CLPR

You should read the following discussion of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included in Part I-Item 1 of this Form 10-Q, as well as our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those discussed in these forward-looking statements. See “Cautionary Note Concerning Forward-Looking Statements” in this Form 10-Q. Overview of Our Company 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. As of June 30, 2026, the Company owned: • two neighboring residential/retail rental properties at 50 Murray Street and 53 Park Place in the Tribeca neighborhood of Manhattan; • one residential property complex in the East Flatbush neighborhood of Brooklyn consisting of 59 buildings; • two primarily commercial properties in Downtown Brooklyn (one of which includes 36 residential apartment units); • one residential/retail rental property at 1955 1st Avenue in Manhattan; • one residential rental property at 107 Columbia Heights in the Brooklyn Heights neighborhood of Brooklyn; • one residential rental property at 1010 Pacific Street in the Prospect Heights neighborhood of Brooklyn; and • one residential rental property at 953 Dean Street, in the Prospect Heights neighborhood of Brooklyn. On May 30, 2025, the Company completed the sale of 10 West 65th Street in Manhattan, a 6-story residential building with approximately 76,000 square feet of residential rental GLA. for gross proceeds of $45,500. The Company incurred $1,900 in closing costs and paid $800 in accrued interest at closing. At closing, the Company repaid in full its $31,200 mortgage note (the “Mortgage”) with Flagstar Bank (“Flagstar”) (see note 4 above). The Company recorded a loss on the disposal of long-lived assets of $685 in conjunction with closing of the sale in the second quarter of 2025, after previously recording a loss on impairment of long-lived assets of $33,780 in the three months ended March 31, 2025. These properties are located in the most densely populated major city in the United States, each with immediate access to mass transportation. 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 62.1% 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 37.9% of the aggregate distributions from the LLC subsidiaries. The Company, through the Operating Partnership, owns all the ownership interests in the Aspen property, the Clover House property, the 1010 Pacific Street property and the Dean Street property. 25 How We Derive Our Revenue Our revenue consists primarily of rents received from our residential, commercial and, to a lesser extent, retail tenants. We have two reportable operating segments, Residential Rental Properties and Commercial Rental Properties. See Note 9, “Segment Reporting” to our condensed consolidated financial statements included in this Form 10-Q. Trends During the second quarter of 2026, the Company’s residential properties continued to have elevated occupancy levels and experienced growth in rental rates, as a result of a robust rental market in the New York metro area. The average rental rate per square foot at the Tribeca House property at June 30, 2026 was $91.88, up from $85.60 at June 30, 2025. At the Flatbush Gardens property, average residential rent per square foot at June 30, 2026, was $33.13, up from $31.27 at June 30, 2025. At the Clover House property, average residential rent per square foot at June 30, 2026, was $91.19, an increase from $87.76 at June 30, 2025. As of June 30, 2026, the Company’s office property 250 Livingston Street was vacant as the City of New York vacated as of August 23, 2025. However, there is no assurance that the Company will be able to replace the City of New York as its tenant or will be able to replace it at comparable rents. Until a new tenant is located, the Company expects to lose approximately $16,000 per annum in combined rental income and property tax and common area maintenance reimbursements and the property will not be able to fund its debt service. The Company’s defaults under the mortgage loan secured by our 250 Livingston Street property resulted in the appointment of a temporary receiver for that property, and the lender has the right at the end of the marketing period under the Consent and Cooperation Agreement (the “Agreement”) entered into with the lender to foreclose on the property or to take a deed to the property in lieu of foreclosure. As of August 6, 2026, the lender has not taken any such action. The Agreement also provides that the borrower under that mortgage loan has the right to submit an offer to purchase the loan. Additionally, our lease with the City of New York at 141 Livingston expired in December 2025, although the City of New York continues to occupy its office space and pays its rent in accordance with the terms of the expired lease. The Company and the City of New York are negotiating the terms of a five-year extension of their expired lease. There can be no assurance that the negotiations will conclude with an agreement, and the Company is at risk of not replacing the City of New York as its tenant or not being able to replace it at comparable rents. See note 4 to condensed consolidated financial statements, “- Liquidity and Capital Resources” below and Part II, Item 1A. Risk Factors.” Throughout the first half of 2026 and all of 2025, we continued to benefit from relatively low interest rates on our debt. Our weighted average interest rate as of June 30, 2026, was approximately 4.2% per annum. Results of Operations Our focus throughout 2025 and year-to-date 2026 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 were in operation for the full period in each comparison and excludes the results of 10 West 65th Street due to its sale on May 30, 2025, and 953 Dean Street which was put into service on August 1, 2025. 26 Income Statement for the Three Months Ended June 30, 2026 and 2025 (in thousands) 2026 10 West: 65thStreet & Dean Street 2026: Excluding 10 West 65th Street & Dean Street 2025 10 West: 65th Street & Dean Street 2025: Excluding 10 West 65th Street & Dean Street Increase (decrease) Excluding 10 West 65th Street & Dean Street % Revenues Residential rental income $ 32,222 $ 2,313 $ 29,909 $ 29,054 $ 691 $ 28,363 $ 1,546 5.5 % Commercial rental income 6,353 29 6,324 9,982 3 9,979 (3,655 ) (36.6 )% Total revenues 38,575 2,342 36,233 39,036 694 38,342 (2,109 ) (5.5 )% Operating Expenses Property operating expenses 9,272 182 9,089 9,561 115 9,446 (357 ) (3.8 )% Real estate taxes and insurance 7,429 (138 ) 7,567 7,518 185 7,333 234 3.2 % General and administrative 4,253 160 4,094 3,819 87 3,732 362 9.7 % Transaction pursuit costs — — — (10 ) — (10 ) 10 (100 )% Depreciation and amortization 8,023 673 7,350 7,314 — 7,314 36 0.5 % Total operating expenses 28,977 877 28,100 28,202 387 27,815 285 1.0 % Litigation settlement and other (209 ) — (209 ) (26 ) — (26 ) (183 ) 703.8 % Income from operations 9,389 1,465 7,924 10,808 (307 ) 10,501 (2,577 ) (24.5 )% Loss on disposal of Long-lived assets — — — (685 ) (685 ) — — 0.0 % Interest expense, net (15,654 ) (2,791 ) (12,863 ) (11,479 ) (322 ) (11,157 ) (1,706 ) (15.3 )% Net loss $ (6,265 ) $ (1,326 ) $ (4,939 ) $ (1,356 ) $ (700 ) $ (656 ) $ (4,283 ) (652.9 )% 27 Revenue. Residential rental income increased to $29,909 for the three months ended June 30, 2026, from $28,363 for the three months ended June 30, 2025, primarily due to increases in rental rates and leased occupancy at all properties in 2026 partially offset by higher bad debt expense. For example, base rent per square foot increased at the Tribeca House property to $91.88 at June 30, 2026, from $85.60 at June 30, 2025, and at the Clover House property, to $91.19 at June 30, 2026, up from $87.76 at June 30, 2025. Commercial rental income decreased to $6,324 for the three months ended June 30, 2026, from $9,979 for the three months ended June 30, 2025, due to the City of New York exiting 250 Livingston on August 23, 2025. Property operating expenses. Property operating expenses include property-level costs such as compensation costs for property-level personnel, repairs and maintenance, supplies, utilities and landscaping. Property operating expenses decreased to $9,089 for the three months ended June 30, 2026, from $9,446 for the three months ended June 30, 2025, primarily due to lower repairs and maintenance at the Flatbush Gardens property partially offset by increased water and sewer costs at Tribeca House. Real estate taxes and insurance. Real estate taxes and insurance expenses increased to $7,567 for the three months ended June 30, 2026, from $7,333 for the three months ended June 30, 2025, primarily due to slightly increased real estate taxes and insurance premiums across the portfolio. General and administrative. General and administrative expenses increased to $4,094 for the three months ended June 30, 2026, from $3,732 for the three months ended June 30, 2025, primarily due to the accrual of various fees related to our default on the 250 Livingston building. Depreciation and amortization. Depreciation and amortization expense increased to $7,350 for the three months ended June 30, 2026, from $7,314 for the three months ended June 30, 2025. Litigation Settlement and other. Litigation settlement and other increased to $209 for the three months ended June 30, 2026, from $26 for the three months ended June 30, 2025, due to the accrual of additional loss reserve on the Sanchez litigation case. Interest expense, net. Interest expense, net, increased to $12,863 for the three months ended June 30, 2026, from $11,157 for the three months ended June 30, 2025, primarily as a result of the Company accruing default interest on the 250 Livingston loan. Net loss. As a result of the foregoing, net loss increased to $4,939 for the three months ended June 30, 2026, from $656 for the three months ended June 30, 2025. 28 Income Statement for the Six Months Ended June 30, 2026 and 2025 (in thousands) 2026 10 West: 65thStreet & Dean Street 2026: Excluding 10 West 65th Street & Dean Street 2025 10 West: 65th Street & Dean Street 2025: Excluding 10 West 65th Street & Dean Street Increase (decrease) Excluding 10 West 65th Street & Dean Street % Revenues Residential rental income $ 64,126 $ 4,015 $ 60,111 $ 58,244 $ 1,761 $ 56,483 $ 3,628 6.4 % Commercial rental income 12,564 34 12,530 20,190 7 20,183 (7,653 ) (37.9 )% Total revenues 76,690 4,049 72,641 78,434 1,768 76,666 (4,025 ) (5.3 )% Operating Expenses Property operating expenses 19,602 485 19,117 19,672 315 19,357 (241 ) (1.2 )% Real estate taxes and insurance 15,126 14 15,112 15,145 463 14,682 431 2.9 % General and administrative 8,360 321 8,039 7,644 206 7,438 601 8.1 % Transaction pursuit costs — — — (10 ) — (10 ) 10 (100 )% Depreciation and amortization 16,002 1,346 14,656 14,950 290 14,660 (4 ) 0.0 % Impairment of Long-Lived Assets — — — 33,780 33,780 — — 0.0 % Total operating expenses 59,090 2,166 56,924 91,181 35,054 56,127 797 1.4 % Litigation settlement and other (3,809 ) — (3,809 ) (26 ) — (26 ) (3,783 ) (14,550 )% Income from operations 13,791 1,883 11,908 (12,773 ) (33,286 ) 20,513 (8,605 ) 41.9 % Loss on disposal of long-lived assets — — — (685 ) (685 ) — — 0.0 % Interest expense, net (31,200 ) (5,553 ) (25,647 ) (23,001 ) (881 ) (22,120 ) (3,527 ) (15.9 )% Net loss $ (17,409 ) $ (3,670 ) $ (13,739 ) $ (36,459 ) $ (34,852 ) $ (1,607 ) $ (12,132 ) (754.9 )% 29 Revenue. Residential rental income increased to $60,111 for the six months ended June 30, 2026, from $56,483 for the six months ended June 30, 2025, primarily due to increases in rental rates and leased occupancy at all properties in 2026 and slightly lower bad debt expense. For example, base rent per square foot increased at the Tribeca House property to $91.88 at June 30, 2026, from $85.60 at June 30, 2025, and at the Clover House property, to $91.19 at June 30, 2026, up from $87.76 at June 30, 2025. Commercial rental income decreased to $12,530 for the six months ended June 30, 2026, from $20,183 for the six months ended June 30, 2025 due to the City of New York exiting 250 Livingston on August 23, 2025. Property operating expenses. Property operating expenses include property-level costs such as compensation costs for property-level personnel, repairs and maintenance, supplies, utilities and landscaping. Property operating expenses decreased to $19,117 for the six months ended June 30, 2026, from $19,357 for the six months ended June 30, 2025, primarily due to lower legal costs. Real estate taxes and insurance. Real estate taxes and insurance expenses increased to $15,112 for the six months ended June 30, 2026, from $14,682 for the six months ended June 30, 2025, primarily due to slightly increased real estate taxes across the portfolio. General and administrative. General and administrative expenses increased to $8,039 for the six months ended June 30, 2026, from $7,438 for the six months ended June 30, 2025, primarily due to the accrual of various fees related to our default on the 250 Livingston building. Depreciation and amortization. Depreciation and amortization expense decreased to $14,656 for the six months ended June 30, 2026, from $14,660 for the six months ended June 30, 2025. Litigation Settlement and other. Litigation settlement and other increased to $3,809 for the six months ended June 30, 2026, from $26 for the six months ended June 30, 2025, due to the accrual of a loss reserve on the Sanchez litigation case. Interest expense, net. Interest expense, net, increased to $25,647 for the six months ended June 30, 2026, from $22,120 for the six months ended June 30, 2025, primarily as a result of the Company accruing default interest on the 250 Livingston loan. Net loss. As a result of the foregoing, net loss increased to $13,739 for the six months ended June 30, 2026, from $1,607 for the six months ended June 30, 2025. Liquidity and Capital Resources As of June 30, 2026, we had $1,287,226 of indebtedness, net of unamortized issuance costs, secured by our properties, $37,702 of cash and cash equivalents, and $24,873 of restricted cash. See Note 4, “Notes Payable” of our consolidated financial statements for a discussion of the Company’s property-level debt. 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 by 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. Short-Term and Long-Term Liquidity Needs Our short-term liquidity needs will primarily be to fund operating expenses, recurring capital expenditures, property taxes and insurance, interest and scheduled debt principal payments, general and administrative expenses, and distributions to stockholders and unit holders. We generally expect to meet our short-term liquidity requirements through net cash provided by operations and cash on hand, and we believe we will have sufficient resources to meet our short-term liquidity requirements Our principal long-term liquidity needs will primarily be to fund additional property acquisitions, major renovation and upgrading projects, and debt payments and retirements at maturity. We do not expect that net cash provided by operations will be sufficient to meet all of these long-term liquidity needs. We anticipate meeting our long-term liquidity requirements by using cash as an interim measure and funds from public and private equity offerings and long-term secured and unsecured debt offerings. The Company sold its property at 10 West 65th Street during the year ended December 31, 2025, and was able to net approximately $13,000 in proceeds from such sale. Additionally, the Company refinanced its existing construction loan at its Dean Street property with a maximum of $160,000 bridge loan, of which $141,750 was drawn at closing. The Company subsequently borrowed an additional $8,250 and the Company may potentially draw additional amounts that can be used for general corporate purposes. 30 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. Distributions In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. On May 5, 2026, the company declared dividends and distributions on our common shares, Class B LLC units and LTIP units totaling $4,690 paid on June 4, 2026. During the three months ended June 30, 2026 and 2025, we paid dividends and distributions on our common shares, Class B LLC units and LTIP units totaling $4,690 and $4,614, respectively. Cash Flows for the Six Months Ended June 30, 2026 and 2025 (in thousands) Six Months Ended June 30, 2026 2025 Operating activities $ 17,999 $ 15,044 Investing activities (4,964 ) 17,967 Financing activities (8,614 ) (10,225 ) Cash flows provided by (used in) operating activities, investing activities and financing activities for the six months ended June 30, 2026 and 2025, were as follows: Net cash flow provided by operating activities was $17,999 for the six months ended June 30, 2026, compared to $15,044 for the six months ended June 30, 2025, primarily due to strong residential lease income and the timing of payments on the 141 Livingston lease. Net cash used by investing activities was $(4,964), for the six months ended June 30, 2026, compared to $17,967 provided for the six months ended June 30, 2025. The decrease was primarily due to proceeds from the sale of 10 west 65th Street during the six months ended June 30, 2025 and significantly greater capital spending at Prospect House property during the six month ended June 30, 2025. Net cash used by financing activities was $8,614 for the six months ended June 30, 2026, compared to $10,225 used for the six months ended June 30, 2025. Cash was used in the six months ended June 30, 2026, related primarily to dividends and distributions of $9,402, additional borrowings of $2 million at 953 Dean Street property and loan amortization payments of $1,008. Cash was used in the six months ended June 30, 2025, 2025 related primarily to the repayment of $31,438 mortgage loan in conjunction with sale of 10 West 65th Street property, $9,228 of dividend and distribution payments and $2,996 of loan issuance costs, partially offset by of $34,231 related to the Dean Street property borrowings on the construction loan and subsequent refinance. Income Taxes 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 to satisfy the requirements for qualification as a REIT for federal income tax purposes. Inflation Inflation has recently become a factor in the United States economy and has increased the cost of acquiring, developing, replacing and operating properties. A substantial portion of our interest costs relating to operating properties are fixed through 2027. Leases at our residential rental properties, which comprise approximately 84% of our revenue, are short-term in nature and permit rent increases to recover increased costs, and our longer-term commercial and retail leases generally allow us to recover some increased operating costs. 31 Non-GAAP Financial Measures In this Quarterly Report on Form 10-Q, 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 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 (loss) or income from operations and considered in addition to cash flows computed in accordance with GAAP, as presented in our consolidated financial statements. Funds From Operations and Adjusted Funds From Operations 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, transaction pursuit costs, loss on modification/extinguishment of debt, gain on involuntary conversion, gain on termination of lease, impairment of long-lived assets, disposals of long-lived assets and certain 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 (loss) 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 the Company’s FFO and AFFO for the periods presented to net loss, computed in accordance with GAAP (amounts in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 FFO Net loss $ (6,265 ) $ (1,356 ) $ (17,409 ) $ (36,459 ) Real estate depreciation and amortization 8,023 7,314 16,002 14,950 FFO $ 1,758 $ 5,958 $ (1,407 ) $ (21,509 ) AFFO FFO $ 1,758 $ 5,958 $ (1,407 ) $ (21,509 ) Amortization of real estate tax intangible 121 121 241 241 Straight-line rent adjustments (276 ) 37 (473 ) 59 Amortization of debt origination costs 868 457 1,737 914 Amortization of LTIP awards 1,086 1,078 2,172 2,221 Recurring capital spending (11 ) (34 ) (71 ) (69 ) Impairment of long lived assets — — — 33,780 Loss on disposal of long-lived assets — 685 — 685 Transaction pursuit costs — (10 ) — (10 ) Litigation settlement and other 209 26 3,809 26 AFFO $ 3,755 $ 8,318 $ 6,008 $ 16,338 32 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, transaction pursuit costs, loss on modification/extinguishment of debt, impairment of long-lived assets, disposals of long-lived assets and certain litigation-related expenses, less gain on involuntary 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): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Adjusted EBITDA Net loss $ (6,265 ) $ (1,356 ) $ (17,409 ) $ (36,459 ) Real estate depreciation and amortization 8,023 7,314 16,002 14,950 Amortization of real estate tax intangible 121 121 241 241 Straight-line rent adjustments (276 ) 37 (473 ) 59 Amortization of LTIP awards 1,086 1,078 2,172 2,221 Interest expense, net 15,654 11,479 31,200 23,001 Transaction pursuit costs — (10 ) — (10 ) Loss on impairment of long-lived assets — — — 33,780 Loss on disposal of long-lived assets — 685 — 685 Litigation settlement and other 209 26 3,809 26 Adjusted EBITDA $ 18,552 $ 19,374 $ 35,542 $ 38,494 Net Operating Income 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, transaction pursuit costs, amortization of identifiable intangibles and straight-line rent adjustments to revenue from long-term leases, impairment of long-lived assets 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. 33 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): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 NOI Income from operations $ 9,389 $ 10,808 $ 13,791 $ (12,773 ) Real estate depreciation and amortization 8,023 7,314 16,002 14,950 General and administrative expenses 4,253 3,819 8,360 7,644 Transaction pursuit costs — (10 ) — (10 ) Amortization of real estate tax intangible 121 121 241 241 Straight-line rent adjustments (276 ) 37 (473 ) 59 Loss on Impairment of long-lived assets — — — 33,780 Litigation Settlement and other 209 26 3,809 26 NOI $ 21,719 $ 22,115 $ 41,730 $ 43,917 Critical Accounting Policies Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that there have been no material changes to the items that we disclosed as our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2025. Recent Accounting Pronouncements See Note 2, “Significant Accounting Policies” of our condensed consolidated financial statements for a discussion of recent accounting pronouncements.