codification Improvements.” There are three codification updates to Topic 842 covered by this ASU: Issue 1 provides guidance on how to compute fair value of leased items for lessors who are non-dealers or manufacturers; Issue 2 relates to cash flow presentation for lessors of sales-type and direct financing leases; and Issue 3 clarifies that certain transition disclosures will only be required in annual disclosures.

In December 2018, FASB issued ASU 2018-20, “Leases (Topic 842), Narrow-Scope Improvements for Lessors.” This ASU modifies ASU 2016-02 to permit lessors, as an accounting policy election, not to evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Instead, those lessors will account for those costs as if they are lessee costs. Consequently, a lessor making this election will exclude from the consideration in the contract and from variable payments not included in the consideration in the contract all collections from lessees of taxes within the scope of the election and will provide certain disclosures (includes sales, use, value-added, and some excise taxes and excludes real estate taxes). The Company has elected not to evaluate whether the aforementioned costs are lessor or lessee costs. This ASU also provides that certain lessor costs require lessors to exclude from variable payments, and therefore revenue, specifically lessor costs paid by lessees directly to third parties. The amendments also require lessors to account for costs excluded from the consideration of a contract that are paid by the lessor and reimbursed by the lessee as variable payments. A lessor will record those reimbursed costs as revenue.

In ~~May 2014,~~ ~~FASB issued ASU~~ ~~2014~~-~~09,~~ “Revenue from Contracts with Customers,” which prescribes a single, common revenue standard that supersedes nearly all existing revenue recognition guidance under U.S. GAAP, including most industry-specific requirements. The core principle of ASU ~~2014~~-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU ~~2014~~-09 ~~outlines a~~ ~~five~~~~-step model to achieve this core principle and, in doing so, more judgment and estimates~~ ~~may~~ ~~be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after~~ ~~December 15, 2018,~~ ~~and interim periods within annual reporting periods beginning after~~ ~~December 15, 2019.~~ ~~The Company’s revenues are primarily derived from rental income, which is scoped out from this standard and is currently accounted for in accordance with ASC Topic~~ ~~840,~~ ~~Leases. The Company adopted this standard effective~~ ~~January 1, 2019,~~ ~~using the modified retrospective approach, applying the provisions to open contracts as of the date of adoption. The adoption of this standard did~~ ~~not~~ ~~have a material impact on the timing or amounts of the Company’s revenues.~~

In February 2016, FASB issued ASU 2016-02, “Leases.” ASU 2016-02 supersedes the current accounting for leases and while retaining two distinct types of leases, finance and operating, requires lessees to recognize most leases on their balance sheets and makes targeted changes to lessor accounting. In July 2018, FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases,” which provides minor clarifications and corrections to ASU 2016-02, “Leases (Topic 842).” Further, in July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements.” This amendment provides a new practical expedient that allows lessors, by class of underlying asset, to avoid separating lease and associated non-lease components within a contract if certain criteria are met: (i) the timing and pattern of transfer for the non-lease component and the associated lease component are the same and (ii) the stand-alone lease component would be classified as an operating lease if accounted for separately. These pronouncements are effective for fiscal years beginning after December 15, 2021, and early adoption is permitted. The Company will adopt this standard effective January 1, 2022 and is currently evaluating the impact of adoption on its consolidated financial statements. As lessor, the Company expects that the adoption of ASU 2016-02 (as amended by subsequent ASUs) will not change the timing of revenue recognition of the Company’s rental revenues. As lessee, the Company is party to certain office equipment leases with future payment obligations for which the Company expects to record right-of-use assets and lease liabilities at the present value of the remaining minimum rental payments upon adoption of this standard.

In August 2018, FASB issued ASU 2018-13, “Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement,” which removes, modifies, and adds certain disclosure requirements related to fair value measurements in ASC 820. This guidance is effective in fiscal years beginning after December 15, 2019 with early adoption permitted. The adoption of this standard did not have a material impact on the Company’s financial statement reporting.

In ~~June 2018,~~ ~~FASB issued ASU~~ ~~2018~~-~~07,~~ ~~“Compensation – Stock Compensation (Topic~~ ~~718~~~~): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments provide specific guidance for transactions for acquiring goods and services from nonemployees and specify that Topic~~ ~~718~~ applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic ~~718~~ ~~does~~ ~~not~~ apply to share-based payments used to effectively provide (i) financing to the issuer or (ii) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic ~~606,~~ ~~“Revenue from Contracts with Customers.” The Company adopted this standard effective~~ ~~January 1, 2020.~~ ~~The adoption of this standard did~~ ~~not~~ ~~have a material impact on the Company’s consolidated financial statements as it has~~ ~~not~~ ~~historically issued share-based payments in exchange for goods or services to be consumed within its operations.~~

In ~~February 2017,~~ ~~FASB issued ASU~~ ~~2017~~-~~05,~~ ~~“Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic~~ ~~610~~-20),” to add guidance for partial sales of nonfinancial assets, including partial sales of real estate. Historically, U.S. GAAP contained several different accounting models to evaluate whether the transfer of certain assets qualified for sale treatment. ASU ~~2017~~-05 ~~reduces the number of potential accounting models that might apply and clarifies which model does apply in various circumstances. ASU~~ ~~2017~~-05 ~~is effective for the Company for its annual reporting beginning after~~ ~~December 15, 2018,~~ ~~including interim reporting periods beginning after~~ ~~December 15, 2019.~~ ~~The Company adopted this standard effective~~ ~~January 1, 2019.~~ ~~The adoption of this standard did~~ ~~not~~ ~~have a material impact on our consolidated financial statements.~~

On November 8, 2019, the Company acquired the 1010 Pacific Street property, a parcel of land, for $31,129, including acquisition costs of $129.

Amortization of deferred costs, lease origination costs and in-place lease intangible assets was ~~$279~~$73 and ~~$196~~$189 for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and ~~$352~~$425 and ~~$384~~$572 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively; ~~$283~~$669 of ~~fully~~ amortized lease origination costs and in-place leases was written off during the ~~six~~nine months ended ~~June~~September 30, 2020. Additionally, $180 of unamortized lease origination costs and in-place leases was written off due to the termination of a commercial lease and is included in gain on termination of lease in the consolidated statements of operations. Amortization of real estate tax abatements of ~~$121~~$120 and ~~$120~~$122 for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and ~~$240~~$360 and ~~$239~~$361 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively, is included in real estate taxes and insurance in the consolidated statements of operations. Amortization of above-market leases of $0 and ~~$29~~$30 for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and $30 and ~~$59~~$89 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively, is included in commercial rental income in the consolidated statements of ~~operations.~~operations; $444 of fully amortized above-market leases was written off during the ~~six~~nine months ended ~~June~~September 30, 2020.

Deferred costs and intangible assets as of ~~June~~September 30, 2020, amortize in future years as follows:

Rental income included amortization of below-market leases of ~~$129~~$130 and ~~$435~~$280 for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and ~~$258~~$388 and ~~$889~~$1,169 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, ~~respectively.~~respectively; $2,254 of fully amortized below-market leases was written off during the nine months ended September 30, 2020. Additionally, $1,048 of unamortized below-market leases was written off due to the termination of a commercial lease and is included in gain on termination of lease in the consolidated statements of operations.

Below-market leases as of ~~June~~September 30, 2020, amortize in future years as follows:

The mortgages, loans and mezzanine notes payable collateralized by the properties, or the Company’s interest in the entities that own the properties and assignment of leases, are as follows:

(a) On May 8, 2020, the Company refinanced the $246,000 mortgage note ~~at Flatbush Gardens~~ with a ~~$329 million,~~$329,000, twelve-year secured first mortgage note with ~~NYCB.~~New York Community Bank (“NYCB”). The note matures on June 1, 2032, and bears interest at 3.125% through May 2027 and thereafter at the prime rate plus 2.75%, subject to an option to fix the rate. The note requires interest-only payments through May 2027, and monthly principal and interest payments thereafter based on a 30-year amortization schedule. The Company has the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to certain prepayment premiums, as defined.

(b) The $125,000 mortgage note agreement with Citi Real Estate Funding Inc., entered into on May 31, 2019, matures on June 6, 2029, bears interest at 3.63% and requires interest-only payments for the entire term. The Company has the option to prepay all (but not less than all) of the unpaid balance of the note within three months of maturity, without a prepayment premium.

(c) The $79,500 mortgage note agreement with NYCB matures on June 1, 2028, and bears interest at 3.875%. The note required interest-only payments through June 2017, and monthly principal and interest payments of $374 thereafter based on a 30-year amortization schedule.

(d) The $360,000 loan with Deutsche Bank, entered into on February 21, 2018, matures on March 6, 2028, bears interest at 4.506% and requires interest-only payments for the entire term. The Company has the option to prepay all (but not less than all) of the unpaid balance of the loan prior to the maturity date, subject to a prepayment premium if it occurs prior to December 6, 2027.

(e) The $70,000 mortgage note agreement with Capital One Multifamily Finance LLC matures on July 1, 2028, and bears interest at 3.68%. The note required interest-only payments through July 2017, and monthly principal and interest payments of $321 thereafter based on a 30-year amortization schedule. The Company has the option to prepay the note prior to the maturity date, subject to a prepayment premium.

(f) The $82,000 mortgage note agreement with MetLife Investment Management, entered into on November 8, 2019, matures on December 1, 2029, bears interest at 3.53% and requires interest-only payments for the entire term. The Company has the option, commencing on January 1, 2024, to prepay the note prior to the maturity date, subject to a prepayment premium if it occurs prior to September 2, 2029.

(g) On October 27, 2017, the Company entered into a $34,350 mortgage note agreement with NYCB, related to the 10 West 65^th Street acquisition. The note matures on November 1, 2027, and bears interest at 3.375% through October 2022 and thereafter at the prime rate plus 2.75%, subject to an option to fix the rate. The note required interest-only payments through November 2019, and monthly principal and interest payments of $152 thereafter based on a 30-year amortization schedule. The Company has the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to certain prepayment premiums, as defined.

(h) On December 24, 2019, the Company entered into a $18,600 mortgage note agreement with CIT Bank, N.A., related to the 1010 Pacific Street acquisition. The Company also entered into a pre-development bridge loan secured by the property with the same lender that will provide up to $2,987 for eligible pre-development and carrying costs, of which ~~$1,280~~$1,528 was drawn as of ~~June~~September 30, 2020. The notes mature on December 24, 2020, are subject to a one-year extension option, require interest-only payments and bear interest at one-month LIBOR (with a floor of 1.25%) plus 3.60% (4.85% as of ~~June~~September 30, 2020).The Company has guaranteed this mortgage note and has complied with the financial covenants therein.

The Company has provided a guaranty for the mortgage notes at several of its properties. The Company also must comply with certain covenants on the mortgage notes at several of its properties.

The following table summarizes principal payment requirements under the terms of the mortgage notes as of ~~June~~September 30, 2020:

The Company’s commercial properties are leased to commercial tenants under operating leases with fixed terms of varying lengths. As of ~~June~~September 30, 2020, the minimum future cash rents receivable (excluding tenant reimbursements for operating expenses) under non-cancelable operating leases for the commercial tenants in each of the next five years and thereafter are as follows:

The Company has commercial leases with the City of New York that comprised approximately 22% of total revenues for the three months ended September 30, 2020, approximately 18% of total revenues for the three months ended September 30, 2019, approximately 20% of total revenues for the nine months ended September 30, 2020, and approximately 19% of total revenues for ~~each of~~ the ~~three~~ ~~and~~ ~~six~~nine months ended ~~June 30, 2020,~~ ~~and 19% of total revenues for each of the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June~~September 30, 2019.

GAAP requires the measurement of certain financial instruments at fair value on a recurring basis. In addition, GAAP requires the measure of other financial instruments and balances at fair value on a non-recurring basis (e.g., carrying ‐‐‐value of impaired real estate and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and classifies such items in Level 1 or Level 2. In instances where the market for a financial instrument is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and establishes a fair value by assigning weights to the various valuation sources.

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

The financial assets and liabilities in the consolidated balance sheets include cash and cash equivalents, restricted cash, receivables, interest rate caps, accounts payable and accrued liabilities, security deposits and notes payable. The carrying amount of cash and cash equivalents, restricted cash, receivables, accounts payable and accrued liabilities, and security deposits reported in the consolidated balance sheets approximates fair value due to the short-term nature of these instruments. The fair value of notes payable, which are classified as Level 2, is estimated by discounting the contractual cash flows of each debt instrument to their present value using adjusted market interest rates.

The carrying amount and estimated fair value of the notes payable are as follows:

The Company purchased interest rate caps in connection with the 250 Livingston Street loan obtained on December 6, 2018, and the 1010 Pacific Street loan obtained on December 24, 2019. The fair value of the interest rate caps, which are classified as Level 2, is estimated using market inputs and credit valuation inputs.

These interest rate caps were not designated as hedges. Accordingly, changes in fair value of the 250 Livingston Street instrument are recognized in earnings. Changes in fair value of the Clover House instrument which matured and was written off in May 2020, were recognized in real estate under development during construction and are recognized in earnings following completion of development. Changes in fair value of the 1010 Pacific Street instrument are recognized in real estate under development. Fair value of the 250 Livingston Street instrument did not change during each of the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019. Fair value of the Clover House instrument did not change during each of the three and ~~six~~nine months ended ~~June~~September 30, 2020; decrease in fair value of the Clover House instrument of $2$0 and $24 for the respective three and ~~six~~nine months ended ~~June~~September 30, 2019, is capitalized to real estate under development. Decrease in fair value of the 1010 Pacific Street instrument of $0 and $14 for the respective three and ~~six~~nine months ended ~~June~~September 30, 2020, is capitalized to real estate under development.

The above disclosures regarding fair value of financial instruments are based on pertinent information available as of ~~June~~September 30, 2020, and December 31, 2019, respectively. Although the Company is not aware of any factors that would significantly affect the reasonableness of the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates, and current estimates of fair value may differ significantly from the amounts presented herein.

On July 3, 2017, the Supreme Court of the State of New York (the “Court”) ruled in favor of 41 present or former tenants of apartment units at the Company’s buildings located at 50 Murray Street and 53 Park Place in Manhattan, New York (the Tribeca House property), who brought an action (the “Kuzmich” case) against the Company alleging that they were subject to applicable rent stabilization laws with the result that rental payments charged by the Company exceeded amounts permitted under these laws because the buildings were receiving certain tax abatements under Real Property Tax Law (“RPTL”) 421-g. The Court also awarded the plaintiffs-tenants their attorney’s fees and costs. The Court declared that the plaintiffs-tenants were subject to rent stabilization requirements and referred the matter to a special referee to determine the amount of rent over-charges, if any. On July 18, 2017, the Court, pursuant to the parties’ agreement, stayed the Court’s ruling; the Company subsequently appealed the decision to the Appellate Division, First Department. On January 18, 2018, the Appellate Division unanimously reversed the Court’s ruling and ruled in favor of the Company, holding that the Company acted properly in de-regulating the apartments. The plaintiffs-tenants thereafter moved for leave to appeal to the Court of Appeals, which motion was granted on April 24, 2018. On June 25, 2019, the New York Court of Appeals reversed the Appellate Division’s order and ruled in favor of the plaintiffs-tenants, holding that apartments in buildings receiving RPTL 421-g tax benefits are not subject to luxury deregulation. The Court of Appeals also remitted the matter for further proceedings consistent with its opinion. As a result of the Court of Appeals’ order, Company management believes that payments may be required to be made to the 41 present or former tenants comprising the plaintiff group, that other tenants may attempt to make similar claims, and that the special referee process referred to above will be used to determine the timing and the amount of any claims that must be paid. On July 25, 2019, the Company filed a motion for reargument with the New York Court of Appeals, which was denied on September 12, 2019. On October 24, 2019, the Company filed a Petition for a Writ of Certiorari with the United States Supreme Court, seeking permission to have that Court hear the Company’s appeal on Constitutional grounds from the Court of Appeals’ order. On January 13, 2020, the United States Supreme Court denied the Company’s Petition for a Writ of Certiorari, meaning that the Court of Appeals’ order is final. On August 13, 2019, the Court, in effect, reinstated its prior order and referred the calculation of rent overcharges and attorneys’ fees for a hearing before a special referee. The special referee’s hearing was scheduled for October 23, 2019. On October 17, 2019, the Company made a motion in the Appellate Division for a stay of the special referee’s hearing pending the Company’s appeal from the August 13 order. On such date, the Appellate Division granted an interim stay of the special referee’s hearing, pending the determination of the underlying motion. On January 7, 2020, the Appellate Division granted the Company’s motion for a full stay of the special referee’s hearing pending appeal. The appeal had been scheduled to be argued during the May 2020 term, but on March 16, 2020, the parties filed a stipulation adjourning the appeal to the September 2020 term. On or about July 13, 2020, the parties filed another stipulation adjourning the appeal to the October 2020 term. The appeal was orally argued on October 8, 2020. On October ~~24, 2019,~~29, 2020, the ~~Company filed a Petition for a Writ of Certiorari with~~Appellate Division reversed the ~~United States Supreme Court, seeking permission~~lower court’s ruling to ~~have~~the extent that ~~Court hear~~it directed any rent overcharges to be calculated pursuant to the ~~Company’s appeal on Constitutional grounds from~~so-called “default formula.” Instead, the Appellate Division applied the Court of Appeals’ ~~order. On~~ recent Regina ruling to this case and held that (~~January 13, 2020,~~ 1) the ~~United States Supreme Court denied~~“base date” for the determination of rent overcharges is four years prior to the 2016 filing of the complaint, and (2) overcharges, if any, are to be determined by comparing the rents actually charged during the four-year period to the rent increases permitted by the New York City Rent Guidelines Board. Although not eliminating rent overcharge liability altogether, this ruling is expected to limit the Company’s ~~Petition~~financial exposure in this regard. The Appellate Division, however, affirmed the lower court’s award of attorneys’ fees to the plaintiffs-tenants. The case will eventually be remanded back to the lower court, which will determine the exact amount of the Company’s liability for ~~a Writ~~rent overcharges and attorneys’ fees; no future court dates have been scheduled as of ~~Certiorari, meaning that the Court of Appeals’ order is final.~~yet. On November 18, 2019, the same law firm which filed the Kuzmich case ~~above~~ filed a second action involving a separate group of 26 tenants (captioned Crowe et al v 50 Murray Street Acquisition LLC, Supreme Court, New York County, Index No. 161227/19), which action advances the same ~~exact~~ claims as in Kuzmich. The Company’s deadline to answer or otherwise respond to the complaint in Crowe had been extended to June 30, 2020; on such date, the Company filed its answer to the complaint. Pursuant to the court’s rules, on July 16, 2020, the plaintiffs filed an amended complaint; the sole difference as compared to the initial complaint is that seven new plaintiffs-tenants were added to the caption; there were no substantive changes to the complaint’s allegations. On August 5, 2020, the Company filed its answer to the amended complaint. The Company cannot predict what the timing or ultimate resolution of these matters will be, and accordingly, at this time, the Company has not recorded any liability for the potential settlement of these matters.

In addition to the above, the Company is subject to certain legal proceedings and claims arising in connection with its business, including a claim under the Americans with Disabilities Act of 1990 at the 141 Livingston Street ~~property.~~ property, which is expected to be settled in November 2020. Management believes, based in part upon consultation with legal counsel, that the ultimate resolution of all such claims will not have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows.

The Company is obligated to provide parking availability through August 2025 under a lease with a tenant at the 250 Livingston Street property; the current cost to the Company is approximately $205 per year.

The COVID-19 pandemic has adversely impacted global economic activity and contributed to significant volatility in financial markets. The COVID-19 pandemic and associated government actions intended to curb its spread are creating disruptions in, and adversely impacting, many industries and have negatively impacted, and could continue to negatively impact, the Company’s business in a number of ways, including affecting its tenants’ ability or willingness to pay rents and reducing demand for housing in the New York metropolitan area. The Tribeca House property has experienced declines in leased occupancy and residential rental rate as a result of the COVID-19 pandemic. Certain of the Company’s commercial tenants have ~~announced temporary closures of their locations and have~~ requested rent deferrals during the ~~COVID-~~19 pandemic. In some cases, the Company may restructure rent and other obligations under its leases with its tenants on terms that are less favorable to it than those currently in place. Additionally, the outbreak could have a continued material adverse impact on economic and market conditions ~~and prolong the current period of global economic slowdown~~ which may ultimately result in a further decrease in occupancy levels and ~~pricing~~rental rates across the Company’s portfolio as residents reduce their ~~spending.~~spending and replacement tenants become harder to find. The rapid development and fluidity with which the situation continues to develop precludes any prediction as to the ultimate material adverse impact of the COVID-19 pandemic. Nevertheless, COVID-19 presents uncertainty and risk with respect to the Company’s tenants, which could adversely affect the Company’s financial performance.

The Company’s properties have remained open and operational throughout the pandemic. The Company is taking the necessary steps to keep employees and tenants safe in compliance with state and local orders, and continues to provide typical services to its residents. The Company’s rent collection rate during the ~~second~~third quarter of 2020 was ~~equal to 94% of its~~ ~~first~~ ~~quarter~~ ~~2020~~ ~~rent collection rate.~~over 97%. At ~~June~~September 30, 2020, the Company’s properties were ~~96%~~93% leased.

The Company’s properties are located in the Boroughs of Manhattan and Brooklyn in New York City, which exposes the Company to greater economic risks than if it owned a more geographically dispersed portfolio.

The breakdown between commercial and residential revenue is as follows (unaudited):

The Company recorded office and overhead expenses pertaining to a related company in general and administrative expense of ~~$45~~$66 and ~~$84~~$0 for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and ~~$133~~$199 and ~~$171~~$45 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

The Company paid legal and advisory fees to firms in which two of our directors were principals or partners of $0 and ~~$313~~$7 for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and $5 and ~~$313~~$319 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

The Company has classified its reporting segments into commercial and residential rental properties. The commercial reporting segment includes the 141 Livingston Street property and portions of the 250 Livingston Street, Tribeca House and Aspen properties. The residential reporting segment includes the Flatbush Gardens property, the Clover House property, the 10 West 65^th Street property, the 1010 Pacific Street property and portions of the 250 Livingston Street, Tribeca House and Aspen properties.

The Company’s income from operations by segment for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, is as follows (unaudited):

The Company’s interest expense by segment for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, is as follows (unaudited):

The Company’s capital expenditures by segment for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, are as follows (unaudited):

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the more detailed information set forth under the caption, “Cautionary Note Concerning Forward-Looking Statements,” and in our financial statements and the related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q/A.

All of the financial information presented in this Item 2 has been revised to reflect the restatement of our unaudited consolidated financial statements, as more fully described in Note 2 to our unaudited consolidated financial statements, included in Part I, Item 1 of this Form 10-Q/A.

Clipper Realty Inc. (the “Company” or “we”) is a self-administered and self-managed real estate company that acquires, owns, manages, operates and repositions multifamily residential and commercial properties in the New York metropolitan area, with a current portfolio in Manhattan and Brooklyn. Our primary focus is to own, manage and operate our portfolio and to acquire and reposition additional multifamily residential and commercial properties in the New York metropolitan area. The Company has been organized and operates in conformity with the requirements for qualification and taxation as a real estate investment trust (“REIT”) under the U.S. federal income tax law and elected to be treated as a REIT commencing with the taxable year ended December 31, 2015.

The Company was incorporated on July 7, 2015. On August 3, 2015, we closed a private offering of shares ‐of our common stock, in which we raised net proceeds of approximately $130.2 million. In connection with the private offering, we consummated a series of investment and other formation transactions that were designed, among other things, to enable us to qualify as a REIT for U.S. federal income tax purposes.

In February 2017, the Company sold 6,390,149 primary shares of common stock (including the exercise of the over-allotment option, which closed on March 10, 2017) to investors in an initial public offering (“IPO”) at $13.50 per share. The proceeds, net of offering costs, were approximately $78.7 million. The Company contributed the IPO proceeds to the Operating Partnership in exchange for units in the Operating Partnership.

On May 9, 2017, the Company completed the purchase of 107 Columbia Heights (since rebranded as “Clover House”), a 158-unit apartment community located in Brooklyn Heights, New York, for $87.5 million.

On October 27, 2017, the Company completed the acquisition of an 82-unit residential property at 10 West 65th Street in Manhattan, New York, for $79.0 million.

On November 8, 2019, the Company completed the acquisition of property located at 1010 Pacific Street in Prospect Heights, New York, for $31.0 million.

These properties are located in the most densely populated major city in the United States, each with immediate access to mass transportation.

On May 8, 2020, the Company refinanced the existing Flatbush Gardens loan with a $329 million, twelve-year secured first mortgage note with New York Community Bank. The note matures on June 1, 2032, and bears interest at 3.125% through May 2027 and thereafter at the prime rate plus 2.75%, subject to an option to fix the rate. The note requires interest-only payments through May 2027, and monthly principal and interest payments thereafter based on a 30-year amortization schedule. The Company has the option to prepay all (but not less than all) of the unpaid balance of the note prior to the maturity date, subject to certain prepayment premiums, as defined.

The Company’s ownership interest in its initial portfolio of properties, which includes the Tribeca House, Flatbush Gardens and the two Livingston Street properties, was acquired in the formation transactions in connection with the private offering. These properties are owned by the LLC subsidiaries, which are managed by the Company through the Operating Partnership. The Operating Partnership’s interests in the LLC subsidiaries generally entitle the Operating Partnership to all cash distributions from, and the profits and losses of, the LLC subsidiaries other than the preferred distributions to the continuing investors who hold Class B LLC units in these LLC subsidiaries. The continuing investors own an aggregate amount of 26,317,396 Class B LLC units, representing ~~59.6%~~59.7% of the Company’s common stock on a fully diluted basis. Accordingly, the Operating Partnership’s interests in the LLC subsidiaries entitle the Operating Partnership to receive ~~40.4%~~40.3% of the aggregate distributions from the LLC subsidiaries. The Company, through the Operating Partnership, owns all of the ownership interests in the Aspen property, the Clover House property, the 10 West 65^th Street property and the 1010 Pacific Street property.

The COVID-19 pandemic has adversely impacted global economic activity and contributed to significant volatility in financial markets. The COVID-19 pandemic and associated government actions intended to curb its spread are creating ~~disruption~~disruptions in, and adversely impacting, many industries and have negatively impacted, and could continue to negatively impact, our business in a number of ways, including affecting our tenants’ ability or willingness to pay rents and reducing demand for housing in the New York metropolitan area. The Tribeca House property has experienced declines in leased occupancy and residential rental rate as a result of the COVID-19 pandemic. Certain of our commercial tenants have ~~announced temporary closures of their locations and have~~ requested rent deferrals during the ~~COVID-19~~ pandemic. In some cases, we may restructure rent and other obligations under our leases with tenants on terms that are less favorable to us than those currently in place. Additionally, the outbreak could have a continued material adverse impact on economic and market conditions ~~and prolong the current period of global economic slowdown~~ which may ultimately result in a further decrease in occupancy levels and ~~pricing~~rental rates across our portfolio as residents reduce their ~~spending.~~spending and replacement tenants become harder to find. The rapid development and fluidity with which the situation continues to develop precludes any prediction as to the ultimate adverse impact of the COVID-19 pandemic on our business. Nevertheless, COVID-19 presents uncertainty and risk with respect to our tenants, which could adversely affect the Company’s business, financial condition, liquidity and results of operations.

Despite these continuing very challenging circumstances, our business has remained durable. Our properties have remained open and operational throughout the pandemic. We are taking the necessary steps to keep our employees and tenants safe in compliance with state and local orders, and we continue to provide typical services to our residents. Our rent collection rate during the ~~second~~third quarter of 2020 was ~~equal to 94% of our first quarter 2020 rent collection rate.~~over 97%. At ~~June~~September 30, 2020, our properties were ~~96%~~93% leased. We expect our properties and the New York City market to remain desirable to a broad range of tenants and our operations to return to a more normal state over time.

In August 2020, the Company’s Board adopted a stock repurchase program to permit the repurchase of up to an aggregate of $10.0 million in outstanding shares of the Company’s common stock. Under the repurchase program, the Company may repurchase its common stock at any time, or from time to time. The Company anticipates funding for the program to come from available sources of liquidity, including cash on hand and future cash flow. The repurchase program permits shares to be repurchased in open market or private transactions, through block trades or otherwise. The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at the Company’s discretion, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses of capital and the Company’s financial performance. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity and other factors deemed appropriate by the Company. These factors may also affect the timing and amount of share repurchases. The repurchase program does not obligate the Company to repurchase any particular number of shares. During the three months ended September 30, 2020, the Company repurchased 45,858 shares of common stock under the repurchase program for a total purchase price of approximately $0.3 million. As of September 30, 2020, the value of shares that may still be purchased under the repurchase program is approximately $9.7 million.

Our focus throughout 2019 and year-to-date 2020 has been to manage our properties to optimize revenues and control costs, while continuing to renovate and reposition certain properties. The discussion below highlights the specific properties contributing to the changes in the results of operations, and focuses on the properties that the Company owned and operated for the full period in each comparison (Clover House was under renovation during the first ~~six months~~three quarters of 2019).

Income Statement for the Three Months Ended ~~June~~September 30, 2020 and 2019 (in thousands)

The dollar amounts in the narrative disclosure below are in thousands, other than the base rent per square foot figures.

Revenue. Residential rental income, excluding Clover House, ~~increased~~decreased from ~~$21,146~~$21,739 for the three months ended ~~June~~September 30, 2019, to ~~$21,831~~$20,257 for the three months ended ~~June~~September 30, 2020, primarily due to ~~increases~~a decrease in leased occupancy and residential rental ~~rates~~rate at the ~~Flatbush Gardens and~~ Tribeca House ~~properties~~property as ~~well as~~a result of the ~~completion of renovations and lease-up of apartments~~COVID-19 pandemic. Leased occupancy decreased at the ~~10 West 65th Street property during 2019. Base rent per square foot increased at the Flatbush Gardens~~Tribeca House property from ~~$24.30~~98.2% at ~~June~~September 30, 2019, to ~~$25.05~~80.1% at ~~June~~September 30, 2020. Base rent per square foot ~~increased~~decreased at the Tribeca House property from ~~$68.77~~$70.85 at ~~June~~September 30, 2019, to ~~$70.43~~$65.74 at ~~June~~September 30, 2020.

Commercial rental income, excluding Clover House, increased from ~~$7,300~~$7,323 for the three months ended ~~June~~September 30, 2019, to ~~$7,475~~$8,088 for the three months ended ~~June~~September 30, 2020, primarily due to ~~adjustments~~an adjustment in straight line rent at the 141 Livingston Street property and ~~increases in tenant reimbursements across~~ the ~~portfolio,~~commencement of a new lease at the 250 Livingston Street property, partially offset by ~~the termination of a commercial lease~~changes in straight line rent at the Tribeca House ~~property.~~and Aspen properties.

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, excluding Clover House, ~~decreased~~increased from ~~$6,747~~$7,034 for the three months ended ~~June~~September 30, 2019, to ~~$6,637~~$7,540 for the three months ended ~~June~~September 30, 2020, primarily due to ~~lower legal expenses, lower commission expenses and lower expenses related to renovation projects, partially offset by~~ an increase in the provision for bad debt across the portfolio due to the impact of COVID-19.

Real estate taxes and insurance. Real estate taxes and insurance expenses, excluding Clover House, increased from ~~$5,707~~$6,667 for the three months ended ~~June~~September 30, 2019, to ~~$6,410~~$7,080 for the three months ended ~~June~~September 30, 2020, due to increased real estate taxes and property insurance across the portfolio.

General and administrative. General and administrative expenses, excluding Clover House, ~~decreased~~increased from ~~$2,579~~$1,806 for the three months ended ~~June~~September 30, 2019, to ~~$2,520~~$2,191 for the three months ended ~~June~~September 30, 2020, primarily due to ~~a decrease~~an increase in ~~executive bonuses.~~non-cash LTIP amortization expense.

Depreciation and amortization. Depreciation and amortization expense, excluding Clover House, increased from ~~$4,590~~$4,784 for the three months ended ~~June~~September 30, 2019, to ~~$5,289~~$5,350 for the three months ended ~~June~~September 30, 2020, due to additions to real estate across the portfolio.

Gain on termination of lease. Gain on termination of lease represents the write-off of unamortized assets and liabilities in relation to the termination of a lease at the Tribeca House property.

Interest expense, net. Interest expense, net, excluding Clover House, increased from ~~$8,210~~$8,630 for the three months ended ~~June~~September 30, 2019, to ~~$9,224~~$9,452 for the three months ended ~~June~~September 30, 2020. The increase primarily resulted from the refinancing of the 250 Livingston Street property in May 2019, the refinancing of the Flatbush Gardens property in May 2020 and lower interest income related to the construction at Clover House. Interest expense, excluding Clover House, included amortization of loan costs and changes in fair value of interest rate caps of ~~$271~~$270 and ~~$424~~$272 for the three months ended ~~June~~September 30, 2020 and 2019, respectively.

Net (loss) income.As a result of the foregoing, net (loss) income, excluding Clover House, decreased from net income of $141 for the three months ended September 30, 2019, to net loss of $2,430 for the three months ended September 30, 2020.

Income Statement for the Nine Months Ended September 30, 2020 and 2019 (in thousands)

The dollar amounts in the narrative disclosure below are in thousands, other than the base rent per square foot figures.

Revenue. Residential rental income, excluding Clover House, increased from $63,657 for the nine months ended September 30, 2019, to $64,084 for the nine months ended September 30, 2020, primarily due to increases in rental rates at the Flatbush Gardens property as well as the completion of renovations and lease-up of apartments at the 10 West 65th Street property during 2019, partially offset by a decrease in leased occupancy and residential rental rate at the Tribeca House property as a result of the COVID-19 pandemic. Base rent per square foot increased at the Flatbush Gardens property from $24.49 at September 30, 2019, to $25.10 at September 30, 2020. Leased occupancy decreased at the Tribeca House property from 98.2% at September 30, 2019, to 80.1% at September 30, 2020. Base rent per square foot decreased at the Tribeca House property from $70.85 at September 30, 2019, to $65.74 at September 30, 2020.

Commercial rental income, excluding Clover House, increased from $21,503 for the nine months ended September 30, 2019, to $23,155 for the nine months ended September 30, 2020, primarily due to an adjustment in straight line rent at the 141 Livingston Street property and the commencement of a new lease at the 250 Livingston Street property, partially offset by changes in straight line rent at the Tribeca House and Aspen properties.

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, excluding Clover House, decreased from $21,344 for the nine months ended September 30, 2019, to $21,097 for the nine months ended September 30, 2020, primarily due to lower recurring legal expenses, commission expenses, expenses related to renovation projects and utility expenses across the portfolio, partially offset by an increase in the provision for bad debt across the portfolio due to the impact of COVID-19.

Real estate taxes and insurance. Real estate taxes and insurance expenses, excluding Clover House, increased from $18,105 for the nine months ended September 30, 2019, to $19,985 for the nine months ended September 30, 2020, due to increased real estate taxes and property insurance across the portfolio.

General and administrative. General and administrative expenses, excluding Clover House, increased from $6,053 for the nine months ended September 30, 2019, to $6,889 for the nine months ended September 30, 2020, primarily due to an increase in non-recurring litigation-related expenses.

Depreciation and amortization. Depreciation and amortization expense, excluding Clover House, increased from $13,923 for the nine months ended September 30, 2019, to $15,615 for the nine months ended September 30, 2020, due to additions to real estate across the portfolio.

Interest expense, net. Interest expense, net, excluding Clover House, increased from $25,114 for the nine months ended September 30, 2019, to $27,709 for the nine months ended September 30, 2020. The increase primarily resulted from the refinancing of the 250 Livingston Street property in May 2019, the refinancing of the Flatbush Gardens property in May 2020 and lower interest income related to the construction at Clover House. Interest expense, excluding Clover House, included amortization of loan costs and changes in fair value of interest rate caps of $813 and $1,200 for the nine months ended September 30, 2020 and 2019, respectively.

Loss on modification/extinguishment of debt. Loss on modification/extinguishment of debt related to the refinancing of the Flatbush Gardens loan in May 2020 and the refinancing of the 250 Livingston Street loan in May 2019. The amount included charges for early modification and extinguishment of debt and the write-off of unamortized debt costs.

Gain on involuntary conversion. Gain on involuntary conversion represented insurance proceeds in excess of the carrying value of assets disposed of related to fire damage suffered by two units at the Flatbush Gardens property.

Net loss. As a result of the foregoing, net loss, excluding Clover House, increased from ~~$1,158~~$1,150 for the ~~three~~nine months ended ~~June~~September 30, 2019, to ~~$4,917~~$7,361 for the ~~three~~nine months ended ~~June 30, 2020.~~

~~Income Statement for the Six Months Ended June 30, 2020 and 2019 (in thousands)~~

~~The dollar amounts in the narrative disclosure below are in thousands, other than the base rent per square foot figures.~~

~~Revenue~~. Residential rental income, excluding Clover House, increased from $41,918 for the six months ended June 30, 2019, to $43,827 for the six months ended June 30, 2020, primarily due to increases in rental rates at the Flatbush Gardens and Tribeca House properties as well as the completion of renovations and lease-up of apartments at the 10 West 65th Street property during 2019. Base rent per square foot increased at the Flatbush Gardens property from $24.30 at June 30, 2019, to $25.05 at June 30, 2020. Base rent per square foot increased at the Tribeca House property from $68.77 at June 30, 2019, to $70.43 at June 30, 2020.

Commercial rental income, excluding Clover House, increased from $14,180 for the six months ended June 30, 2019, to $15,067 for the six months ended June 30, 2020, primarily due to adjustments in straight line rent.

~~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, excluding Clover House, decreased from $14,310 for the six months ended June 30, 2019, to $13,557 for the six months ended June 30, 2020, primarily due to lower legal expenses, lower commission expenses, lower expenses related to renovation projects and lower utility expenses across the portfolio, partially offset by an increase in the provision for bad debt across the portfolio due to the impact of COVID-19.

~~Real estate taxes and insurance~~. Real estate taxes and insurance expenses, excluding Clover House, increased from $11,438 for the six months ended June 30, 2019, to $12,905 for the six months ended June 30, 2020, due to increased real estate taxes and property insurance across the portfolio.

~~General and administrative~~. General and administrative expenses, excluding Clover House, increased from $4,247 for the six months ended June 30, 2019, to $4,698 for the six months ended June 30, 2020, primarily due to increases in legal expenses (including non-recurring litigation-related expenses).

~~Depreciation and amortization~~. Depreciation and amortization expense, excluding Clover House, increased from $9,139 for the six months ended June 30, 2019, to $10,265 for the six months ended June 30, 2020, due to additions to real estate across the portfolio.

~~Interest expense, net~~. Interest expense, net, excluding Clover House, increased from $16,484 for the six months ended June 30, 2019, to $18,257 for the six months ended June 30, 2020. The increase primarily resulted from the refinancing of the 250 Livingston Street property in May 2019, the refinancing of the Flatbush Gardens property in May 2020 and lower interest income related to the construction at Clover House. Interest expense, excluding Clover House, included amortization of loan costs and changes in fair value of interest rate caps of $543 and $928 for the six months ended June 30, 2020 and 2019, respectively.

~~Loss on modification/extinguishment of debt.~~ Loss on modification/extinguishment of debt related to the refinancing of the Flatbush Gardens loan in May 2020 and the refinancing of the 250 Livingston Street loan in May 2019. The amount included charges for early modification and extinguishment of debt and the write-off of unamortized debt costs.

~~Gain on involuntary conversion.~~ ~~Gain on involuntary conversion represented insurance proceeds in excess of the carrying value of assets disposed of related to fire damage suffered by two units at the Flatbush Gardens property.~~

~~Net loss~~.~~As a result of the foregoing, net loss, excluding Clover House, increased from $1,291 for the six months ended June 30, 2019, to $4,931 for the six months ended June~~September 30, 2020.

As of ~~June~~September 30, 2020, we had ~~$1,079.7~~$1,079.6 million of indebtedness (net of unamortized issuance costs) secured by our properties, ~~$88.3~~$82.9 million of cash and cash equivalents, and ~~$28.0~~$22.1 million of restricted cash. See Note 8 of the accompanying “Notes to Consolidated Financial Statements” for a discussion of the Company’s property-level debt.

As a REIT, we are required to distribute at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gains, to stockholders on an annual basis. We expect that these needs will be met from cash generated from operations and other sources, including proceeds from secured mortgages and unsecured indebtedness, proceeds from additional equity issuances and cash generated from the sale of property.

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.

We believe that as a publicly traded REIT, we will have access to multiple sources of capital to fund our long-term liquidity requirements. These sources include the incurrence of additional debt and the issuance of additional equity. However, we cannot provide assurance that this will be the case. Our ability to secure additional debt will depend on a number of factors, including our cash flow from operations, our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed. Our ability to access the equity capital markets will depend on a number of factors as well, including general market conditions for REITs and market perceptions about our company.

We believe that our current cash flows from operations and cash on hand, coupled with additional mortgage debt, will be sufficient to allow us to continue operations, satisfy our contractual obligations and make distributions to our stockholders and the members of our LLC subsidiaries for at least the next twelve months. However, no assurance can be given that we will be able to refinance any of our outstanding indebtedness in the future on favorable terms or at all.

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. During the three months ended ~~June~~September 30, 2020 and 2019, we paid dividends and distributions on our common shares, Class B LLC units and LTIP units totaling $4.3 million and $4.3 million, respectively, and during the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, we paid dividends and distributions on our common shares, Class B LLC units and LTIP units totaling ~~$8.6~~$12.9 million and ~~$8.5~~$12.8 million, respectively.

Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019 (in thousands)

Cash flows provided by (used in) operating activities, investing activities and financing activities for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, were as follows:

Net cash flow provided by operating activities was ~~$5,082~~$10,246 for the ~~six~~nine months ended ~~June~~September 30, 2020, compared to ~~$10,443~~$18,390 for the ~~six~~nine months ended ~~June~~September 30, 2019. The net decrease during the 2020 period reflected ~~an increase~~a decrease of ~~$125~~$1,846 of cash flow from operating results, and a decrease of ~~$5,486~~$6,298 of cash generated by operating assets and liabilities.

Net cash used in investing activities was ~~$13,525~~$24,788 for the ~~six~~nine months ended ~~June~~September 30, 2020, compared to ~~$21,383~~$36,512 for the ~~six~~nine months ended ~~June~~September 30, 2019. We spent ~~$13,622~~$24,885 and ~~$21,383~~$34,962 on capital projects for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2020, we received $111 of insurance proceeds from the disposal of assets damaged in a fire at a property and spent $14 on the purchase of an interest rate cap. For the nine months ended September 30, 2019, we funded a $1,550 acquisition deposit for the 1010 Pacific Street property.

Net cash provided by financing activities was ~~$67,811~~$62,583 for the ~~six~~nine months ended ~~June~~September 30, 2020, compared to ~~$37,880~~$32,894 for the ~~six~~nine months ended ~~June~~September 30, 2019. Cash was primarily provided in the ~~six~~nine months ended ~~June~~September 30, 2020, by proceeds from the refinancing of the Flatbush Gardens property ($329,000), offset by repayment of the existing loan on the property ($246,000), loan issuance and extinguishment costs ($5,220) ~~and~~, scheduled debt amortization ($~~1,798)~~2,706) and repurchases of common stock ($240); and in the ~~six~~nine months ended ~~June~~September 30, 2019, by proceeds from the refinancing of the 250 Livingston Street property ($125,000), offset by repayment of the existing loan on the property ($75,000), loan issuance and extinguishment costs ($2,166) and scheduled debt amortization ($~~1,416)~~2,127). The Company paid distributions of ~~$8,595~~$12,922 and ~~$8,538~~$12,813 in the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

No provision has been made for income taxes since all of the Company’s operations are held in pass-through entities and accordingly the income or loss of the Company is included in the individual income tax returns of the partners or members.

We elected to be treated as a REIT for U.S. federal income tax purposes, beginning with our first taxable three months ended March 31, 2015. As a REIT, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate tax rates. We believe that we are organized and operate in a manner that will enable us to qualify and be taxed as a REIT and we intend to continue to operate so as to satisfy the requirements for qualification as a REIT for federal income tax purposes.

Inflation in the United States has been relatively low in recent years and did not have a significant impact on the results of operations for the Company’s business for the periods reported in the consolidated financial statements. We do not believe that inflation currently poses a material risk to the Company. The leases at our residential rental properties, which comprise approximately ~~76%~~73% and 75% of our revenue for the three and nine months ended September 30, 2020, respectively, are short-term in nature. Our longer-term commercial and retail leases would generally allow us to recover some increased costs in the event of significant inflation.

Although the impact of inflation has been relatively insignificant in recent years, it does remain a factor in the United States economy and could increase the cost of acquiring or replacing properties in the future.

As of ~~June~~September 30, 2020, we do not have any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.

In this Quarterly Report on Form 10-Q/A, we disclose and discuss funds from operations (“FFO”), adjusted funds from operations (“AFFO”), adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and net operating income (“NOI”), all of which meet the definition of “non-GAAP financial ~~measure”~~measures” set forth in Item 10(e) of Regulation S-K promulgated by the SEC.

While management and the investment community in general believe that presentation of these measures provides useful information to investors, neither FFO, AFFO, Adjusted EBITDA, nor NOI should be considered as an alternative to net income (loss) or income from operations as an indication of our performance. We believe that to understand our performance further, FFO, AFFO, Adjusted EBITDA, and NOI should be compared with our reported net income or income from operations and considered in addition to cash flows computed in accordance with GAAP, as presented in our consolidated financial statements.

FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and impairment adjustments, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO is consistent with FFO as defined by NAREIT.

AFFO is defined by us as FFO excluding amortization of identifiable intangibles incurred in property acquisitions, straight-line rent adjustments to revenue from long-term leases, amortization costs incurred in originating debt, interest rate cap mark-to-market adjustments, amortization of non-cash equity compensation, acquisition and other costs, loss on modification/extinguishment of debt, gain on involuntary conversion, gain on termination of lease and non-recurring litigation-related expenses, less recurring capital spending.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. In fact, real estate values have historically risen or fallen with market conditions. FFO is intended to be a standard supplemental measure of operating performance that excludes historical cost depreciation and valuation adjustments from net income. We consider FFO useful in evaluating potential property acquisitions and measuring operating performance. We further consider AFFO useful in determining funds available for payment of distributions. Neither FFO nor AFFO represent net income or cash flows from operations computed in accordance with GAAP. You should not consider FFO and AFFO to be alternatives to net income (loss) as reliable measures of our operating performance; nor should you consider FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (computed in accordance with GAAP) as measures of liquidity.

Neither FFO nor AFFO measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization, capital improvements and distributions to stockholders. FFO and AFFO do not represent cash flows from operating, investing or financing activities computed in accordance with GAAP. Further, FFO and AFFO as disclosed by other REITs might not be comparable to our calculations of FFO and AFFO.

The following table sets forth a reconciliation of FFO and AFFO for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands):

Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization

We believe that Adjusted EBITDA is a useful measure of our operating performance. We define Adjusted EBITDA as net income (loss) before allocation to non-controlling interests, plus real estate depreciation and amortization, amortization of identifiable intangibles, straight-line rent adjustments to revenue from long-term leases, amortization of non-cash equity compensation, interest expense (net), acquisition and other costs, loss on modification/extinguishment of debt and non-recurring litigation-related expenses, less gain on involuntary ~~conversion.~~conversion and gain on termination of lease.

We believe that this measure provides an operating perspective not immediately apparent from GAAP income from operations or net income (loss). We consider Adjusted EBITDA to be a meaningful financial measure of our core operating performance.

However, Adjusted EBITDA should only be used as an alternative measure of our financial performance. Further, other REITs may use different methodologies for calculating Adjusted EBITDA, and accordingly, our Adjusted EBITDA may not be comparable to that of other REITs.

The following table sets forth a reconciliation of Adjusted EBITDA for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands):

We believe that NOI is a useful measure of our operating performance. We define NOI as income from operations plus real estate depreciation and amortization, general and administrative expenses, acquisition and other costs, amortization of identifiable intangibles and straight-line rent adjustments to revenue from long-term ~~leases.~~leases, less gain on termination of lease. We believe that this measure is widely recognized and provides an operating perspective not immediately apparent from GAAP income from operations or net income (loss). We use NOI to evaluate our performance because NOI allows us to evaluate the operating performance of our company by measuring the core operations of property performance and capturing trends in rental housing and property operating expenses. NOI is also a widely used metric in valuation of properties.

However, NOI should only be used as an alternative measure of our financial performance. Further, other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to that of other REITs.

The following table sets forth a reconciliation of NOI for the periods presented to income from operations, computed in accordance with GAAP (amounts in thousands):

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 Form 10-K for the year ended December 31, 2019.

See Note 4, “Significant Accounting Policies” of our consolidated financial statements for a discussion of recent accounting pronouncements.

Our future income, cash flows and fair value relevant to our financial instruments depends upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. Based upon the nature of our operations, the principal market risk to which we are exposed is the risk related to interest rate fluctuations. Many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control, contribute to interest rate risk. To manage this risk, we purchased interest rate caps on the $64.7 million of Clover House debt outstanding (prior to the Clover House debt refinancing on November 8, 2019), the $75.0 million of 250 Livingston Street debt outstanding (prior to the 250 Livingston Street debt refinancing on May 31, 2019) and the ~~$19.9~~$20.1 million of 1010 Pacific Street debt outstanding as of ~~June~~September 30, 2020, that would provide interest rate protection if one-month LIBOR exceeds 3.0% for the Clover House loans, 4.0% for the 250 Livingston Street loan and 3.6% for the 1010 Pacific Street loans.

A one percent change in interest rates on our ~~$19.9~~$20.1 million of variable rate debt as of ~~June~~September 30, 2020, would impact annual net income by approximately $0.2 million.

The fair value of the Company’s notes payable was approximately ~~$1,219.5~~$1,224.8 million and $1,058.1 million as of ~~June~~September 30, 2020, and December 31, 2019, respectively.

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q/A. Based on such evaluation, our CEO and CFO have concluded that as of ~~June~~September 30, 2020, our disclosure controls and procedures were not effective at the reasonable assurance level as a result of the material weakness in our internal control over financial reporting discussed below.

Other than the material weakness described below, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q/A that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management is in the process of implementing remediation procedures to address the control deficiency that led to the material weakness. The remediation plan includes, but is not limited to, the implementation of additional review procedures regarding the method for accounting for straight-line rent associated with the reassessment of the lease term. We believe these measures will remediate the material weakness noted. While we have completed some of these measures as of the date of this report, we have not completed all measures. The material weakness has not been fully remediated as of the date of the filing of this Form 10-Q/A. As we continue to evaluate and work to remediate the control deficiencies that gave rise to the material weakness, we may determine that additional measures or time are required to address the control deficiencies or that we need to modify or otherwise adjust the remediation measures described above. We will continue to assess the effectiveness of our remediation efforts in connection with our evaluation of our internal control over financial reporting.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

On July 3, 2017, the Supreme Court of the State of New York (the “Court”) ruled in favor of 41 present or former tenants of apartment units at the Company’s buildings located at 50 Murray Street and 53 Park Place in Manhattan, New York (the Tribeca House property), who brought an action (the “Kuzmich” case) against the Company alleging that they were subject to applicable rent stabilization laws with the result that rental payments charged by the Company exceeded amounts permitted under these laws because the buildings were receiving certain tax abatements under Real Property Tax Law (“RPTL”) 421-g. The Court also awarded the plaintiffs-tenants their attorney’s fees and costs. The Court declared that the plaintiffs-tenants were subject to rent stabilization requirements and referred the matter to a special referee to determine the amount of rent over-charges, if any. On July 18, 2017, the Court, pursuant to the parties’ agreement, stayed the Court’s ruling; the Company subsequently appealed the decision to the Appellate Division, First Department. On January 18, 2018, the Appellate Division unanimously reversed the Court’s ruling and ruled in favor of the Company, holding that the Company acted properly in de-regulating the apartments. The plaintiffs-tenants thereafter moved for leave to appeal to the Court of Appeals, which motion was granted on April 24, 2018. On June 25, 2019, the New York Court of Appeals reversed the Appellate Division’s order and ruled in favor of the plaintiffs-tenants, holding that apartments in buildings receiving RPTL 421-g tax benefits are not subject to luxury deregulation. The Court of Appeals also remitted the matter for further proceedings consistent with its opinion. As a result of the Court of Appeals’ order, Company management believes that payments may be required to be made to the 41 present or former tenants comprising the plaintiff group, that other tenants may attempt to make similar claims, and that the special referee process referred to above will be used to determine the timing and the amount of any claims that must be paid. On July 25, 2019, the Company filed a motion for reargument with the New York Court of Appeals, which was denied on September 12, 2019. On October 24, 2019, the Company filed a Petition for a Writ of Certiorari with the United States Supreme Court, seeking permission to have that Court hear the Company’s appeal on Constitutional grounds from the Court of Appeals’ order. On January 13, 2020, the United States Supreme Court denied the Company’s Petition for a Writ of Certiorari, meaning that the Court of Appeals’ order is final. On August 13, 2019, the Court, in effect, reinstated its prior order and referred the calculation of rent overcharges and attorneys’ fees for a hearing before a special referee. The special referee’s hearing was scheduled for October 23, 2019. On October 17, 2019, the Company made a motion in the Appellate Division for a stay of the special referee’s hearing pending the Company’s appeal from the August 13 order. On such date, the Appellate Division granted an interim stay of the special referee’s hearing, pending the determination of the underlying motion. On January 7, 2020, the Appellate Division granted the Company’s motion for a full stay of the special referee’s hearing pending appeal. The appeal had been scheduled to be argued during the May 2020 term, but on March 16, 2020, the parties filed a stipulation adjourning the appeal to the September 2020 term. On or about July 13, 2020, the parties filed another stipulation adjourning the appeal to the October 2020 term. The appeal was orally argued on October 8, 2020. On October ~~24, 2019,~~29, 2020, the ~~Company filed a Petition for a Writ of Certiorari with~~Appellate Division reversed the ~~United States Supreme Court, seeking permission~~lower court’s ruling to ~~have~~the extent that ~~Court hear~~it directed any rent overcharges to be calculated pursuant to the ~~Company’s appeal on Constitutional grounds from~~so-called “default formula.” Instead, the Appellate Division applied the Court of Appeals’ ~~order. On January 13, 2020,~~recent Regina ruling to this case and held that (1) the ~~United States Supreme Court denied~~“base date” for the determination of rent overcharges is four years prior to the 2016 filing of the complaint, and (2) overcharges, if any, are to be determined by comparing the rents actually charged during the four-year period to the rent increases permitted by the New York City Rent Guidelines Board. Although not eliminating rent overcharge liability altogether, this ruling is expected to limit the Company’s ~~Petition~~financial exposure in this regard. The Appellate Division, however, affirmed the lower court’s award of attorneys’ fees to the plaintiffs-tenants. The case will eventually be remanded back to the lower court, which will determine the exact amount of the Company’s liability for ~~a Writ~~rent overcharges and attorneys’ fees; no future court dates have been scheduled as of ~~Certiorari, meaning that the Court of Appeals’ order is final.~~yet. On November 18, 2019, the same law firm which filed the Kuzmich case ~~above~~ filed a second action involving a separate group of 26 tenants (captioned Crowe et al v 50 Murray Street Acquisition LLC, Supreme Court, New York County, Index No. 161227/19), which action advances the same ~~exact~~ claims as in Kuzmich. The Company’s deadline to answer or otherwise respond to the complaint in Crowe had been extended to June 30, 2020; on such date, the Company filed its answer to the complaint. Pursuant to the court’s rules, on July 16, 2020, the plaintiffs filed an amended complaint; the sole difference as compared to the initial complaint is that seven new plaintiffs-tenants were added to the caption; there were no substantive changes to the complaint’s allegations. On August 5, 2020, the Company filed its answer to the amended complaint. The Company cannot predict what the timing or ultimate resolution of these matters will be, and accordingly, at this time, the Company has not recorded any liability for the potential settlement of these matters.

In addition to the above, the Company is subject to certain legal proceedings and claims arising in connection with its business, including a claim under the Americans with Disabilities Act of 1990 at the 141 Livingston Street ~~property.~~property, which is expected to be settled in November 2020. Management believes, based in part upon consultation with legal counsel, that the ultimate resolution of all such claims will not have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows.

The risk factors disclosed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, 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. Moreover, many of the risks described in the risk factors set forth in our Annual Report on Form 10-K may be more likely to impact us as a result of the COVID-19 pandemic.

The risk factors set forth below supplement, and should be read together with, the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

The ongoing COVID-19 pandemic, and measures intended to curb its spread, could have a material adverse impact on our business, financial condition, liquidity and results of operations.

The COVID-19 pandemic, which was declared a pandemic by the World Health Organization in March 2020, has had an ongoing significant adverse impact on local, national, and global economic activity and has contributed to volatility in global financial markets. The pandemic led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to control the spread of the virus, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. Beginning in early May 2020, the United States began to lift certain lockdown restrictions and allow for the reopening of ~~businesses,~~businesses; however, state and local governments, including the State and City of New York, have since imposed localized restrictions and there can be no assurance that ~~these~~broader lockdown restrictions will not be re-imposed or that additional new restrictions will not be put in place.

The impact of the COVID-19 pandemic and measures enacted by governmental authorities to curb its spread have negatively impacted, and may continue to negatively impact, our business in a number of ways, including affecting our tenants’ ability or willingness to pay rents and reducing demand for housing in the New York metropolitan area; for example, the ~~percentage~~Tribeca House property has experienced declines in leased occupancy and residential rental rate as a result of ~~our tenants’ rent that we collected in~~ the ~~second quarter of 2020 was lower than the collection rate in the first quarter of 2020, prior to the impact of COVID-19,~~pandemic, and certain of our commercial tenants have ~~announced temporary closures of their locations and~~ requested rent deferrals during the pandemic. In some cases, we may restructure rent and other obligations under our leases with our tenants on terms that are less favorable to us than those currently in place. In the event of resident nonpayment, default or bankruptcy, we may incur costs in protecting our investment and re-leasing our property. Additionally, local and national authorities may enact, expand or extend certain measures, including moratoriums on or suspensions of eviction proceedings, imposing restrictions on our ability to enforce tenants’ contractual rental obligations. In addition, if governmental restrictions restricting our employees’ and other brokers’ ability to meet with existing and potential residents are re-imposed, such restrictions may disrupt our ability to lease apartments which could adversely impact our rental rate and occupancy levels.

The COVID-19 pandemic has caused, and is likely to continue to cause, severe economic, market and other disruptions worldwide. We cannot assure you conditions will not continue to deteriorate as a result of the COVID-19 pandemic. For example, due to ~~the~~a recent increase in the number of COVID-19 cases ~~following~~in certain areas of New York State and New York City, the ~~reopening~~State and City of ~~some portions of~~New York instituted local restrictions in targeted neighborhoods in New York City. Additionally, the United States, state and local governments may reinstitute lockdowns to control the further spread of the virus. In addition, the continued deterioration of global economic conditions as a result of the COVID-19 pandemic may ultimately result in a further decrease in occupancy levels and ~~pricing~~rental rates across our portfolio as residents and commercial tenants reduce their ~~spending.~~spending and replacement tenants become harder to find.

The full extent of the COVID-19 pandemic’s effect on our business, financial condition, liquidity and results of operations will depend on future developments, including the duration, spread and intensity of the outbreak and the measures intended to curb its spread, all of which are uncertain and difficult to predict. As a result of the rapid development and fluidity with which the situation continues to develop, we are unable to estimate the effect of these factors on our business, but if such events lead to a continued significant or prolonged impact on capital or credit markets or economic growth, then our business, financial condition, liquidity and results of operations could be adversely affected.

We recently identified a material weakness in our internal control over financial reporting related to the method for accounting for straight-line revenue in connection with a multi-year lease with a termination option. If we do not effectively remediate the material weakness or if we otherwise fail to maintain effective disclosure controls and procedures or internal control over financial reporting, our ability to report our financial results on a timely and accurate basis may adversely affect the market price of our common stock.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As described in Note 2 to our unaudited consolidated financial statements included in Part I, Item 1 of this Form 10-Q/A, we identified a control deficiency constituting a material weakness in our internal control over financial reporting related to an error identified in connection with the accounting for straight-line rent associated with the reassessment of a lease term. As a result of the material weakness identified in Note 2, our management concluded that we did not maintain effective disclosure controls and procedures and internal control over financial reporting as of December 31, 2020. Management is in the process of implementing remediation procedures to address the control deficiency that led to the material weakness. The remediation plan includes, but is not limited to, the implementation of additional review procedures regarding the accounting for straight-line rent associated with the reassessment of the lease term. There can be no assurances that the remediation plan will be effective in addressing this control deficiency or preventing other control deficiencies in the future. Subsequent testing by us or our independent registered public accounting firm, which has not yet performed an audit of our internal control over financial reporting, may reveal additional deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or significant deficiencies.

In future periods, if the process required by Section 404 of the Sarbanes-Oxley Act of 2002 reveals or we otherwise identify one or more material weaknesses or significant deficiencies, the correction of any such material weakness or significant deficiency could require additional remedial measures including additional personnel which could be costly and time-consuming. If a material weakness exists as of a future period year-end (including a material weakness identified prior to year-end for which there is an insufficient period of time to evaluate and confirm the effectiveness of the corrections or related new procedures), our management will be unable to report favorably as of such future period year-end to the effectiveness of our control over financial reporting and we could be required again to restate our financial results. If we are unable to assert that our internal control over financial reporting is effective in any future period, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the trading price of our common stock and potentially subject us to potentially costly litigation and governmental inquiries/investigations.

In August 2020, the Board adopted a stock repurchase program to permit the repurchase of up to an aggregate of $10.0 million in outstanding shares of the Company’s common stock. Under the repurchase program, the Company may repurchase its common stock at any time, or from time to time. The Company anticipates funding for the program to come from available sources of liquidity, including cash on hand and future cash flow. The repurchase program permits shares to be repurchased in open market or private transactions, through block trades or otherwise. The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at the Company’s discretion, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses of capital and the Company’s financial performance. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity and other factors deemed appropriate by the Company. These factors may also affect the timing and amount of share repurchases. The repurchase program does not obligate the Company to repurchase any particular number of shares. During the three months ended September 30, 2020, we repurchased 45,858 shares of common stock for a total purchase price of $0.3 million.

The following table is a summary of our repurchase activity during the quarter ended September 30, 2020:

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned.

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2020			2019			2020			2019
	(restated)						(restated)						(restated)						(restated)
REVENUES
Residential rental income	$	23,679		$	21,146		$	47,397		$	41,918		$	21,948		$	22,117		$	69,345		$	64,035
Commercial rental income		7,479			7,300			15,076			14,180			8,092			7,323			23,168			21,503
TOTAL REVENUES		31,158			28,446			62,473			56,098			30,040			29,440			92,513			85,538

OPERATING EXPENSES
Property operating expenses		6,868			6,747			14,027			14,310			7,867			7,357			21,894			21,667
Real estate taxes and insurance		6,778			5,707			13,642			11,438			7,463			6,740			21,105			18,178
General and administrative		2,704			2,579			5,027			4,247			2,297			1,904			7,324			6,151
Depreciation and amortization		5,872			4,590			11,430			9,139			5,934			4,929			17,364			14,068
TOTAL OPERATING EXPENSES		22,222			19,623			44,126			39,134			23,561			20,930			67,687			60,064

Gain on termination of lease														838			0			838			0

INCOME FROM OPERATIONS		8,936			8,823			18,347			16,964			7,317			8,510			25,664			25,474

Interest expense, net		(9,979	)		(8,210	)		(19,767	)		(16,484	)		(10,207	)		(8,692	)		(29,974	)		(25,176	)
Loss on modification/extinguishment of debt		(4,228	)		(1,771	)		(4,228	)		(1,771	)		0			0			(4,228	)		(1,771	)
Gain on involuntary conversion		85			0			85			0			0			0			85			0

Net loss		(5,186	)		(1,158	)		(5,563	)		(1,291	)		(2,890	)		(182	)		(8,453	)		(1,473	)

Net loss attributable to non-controlling interests		3,092			691			3,317			770			1,723			109			5,040			879
Net loss attributable to common stockholders	$	(2,094	)	$	(467	)	$	(2,246	)	$	(521	)	$	(1,167	)	$	(73	)	$	(3,413	)	$	(594	)
Basic and diluted net loss per share	$	(0.12	)	$	(0.03	)	$	(0.13	)	$	(0.04	)	$	(0.08	)	$	(0.01	)	$	(0.21	)	$	(0.05	)

	Number of common shares		Common stock		Additional paid-in- capital			Accumulated deficit			Total stockholders’ equity			Non- controlling interests			Total equity			Number of common shares		Common stock		Additional paid-in- capital			Accumulated deficit			Total stockholders’ equity			Non- controlling interests			Total equity
Balance December 31, 2018		17,812,755	$	178	$	92,945		$	(27,941	)	$	65,182		$	96,303		$	161,485			17,812,755	$	178	$	92,945		$	(27,941	)	$	65,182		$	96,303		$	161,485
Amortization of LTIP grants		—		0		—			—			—			156			156			—		0		—			—			—			156			156
Dividends and distributions		—		0		0			(1,692	)		(1,692	)		(2,569	)		(4,261	)		—		0		0			(1,692	)		(1,692	)		(2,569	)		(4,261	)
Net loss		—		0		—			(54	)		(54	)		(79	)		(133	)		—		0		—			(54	)		(54	)		(79	)		(133	)
Reallocation of noncontrolling interests		—		0		35			0			35			(35	)		0			—		0		35			0			35			(35	)		0
Balance March 31, 2019		17,812,755	$	178	$	92,980		$	(29,687	)	$	63,471		$	93,776		$	157,247			17,812,755	$	178	$	92,980		$	(29,687	)	$	63,471		$	93,776		$	157,247
Issuance of common stock		1,917		0		25			0			25			0			25			1,917		0		25			0			25			0			25
Redemption of LTIP grants		—		0		(25	)		0			(25	)		0			(25	)		—		0		(25	)		0			(25	)		0			(25	)
Amortization of LTIP grants		—		0		0			0			0			704			704			—		0		0			0			0			704			704
Dividends and distributions		—		0		0			(1,693	)		(1,693	)		(2,584	)		(4,277	)		—		0		0			(1,693	)		(1,693	)		(2,584	)		(4,277	)
Net loss		—		0		0			(467	)		(467	)		(691	)		(1,158	)		—		0		0			(467	)		(467	)		(691	)		(1,158	)
Reallocation of noncontrolling interests		—		0		255			0			255			(255	)		0			—		0		255			0			255			(255	)		0
Balance June 30, 2019		17,814,672	$	178	$	93,235		$	(31,847	)	$	61,566		$	90,950		$	152,516			17,814,672	$	178	$	93,235		$	(31,847	)	$	61,566		$	90,950		$	152,516
Amortization of LTIP grants																					—		0		0			0			0			325			325
Dividends and distributions																					—		0		0			(1,692	)		(1,692	)		(2,583	)		(4,275	)
Net loss																					—		0		0			(73	)		(73	)		(109	)		(182	)
Reallocation of noncontrolling interests																					—		0		97			0			97			(97	)		0
Balance September 30, 2019																					17,814,672	$	178	$	93,332		$	(33,612	)	$	59,898		$	88,486		$	148,384

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except per share amounts)	2020			2019			2020			2019			2020			2019			2020			2019
	(restated)						(restated)						(restated)						(restated)
Numerator
Net loss attributable to common stockholders	$	(2,094	)	$	(467	)	$	(2,246	)	$	(521	)	$	(1,167	)	$	(73	)	$	(3,413	)	$	(594	)
Less: income attributable to participating securities		(126	)		(83	)		(210	)		(152	)		(134	)		(84	)		(344	)		(236	)
Subtotal	$	(2,220	)	$	(550	)	$	(2,456	)	$	(673	)	$	(1,301	)	$	(157	)	$	(3,757	)	$	(830	)
Denominator
Weighted average common shares outstanding		17,815			17,815			17,815			17,814			17,811			17,815			17,814			17,814

Basic and diluted net loss per share attributable to common stockholders	$	(0.12	)	$	(0.03	)	$	(0.13	)	$	(0.04	)	$	(0.08	)	$	(0.01	)	$	(0.21	)	$	(0.05	)

	June 30, 2020			December 31, 2019			September 30, 2020			December 31, 2019
	(unaudited)						(unaudited)
Deferred costs	$	348		$	348		$	348		$	348
Above-market leases		0			444			0			444
Lease origination costs		1,141			1,385			1,078			1,385
In-place leases		859			859			428			859
Real estate tax abatements		9,142			9,142			9,142			9,142
Total deferred costs and intangible assets		11,490			12,178			10,996			12,178
Less accumulated amortization		(3,291	)		(3,396	)		(3,098	)		(3,396	)
Total deferred costs and intangible assets, net	$	8,199		$	8,782		$	7,898		$	8,782

2020 (Remainder)	$	387	$	178
2021		760		697
2022		729		668
2023		583		559
2024		537		544
Thereafter		5,203		5,252
Total	$	8,199	$	7,898

	As of June 30, 2020								As of September 30, 2020
	As Reported			Adjustment		Restated			As Reported			Adjustment		Restated
Balance Sheet:
Deferred rent	$	881		$	858	$	1,739		$	673		$	1,287	$	1,960
Total Assets	$	1,230,449		$	858	$	1,231,307		$	1,222,881		$	1,287	$	1,224,168
Accounts payable and accrued liabilities	$	10,699		$	110	$	10,809
Total Liabilities	$	1,102,879		$	110	$	1,102,989
Accumulated deficit	$	(42,307	)	$	302	$	(42,005	)	$	(45,384	)	$	519	$	(44,865	)
Total stockholders’ equity	$	51,497		$	302	$	51,799		$	48,406		$	519	$	48,925
Non-controlling interests	$	76,073		$	446	$	76,519		$	71,693		$	768	$	72,461
Total Equity	$	127,570		$	748	$	128,318		$	120,099		$	1,287	$	121,386
Total Liabilities and Equity	$	1,230,449		$	858	$	1,231,307		$	1,222,881		$	1,287	$	1,224,168

	Three Months Ended June 30, 2020									Three Months Ended September 30, 2020
	As Reported			Adjustment			Restated			As Reported			Adjustment			Restated
Statements of Operations:
Commercial rental income	$	7,050		$	429		$	7,479		$	7,663		$	429		$	8,092
Total Revenues	$	30,729		$	429		$	31,158		$	29,611		$	429		$	30,040
General and administrative	$	2,594		$	110		$	2,704		$	2,407		$	(110	)	$	2,297
Total Operating Expenses	$	22,112		$	110		$	22,222		$	23,671		$	(110	)	$	23,561
Income From Operations	$	8,617		$	319		$	8,936		$	6,778		$	539		$	7,317
Net loss	$	(5,505	)	$	319		$	(5,186	)	$	(3,429	)	$	539		$	(2,890	)
Net loss attributable to non-controlling interests	$	3,283		$	(191	)	$	3,092		$	2,045		$	(322	)	$	1,723
Net loss attributable to common stockholders	$	(2,222	)	$	128		$	(2,094	)	$	(1,384	)	$	217		$	(1,167	)
Basic and diluted net loss per share	$	(0.13	)	$	0.01		$	(0.12	)	$	(0.09	)	$	0.01		$	(0.08	)

	Six Months Ended June 30, 2020									Nine Months Ended September 30, 2020
	As Reported			Adjustment			Restated			As Reported			Adjustment			Restated
Statements of Operations:
Commercial rental income	$	14,218		$	858		$	15,076		$	21,881		$	1,287		$	23,168
Total Revenues	$	61,615		$	858		$	62,473		$	91,226		$	1,287		$	92,513
General and administrative	$	4,917		$	110		$	5,027
Total Operating Expenses	$	44,016		$	110		$	44,126
Income From Operations	$	17,599		$	748		$	18,347		$	24,377		$	1,287		$	25,664
Net loss	$	(6,311	)	$	748		$	(5,563	)	$	(9,740	)	$	1,287		$	(8,453	)
Net loss attributable to non-controlling interests	$	3,763		$	(446	)	$	3,317		$	5,808		$	(768	)	$	5,040
Net loss attributable to common stockholders	$	(2,548	)	$	302		$	(2,246	)	$	(3,932	)	$	519		$	(3,413	)
Basic and diluted net loss per share	$	(0.15	)	$	0.02		$	(0.13	)	$	(0.24	)	$	0.03		$	(0.21	)

	As of and for the Three Months Ended March 31, 2020
	As Reported			Adjustment		Restated
Statements of Changes in Equity:
Net loss	$	(806	)	$	429	$	(377	)
Accumulated deficit	$	(38,393	)	$	174	$	(38,219	)
Total stockholders’ equity	$	55,246		$	174	$	55,420
Non-controlling interests	$	81,613		$	255	$	81,868
Total Equity	$	136,859		$	429	$	137,288

	As of and for the Three Months Ended June 30, 2020
	As Reported			Adjustment		Restated
Statements of Changes in Equity:
Net loss	$	(5,505	)	$	319	$	(5,186	)
Accumulated deficit	$	(42,307	)	$	302	$	(42,005	)
Total stockholders’ equity	$	51,497		$	302	$	51,799
Non-controlling interests	$	76,073		$	446	$	76,519
Total Equity	$	127,570		$	748	$	128,318

	As of and for the Three Months Ended September 30, 2020
	As Reported			Adjustment		Restated
Statements of Changes in Equity:
Net loss	$	(3,429	)	$	539	$	(2,890	)
Accumulated deficit	$	(45,384	)	$	519	$	(44,865	)
Total stockholders’ equity	$	48,406		$	519	$	48,925
Non-controlling interests	$	71,693		$	768	$	72,461
Total Equity	$	120,099		$	1,287	$	121,386

Building and improvements (in years)	10	–	44
Tenant improvements	Shorter of useful life or lease term
Furniture, fixtures and equipment (in years)	3	–	15

Property	Maturity	Interest Rate	June 30, 2020			December 31, 2019			Maturity	Interest Rate	September 30, 2020			December 31, 2019

Flatbush Gardens, Brooklyn, NY (a)	6/1/2032	3.125%	$	329,000		$	0		6/1/2032	3.125%	$	329,000		$	0
Flatbush Gardens, Brooklyn, NY (a)	3/1/2028	3.50%		0			246,000		3/1/2028	3.50%		0			246,000
250 Livingston Street, Brooklyn, NY (b)	6/6/2029	3.63%		125,000			125,000		6/6/2029	3.63%		125,000			125,000
141 Livingston Street, Brooklyn, NY (c)	6/1/2028	3.875%		75,037			75,817		6/1/2028	3.875%		74,641			75,817
Tribeca House, Manhattan, NY (d)	3/6/2028	4.506%		360,000			360,000		3/6/2028	4.506%		360,000			360,000
Aspen, Manhattan, NY (e)	7/1/2028	3.68%		66,180			66,862		7/1/2028	3.68%		65,837			66,862
Clover House, Brooklyn, NY (f)	12/1/2029	3.53%		82,000			82,000		12/1/2029	3.53%		82,000			82,000
10 West 65^th Street, Manhattan, NY (g)	11/1/2027	3.375%		33,960			34,295		11/1/2027	3.375%		33,790			34,295
1010 Pacific Street, Brooklyn, NY (h)	12/24/2020	LIBOR + 3.60%		19,880			19,457		12/24/2020	LIBOR + 3.60%		20,128			19,457
Total debt	Total debt		$	1,091,057		$	1,009,431		Total debt		$	1,090,396		$	1,009,431
Unamortized debt issuance costs	Unamortized debt issuance costs			(11,380	)		(11,528	)	Unamortized debt issuance costs			(10,811	)		(11,528	)
Total debt, net of unamortized debt issuance costs	Total debt, net of unamortized debt issuance costs		$	1,079,677		$	997,903		Total debt, net of unamortized debt issuance costs		$	1,079,585		$	997,903

2020 (Remainder)	$	21,769	$	21,108
2021		3,777		3,777
2022		3,920		3,920
2023		4,068		4,068
2024		4,216		4,216
Thereafter		1,053,307		1,053,307
Total	$	1,091,057	$	1,090,396

2020 (Remainder)	$	13,211	$	6,913
2021		29,977		29,658
2022		29,746		29,787
2023		27,693		27,725
2024		26,960		27,314
Thereafter		24,846		31,101
Total	$	152,433	$	152,498

Notional Amount		Related Property Loans	Maturity Date	Strike Rate			Estimated Fair Value at June 30, 2020		Estimated Fair Value at December 31, 2019			Related Property Loans	Maturity Date	Strike Rate		Estimated Fair Value at September 30, 2020		Estimated Fair Value at December 31, 2019
							(unaudited)									(unaudited)
$75,000		250 Livingston Street	December 15, 2020		4.0	%	$	0	$	0		250 Livingston Street	December 15, 2020		4.0%	$	0	$	0
$21,587		1010 Pacific Street	December 24, 2020		3.6	%		0		0		1010 Pacific Street	December 24, 2020		3.6%		0		0

Total fair value of derivative instruments included in prepaid expenses and other assets	Total fair value of derivative instruments included in prepaid expenses and other assets						$	0	$	0	Total fair value of derivative instruments included in prepaid expenses and other assets					$	0	$	0

	Commercial			Residential			Total
Three months ended June 30, 2020 (as restated)		24	%		76	%		100	%
Three months ended June 30, 2019		26	%		74	%		100	%
Six months ended June 30, 2020 (as restated)		24	%		76	%		100	%
Six months ended June 30, 2019		25	%		75	%		100	%

Three months ended June 30, 2020	Commercial		Residential		Total
Three months ended September 30, 2020							Commercial		Residential		Total
	(restated)				(restated)		(restated)				(restated)
Rental income	$	7,479	$	23,679	$	31,158	$	8,092	$	21,948	$	30,040
Total revenues		7,479		23,679		31,158		8,092		21,948		30,040
Property operating expenses		898		5,970		6,868		1,025		6,842		7,867
Real estate taxes and insurance		1,444		5,334		6,778		1,917		5,546		7,463
General and administrative		512		2,192		2,704		234		2,063		2,297
Depreciation and amortization		1,092		4,780		5,872		1,117		4,817		5,934
Total operating expenses		3,946		18,276		22,222		4,293		19,268		23,561
Gain on termination of lease								838		0		838
Income from operations	$	3,533	$	5,403	$	8,936	$	4,637	$	2,680	$	7,317

Six months ended June 30, 2020	Commercial		Residential		Total
	(restated)				(restated)
Rental income	$	15,076	$	47,397	$	62,473
Total revenues		15,076		47,397		62,473
Property operating expenses		2,035		11,992		14,027
Real estate taxes and insurance		2,936		10,706		13,642
General and administrative		849		4,178		5,027
Depreciation and amortization		2,111		9,319		11,430
Total operating expenses		7,931		36,195		44,126
Income from operations	$	7,145	$	11,202	$	18,347

Nine months ended September 30, 2020	Commercial		Residential		Total
	(restated)				(restated)
Rental income	$	23,168	$	69,345	$	92,513
Total revenues		23,168		69,345		92,513
Property operating expenses		3,060		18,834		21,894
Real estate taxes and insurance		4,853		16,252		21,105
General and administrative		1,083		6,241		7,324
Depreciation and amortization		3,228		14,136		17,364
Total operating expenses		12,224		55,463		67,687
Gain on termination of lease		838		0		838
Income from operations	$	11,782	$	13,882	$	25,664

Nine months ended September 30, 2019	Commercial		Residential		Total
Rental income	$	21,503	$	64,035	$	85,538
Total revenues		21,503		64,035		85,538
Property operating expenses		3,296		18,371		21,667
Real estate taxes and insurance		4,004		14,174		18,178
General and administrative		947		5,204		6,151
Depreciation and amortization		2,876		11,192		14,068
Total operating expenses		11,123		48,941		60,064
Income from operations	$	10,380	$	15,094	$	25,474

	2020			Less: Clover House			2020 excluding Clover House			2019			Increase (decrease)			%
	(restated)						(restated)
Revenues
Residential rental income	$	23,679		$	1,848		$	21,831		$	21,146		$	685			3.2	%
Commercial rental income		7,479			4			7,475			7,300			175			2.4	%
Total revenues		31,158			1,852			29,306			28,446			860			3.0	%
Operating Expenses
Property operating expenses		6,868			231			6,637			6,747			(110	)		(1.6	)%
Real estate taxes and insurance		6,778			368			6,410			5,707			703			12.3	%
General and administrative		2,704			184			2,520			2,579			(59	)		(2.3	)%
Depreciation and amortization		5,872			583			5,289			4,590			699			15.2	%
Total operating expenses		22,222			1,366			20,856			19,623			1,233			6.3	%
Income from operations		8,936			486			8,450			8,823			(373	)		(4.2	)%
Interest expense, net		(9,979	)		(755	)		(9,224	)		(8,210	)		1,014			12.4	%
Loss on modification/extinguishment of debt		(4,228	)		—			(4,228	)		(1,771	)		2,457			138.7	%
Gain on involuntary conversion		85			—			85			—			85			NM
Net loss	$	(5,186	)	$	(269	)	$	(4,917	)	$	(1,158	)	$	(3,759	)		324.6	%

Period	Total Number of Shares Purchased		Weighted Average Price Per Share		Maximum Dollar Value of Shares that May Still Be Purchased Under the Program (in thousands)
Common stock
July 1, 2020 – July 31, 2020	NA		NA		NA
August 1, 2020 – August 31, 2020		—	$	—	$	10,000
September 1, 2020 – September 30, 2020		45,858		5.90		9,729
Total common stock		45,858	$	5.90

Exhibit Number	Description
*31.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

*31.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

*32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

**101.INS	Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

**101.SCH	Inline XBRL Taxonomy Extension Schema Document

**101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

**101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

**101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

**101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

**104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	CLIPPER REALTY INC.

April 28, 2021	By:	/s/ David Bistricer
		David Bistricer
		Co-Chairman and Chief Executive Officer