Good afternoon, ladies and gentlemen, and welcome to the Clipper Realty third quarter 2022 earnings call. At this time, all participants have been placed on a listen only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Larry Kreider. Sir, the floor is yours.
Good afternoon, and thank you for joining us for the third quarter 2022 Clipper Realty Inc. earnings conference call. Participating with me today on today's call are David Bistricer, Co-Chairman of the Board and Chief Executive Officer, and JJ Bistricer, Chief Operating Officer. Please be aware that statements made during the call that are not historical may be deemed forward-looking statements, and actual results may differ materially from those indicated by such forward-looking statements. These statements are subject to numerous risks and uncertainties, including those disclosed in the company's 2021 annual report on Form 10-K, which is accessible at www.sec.gov and our website. As a reminder, the forward-looking statements speak only as of the date of this call, November 9, 2022, and the company undertakes no duty to update them.
During this call, management may refer to certain non-GAAP financial measures, including adjusted funds from operations or AFFO. Adjusted earnings before interest, taxes, depreciation, and amortization, or adjusted EBITDA, and net operating income, or NOI. Please see our press release, supplemental financial information and Form 10-Q, posted today for a reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will now turn the call over to our Co-Chairman and CEO, David Bistricer.
Thank you, Larry. Good afternoon, and welcome to the third quarter 2022 earnings call for Clipper Realty. I will provide an update on our business performance, including recent highlights and milestones, as well as our company's progress. I will then turn the call over to JJ, who will discuss property level activity, including leasing performance. Finally, Larry will speak about our quarterly performance, financial performance. We will then take your questions. We see positive operational trends as we look forward. Residential leasing activity continues to rapidly improve despite the recent headline news on inflation and interest rate increases. Rental demand at our properties has been very strong all year. As New York City has largely reopened, people seem to relocate back to the city, and employees increasingly return to their offices.
At the end of the third quarter, our properties were 99% leased, and new leases at all our properties are exceeding pre-pandemic levels. At the Tribeca House property, where new leases in the third quarter exceeded $83 per sq ft, more than 23% better than the previous rent, consistent with our trends in the previous quarter, causing the average of all leases to increase to a record $71 per sq ft from $67 per sq ft at the end of June. $65 per sq ft at the end of March and $63 per sq ft at the end of December. At Flatbush Gardens, new leases on units not yet at the legal limit averaged $39 per foot, versus an overall lease rate of $25.66 at the end of September.
With respect to interest rate increases, we believe we are buffered by the relatively strong duration of debt on our operating properties, of which 95% is fixed at 3.72% with an average duration of 6.87 years and is non-recourse, subject to limited standard coverage, is non-cross collateralized. With respect to inflation, we look to the short duration of our residential leases to allow us to cover increased expenses on our operating properties at higher construction costs on our development properties. Although, I should note that we bought out all the contracts on our newly completed Ten Ten Pacific construction project in 2021 before the inflation increased. Our balance sheet continues to be well-positioned from a liquidity perspective.
We have approximately $34 and a half million of cash, consisting of $20 million unrestricted cash and $15 and a half million restricted cash. We finance our portfolio on an asset-by-asset basis. Turning to ongoing developments. The essentially ground up development of our 1010 Pacific acquisition is moving along very well. We are targeting substantial completion in the fourth quarter and completion of long-term financing in the first quarter of 2023. Property is located in Prospect Heights, Brooklyn, about one mile from the Atlantic Terminal Barclays Center hub. We estimate the project to cost $85 million, which is on budget and develop to 7.2% stabilized cap rate in improved leasing environment. JJ will provide further update on the project shortly.
At the end of the year, we also bought another property in the same area in Brooklyn, 953 Dean Street, that we'll also intend to develop from the ground up. In April and August, we completed incremental purchases of land and financing to bring the initial purchase to total cost of approximately $56 and a half million with acquisition financing of $37 million. We expect to build a nine-story fully amenitized residential building with 167,000 residential rentable sq ft, 240 total units, 70% free market and 30% affordable, along with 8,500 commercial rental sq ft.
With regard to our third quarter results, we are reporting record quarterly revenue of $32.8 million. Net operating income of $17.4 million, both exceeding pre-pandemic levels, and AFFO of $5 million as a result of improved leasing I mentioned above. These results represent significant improvements over the third quarter of last year, as JJ and Larry will further detail. I will now turn over the call to JJ, who will provide an update on operations.
Thank you. New residential leasing activity that began towards last year continues to improve. At the end of the third quarter, all our residential properties, occupancy and rent levels per sq ft are exceeding pre-pandemic levels. As I will detail shortly, combined for all properties, new lease rental rates in the third quarter exceeded previous rent by over 23%, and renewal rental rates exceeded previous rent by over 9%. We are experiencing strong rental demand at our Tribeca House property. While lease occupancy has averaged 98% over the last 12 months, we have increased average rent per sq ft to $71 per sq ft from $60 over that same period. In the last 9 months, rents on new leases have risen to over $83 per sq ft, representing an increase of 27% over previous rents.
Rents on renewals have increased 16% over previous rents. Further, we expect rent per square foot to continue to grow steadily through next year as a result of turnover of our one- and two-year leases entered into last year in response to pandemic conditions. We also continue to make progress on new leases and retail properties at the Tribeca House property. We have entered into four new smaller leases this year at substantially higher rates, renewed our garage lease, and firmed up our gym lease. We are also moving ahead to lease out the last remaining retail spaces vacated in the pandemic. At the Flatbush Gardens complex in Brooklyn, in the third quarter, we are focused on leasing the units vacated in the pandemic since mid-2020.
Since the beginning of the year, we have increased lease occupancy to nearly 99%, while new leases average nearly $32 per sq ft, approximately 7% higher than the units previously rented, and $38 per sq ft to units not yet at the legal limit, which were 14% higher than previous rents. As a result, overall average rents for the property have begun to increase again, rising to $25.66 per sq ft at the end of the quarter versus $25.12 at the end of last year. Looking forward, we should also benefit from the new guidelines put forth by the Rent Guidelines Board, which beginning October 1, which will allow increases on rent-stabilized units of 3.25% for one-year leases and 5% for two-year leases.
Such increases have been limited to 0% and 2% for the last couple of years. These increases will help offset our continuing investment in the property, which has amounted to nearly $2 million this year. Lastly, we continue to benefit from the 2020 reorganization of the property's operations that created nearly $800,000 in savings. Our other residential properties, Clover House, 10 West 65th Street, Aspen, and 250 Livingston Street, continue to perform well. Leased occupancies for these properties average 99%, and average overall rental rates, with the exception of Aspen, have increased 10% since the beginning of the year. Aspen, which had little turnover up to June, is now up 3% in September alone. For the whole group, average increases on new leases for the year exceeded 28%, and average increases on renewals exceeded 15%.
Rent collections across our portfolio remain strong despite the residual challenges of the pandemic. The overall collection rate in the third quarter was over 97%. We have continued to benefit from remittances under the New York Emergency Rental Assistance Program, or ERAP, and the Landlord Rental Assistance Program, or LRAP, by which we received $1.2 million in the third quarter, $1.4 million in the second quarter, $600,000 in the first quarter, and $2.5 million in the fourth quarter of 2021. On the development side, we are moving well on construction at Ten Ten Pacific Street and are on target for substantial completion by the fourth quarter. We have nearly completed the side work, sheetrocking, and window installation, and have begun installing finishes.
Costs are on budget, and we bought out virtually all our construction contracts last year before the recent spike in costs. We have financed our construction fully through our $52.5 million construction loan and expect to refinance on a long-term basis soon after completion. The development is a nine-story, 119,000 rentable sq ft, fully amenitized multi-family rental building with underground indoor parking. The property is expected to have 175 total units, 70% of which will be free market and 30% affordable, and is eligible for a 35-year 421-a tax abatement. Looking ahead, we remain focused on optimizing occupancies, pricing, and expenses across the business to best position ourselves for growth. I will now turn the call over to Larry, who will discuss our financial results.
Thank you, JJ. Excuse me. For the third quarter, revenues increased by $2.2 million to a record $32.8 million from $30.6 million last year, third quarter. On a comparable basis, revenue from actual billings increased by $33 million to $33 million, excluding the bad debt expense, which is now deducted directly from revenue this year due to our adoption of a new leasing accounting standard, as explained in our Form 10-Q. NOI this quarter increased $1.4 million to another record $17.4 million from $16.1 million last year, third quarter. AFFO increased by $1 million to $5.0 million this quarter from $4.0 million last year, third quarter. The revenue increase was primarily due to higher residential rental rates at all properties, higher occupancy at all properties, especially at the Flatbush Gardens property, new commercial tenants at the Tribeca House property, and increased escalation billings at the 141 Livingston Street property.
Bad debt expense netted against revenue this year was $800,000 versus $200,000 last year, where it was added and included to operating expenses. On the expense side, key year-over-year changes were as follows. Property operating expenses were $800,000 higher this than last year, excluding the $200,000 charge for bad debt expense in last year's third quarter. This was due primarily to increased utility, repairs, and supplies costs at the Flatbush Gardens property. Real estate taxes and insurance increased by approximately $400,000 in the third quarter year-on-year, due to increased real estate taxes of $600,000, partially offset by reduced insurance costs to $200,000.
Interest expense decreased $300,000 in the third quarter year-on-year due to additional capitalization of interest associated with the 1010 Pacific Street and 953 Dean Street development properties. With regard to the balance sheet, as David mentioned earlier, we have $20 million of unrestricted cash and $15 million of restricted cash. We are funding our development of our 1010 Pacific Street and Dean Street acquisitions substantially with construction financing. We finance our portfolio on an asset-by-asset basis, and our debt is non-recourse subject to limited standard carve-outs and is not cross-collateralized. We have no debt maturities on any operating properties until 2027, with an average overall duration of 6.87 years.
Today, we are announcing a dividend of $0.095 per share for the third quarter, the same amount as last quarter. The dividend will be paid on November 25 to shareholders of record on November 21. Let me now turn the call back over to David for concluding remarks.
Thank you, Larry. We remain focused on efficiently operating our portfolio. We look for our current operating improvements to continue to accelerate through the next quarter and into 2023. We look forward to capitalizing on a myriad of growth opportunities, including 1010 Pacific and 953 Dean Street developments and other possibilities that may present themselves. I will now open the line for questions.
Thank you. Ladies and gentlemen, the floor is open for questions. If you have any questions or comments, please press star one on your touchtone phone. Pressing star two will remove you from the queue should your question be answered. Lastly, while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Once again, that's star one if you have a question or a comment. The first question is coming from Craig Kucera with B. Riley Securities. Craig, your line is live.
Yeah. Yeah, thanks, guys. Most of my questions were covered in your opening commentary, so thank you for that. I do wanna follow up that I did see a news story that you had listed Flatbush Gardens for sale. Can you comment on that and your expectations there, and if that's true, kinda what your expected use of proceeds would be?
We can really not comment on it. It's too early to tell. We will keep the market posted as it develops. Right now, there's nothing really to report other than we've listed the property in an attempt to see what it could bear. We've said that we believe that we have a focus now on the newer developments. We think our talents and experience in the market can do us better in that environment, and that's what we're segueing into. As of now, there's nothing more to report, as there's no news about that effort yet.
Fair enough. Are you looking to potentially dispose of any other assets or just that?
That's the one that we're looking to trade at the moment.
Okay. Thanks. Appreciate your time.
Sure.
If there are any remaining questions or comments, please indicate so by pressing star one on your touch-tone phone. Once again, that's star one if you have a question or a comment. Okay, we currently have no questions in queue.
Thank you for joining us today. We look forward to speaking with you again soon. Stay well. Have a good evening. A pleasant evening.
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.