What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-02 compared with 2020-08-03 · 74 added, 73 removed, 133 unchanged (53% of the section changed)

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Many of the factors that will determine these items are beyond our ability to control or predict.

Currently, one of the most significant factors is the ongoing adverse effect of the novel strain of coronavirus (“COVID-19”) pandemic on our business, financial condition, results of operations, cash flows, operating performance and the effect it has had and may continue to have on our tenants, the global, national, regional and local economies and financial markets and the real estate market in general.

Currently, one of the most significant factors is the ongoing adverse effect of the COVID-19 pandemic on our business, financial condition, results of operations, cash flows, operating performance and the effect it has had and may continue to have on our tenants, the global, national, regional and local economies and financial markets and the real estate market in general.

The extent of the impact of the COVID-19 pandemic will depend on future developments, including the duration of the pandemic, which are highly uncertain at this time, but that impact could be material.

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– Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, “Item 1A.

– Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and “Item 1A.

– Risk Factors” in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 and “Item 1A.

– Risk Factors” in this Quarterly Report on Form 10-Q.

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We do not undertake any obligation to release publicly, any revisions to our forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Management’s Discussion and Analysis of Financial Condition and Results of Operations include a discussion of our consolidated financial statements for the three and six months ended June 30, 2020 and 2019.

Management’s Discussion and Analysis of Financial Condition and Results of Operations include a discussion of our consolidated financial statements for the three and nine months ended September 30, 2020 and 2019.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from those estimates.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the operating results for the full year.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the operating results for the full year.

Critical Accounting Policies

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 2 – Summary of Significant Accounting Policies” to the consolidated financial statements included therein.

For the six months ended June 30, 2020, there were no material changes to these policies.

For the nine months ended September 30, 2020, there were no material changes to these policies.

Alexander’s, Inc.

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COVID-19 Pandemic

In December 2019, a novel strain of coronavirus (“COVID-19”) was identified in Wuhan, China and by March 11, 2020, the World Health Organization had declared it a global pandemic.

Many states in the U.S., including New York and New Jersey, implemented stay-at-home orders for all “non-essential” business and activity in an aggressive effort to curb the spread of the virus.

In June 2020, the New York City metropolitan area began a phased re-opening of the businesses that were previously ordered to close, with limitations on occupancy and certain other restrictions.

It is uncertain as to how long these restrictions will continue or if additional restrictions or closures will be imposed.

As a result of the COVID-19 pandemic, the U.S.

economy has suffered and there has been significant volatility in the financial markets.

industries and businesses have been negatively affected and millions of people have filed for unemployment.

Our properties, which are all located in the greater New York City metropolitan area, have been adversely affected as a result of the COVID-19 pandemic and the preventive measures taken to help curb the spread of the virus.

Other than grocery stores and other “essential” businesses, all of our retail tenants closed their stores in March 2020 and although substantially all have re-opened in the latter part of June 2020, when the phased re-opening began, there are limitations on occupancy and other restrictions that limit their ability to resume full operations.

Because certain of our redevelopment projects are deemed “non-essential,” they were temporarily paused in March 2020 due to New York State executive orders and resumed under updated safety guidelines once the orders were lifted in June 2020.

Our business has been adversely affected by the ongoing COVID-19 pandemic.

In March 2020, our “non-essential” retail tenants were ordered to temporarily close and although substantially all re-opened in the latter part of June 2020, there are limitations on occupancy and other restrictions that affect their ability to resume full operations.

In limited circumstances, we have agreed to and may continue to agree to rent deferrals and abatements for certain of our tenants.

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See Note 4 - Recently Issued Accounting Literature for additional information.

Overall, we have collected approximately 89% of rent billed for the quarter ended June 30, 2020 (92% including rent deferrals under agreements which generally require repayment in monthly installments over a period of time not to exceed twelve months), including 100% for our office tenant, approximately 76% for our retail tenants (83% including rent deferrals) and approximately 96% for our residential tenants.

Based on our assessment of the probability of collecting the rent for certain tenants, we have written off as uncollectible $1,022,000 resulting in a reduction of rental revenues during the three and six months ended June 30, 2020.

In addition, we have written off receivables arising from the straight-lining of rents of $4,247,000 related to these tenants resulting in a reduction of rental revenues during the three and six months ended June 30, 2020.

Overall, we have collected approximately 95% of rent billed for the quarter ended September 30, 2020 (96% including rent deferrals under agreements which generally require repayment in monthly installments over a period of time not to exceed twelve months), including 100% for our office tenant, approximately 87% for our retail tenants (89% including rent deferrals) and approximately 97% for our residential tenants.

On September 10, 2020, Century 21, which leases 135,000 square feet at our Rego Park II shopping center ($6,400,000 of annual revenue), filed for Chapter 11 bankruptcy.

There are $1,619,000 of unamortized deferred leasing costs on our consolidated balance sheet related to Century 21 as of September 30, 2020.

Based on our assessment of the probability of collecting rent from certain tenants, we have written off as uncollectible $3,100,000 and $4,122,000 for the three and nine months ended September 30, 2020, respectively, resulting in a reduction of rental revenues during these periods.

Of these amounts, $2,716,000 in each period is attributable to Century 21.

In addition, we have written off receivables arising from the straight-lining of rents related to these tenants of $6,590,000 and $10,837,000 for the three and nine months ended September 30, 2020, respectively, resulting in a reduction of rental revenues during these periods.

Of these amounts, $5,919,000 in each period is attributable to Century 21.

Prospectively, revenue recognition for these tenants will be based on actual amounts received.

Quarter Ended September 30, 2020 Financial Results Summary

Net income for the quarter ended September 30, 2020 was $6,604,000, or $1.29 per diluted share, compared to $16,493,000, or $3.22 per diluted share in the prior year’s quarter.

Funds from operations (“FFO”) (non-GAAP) for the quarter ended September 30, 2020 was $15,363,000, or $3.00 per diluted share, compared to $25,208,000 or $4.92 per diluted share in the prior year’s quarter.

Nine Months Ended September 30, 2020 Financial Results Summary

Net income for the nine months ended September 30, 2020 was $23,507,000, or $4.59 per diluted share, compared to $45,641,000, or $8.92 per diluted share in the prior year’s nine months.

FFO (non-GAAP) for the nine months ended September 30, 2020 was $57,102,000, or $11.15 per diluted share, compared to $75,044,000 or $14.66 per diluted share in the prior year’s nine months.

Overview - continued

Quarter Ended June 30, 2020 Financial Results Summary

Net income for the quarter ended June 30, 2020 was $12,331,000, or $2.41 per diluted share, compared to $11,283,000, or $2.20 per diluted share in the prior year’s quarter.

Funds from operations (“FFO”) (non-GAAP) for the quarter ended June 30, 2020 was $17,995,000, or $3.51 per diluted share, compared to $24,305,000 or $4.75 per diluted share in the prior year’s quarter.

Six Months Ended June 30, 2020 Financial Results Summary

Net income for the six months ended June 30, 2020 was $16,903,000, or $3.30 per diluted share, compared to $29,148,000, or $5.70 per diluted share in the prior year’s six months.

FFO (non-GAAP) for the six months ended June 30, 2020 was $41,739,000, or $8.15 per diluted share, compared to $49,836,000 or $9.74 per diluted share in the prior year’s six months.

Square Footage, Occupancy and Leasing Activity

As of June 30, 2020 , our portfolio was comprised of seven properties aggregating 2,449,000 square feet, of which 2,254,000 square feet was in service and 195,000 square feet (the former Sears space at our Rego Park I property) was out of service for redevelopment.

The in service square feet was 97% occupied as of June 30, 2020.

As of September 30, 2020, our portfolio was comprised of seven properties aggregating 2,449,000 square feet, of which 2,254,000 square feet was in service and 195,000 square feet (the former Sears space at our Rego Park I property) was out of service for redevelopment.

The in service square feet was 96% occupied as of September 30, 2020.

On February 14, 2020, we reduced our participation in our Rego Park II shopping center loan to $50,000,000 and received cash proceeds of approximately $145,000,000.

On September 14, 2020, we amended and extended the $350,000,000 mortgage loan on the retail condominium of our 731 Lexington Avenue property.

Under the terms of the amendment, we paid down the loan by $50,000,000 to $300,000,000, extended the maturity date to August 2025 and guaranteed the interest payments and certain leasing costs.

The principal of the loan is non-recourse to us.

The interest-only loan remains at the same rate, LIBOR plus 1.40% (1.56% as of September 30, 2020).

On October 23, 2020, we completed a financing of The Alexander apartment tower in the amount of $94,000,000.

The interest-only loan has a fixed rate of 2.63% and matures in November 2027.

Significant Tenant

Bloomberg accounted for revenue of $53,180,000 and $53,676,000 for the six months ended June 30, 2020 and 2019, respectively, representing approximately 53% and 48% of our total revenues in each period, respectively.

Bloomberg accounted for revenue of $80,696,000 and $81,314,000 for the nine months ended September 30, 2020 and 2019, respectively, representing approximately 56% and 48% of our total revenues in each period, respectively.

No other tenant accounted for more than 10% of our total revenues.

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In addition, we access and evaluate financial information regarding Bloomberg from other private sources, as well as publicly available data.

Results of Operations – Three Months Ended June 30, 2020 , compared to June 30, 2019

Results of Operations – Three Months Ended September 30, 2020, compared to September 30, 2019

Rental Revenues

Rental revenues were $45,478,000 in the quarter ended June 30, 2020 , compared to $55,932,000 in the prior year’s quarter, a decrease of $10,454,000.

This decrease was primarily due to (i) $4,247,000 from the write-off of receivables arising from the straight-lining of rents from certain of our retail tenants, (ii) $2,999,000 from retail tenant vacancies at our 731 Lexington Avenue property and (iii) $1,022,000 of lower rental income from certain of our retail tenants which were deemed uncollectible.

Rental revenues were $43,499,000 in the quarter ended September 30, 2020, compared to $57,760,000 in the prior year’s quarter, a decrease of $14,261,000.

This decrease was primarily due to (i) $6,590,000 from the write-off of receivables arising from the straight-lining of rents from certain of our retail tenants, of which $5,919,000 is attributable to Century 21, (ii) $3,814,000 of lower rental income from certain of our retail tenants which were deemed uncollectible, of which $2,716,000 is attributable to Century 21 and (iii) $3,034,000 from retail tenant vacancies at our 731 Lexington Avenue property.

Operating Expenses

Operating expenses were $19,778,000 in the quarter ended June 30, 2020 , compared to $21,667,000 in the prior year’s quarter, a decrease of $1,889,000.

Operating expenses were $22,448,000 in the quarter ended September 30, 2020, compared to $23,389,000 in the prior year’s quarter, a decrease of $941,000.

This decrease was primarily due to lower reimbursable operating expenses.

Depreciation and Amortization

Depreciation and amortization was $7,633,000 in the quarter ended June 30, 2020 , compared to $7,869,000 in the prior year’s quarter, a decrease of $236,000.

Depreciation and amortization was $7,587,000 in the quarter ended September 30, 2020, compared to $7,831,000 in the prior year’s quarter, a decrease of $244,000.

General and Administrative Expenses

General and administrative expenses were $2,111,000 in the quarter ended June 30, 2020 , compared to $1,893,000 in the prior year’s quarter, an increase of $218,000.

This increase was primarily due to higher stock-based compensation expense in connection with the fair value of deferred stock units granted to a newly appointed member of our Board of Directors during the second quarter of 2020, comprised of an initial award of $150,000 and a $56,000 annual award.

General and administrative expenses were $1,386,000 in the quarter ended September 30, 2020, compared to $1,333,000 in the prior year’s quarter, an increase of $53,000.

Interest and Other Income, net

Interest and other income, net was $710,000 in the quarter ended June 30, 2020 , compared to $2,223,000 in the prior year’s quarter, a decrease of $1,513,000.

This decrease was primarily due to $1,517,000 of lower interest income due to a decrease in average interest rates.

Interest and other income, net was $220,000 in the quarter ended September 30, 2020, compared to $2,075,000 in the prior year’s quarter, a decrease of $1,855,000.

This decrease was primarily due to $1,532,000 of lower interest income due to a decrease in average interest rates and $316,000 of lower dividend income from Macerich.

Interest and Debt Expense

Interest and debt expense was $6,172,000 in the quarter ended June 30, 2020, compared to $10,165,000 in the prior year’s quarter, a decrease of $3,993,000.

This decrease was primarily due to $4,400,000 of lower interest expense due to a decrease in LIBOR, partially offset by $612,000 of higher interest expense due to an increase in average debt balances.

Interest and debt expense was $4,463,000 in the quarter ended September 30, 2020, compared to $9,772,000 in the prior year’s quarter, a decrease of $5,309,000.

This decrease was primarily due to (i) $4,727,000 of lower interest expense due to a decrease in LIBOR and (ii) $1,117,000 of lower amortization of debt issuance costs, partially offset by (iii) $438,000 of higher interest expense due to an increase in average debt balances.

Change in Fair Value of Marketable Securities

Change in fair value of marketable securities was income of $1,837,000 in the quarter ended June 30, 2020, consisting of $1,788,000 resulting from an increase in The Macerich Company’s (“Macerich”) share price of $3.34 on 535,265 shares owned and $49,000 resulting from an increase in Macerich’s share price of $1.67 on 29,347 shares owned.

Change in fair value of marketable securities was an expense of $1,231,000 in the quarter ended September 30, 2020, resulting from a decrease in The Macerich Company’s (“Macerich”) share price of $2.18 on 564,612 shares owned.

Change in fair value of marketable securities was an expense of $1,017,000 in the prior year’s quarter, resulting from a decrease in Macerich’s share price of $1.90 on 535,265 shares owned.

Results of Operations – Six Months Ended June 30, 2020 , compared to June 30, 2019

Results of Operations – Nine Months Ended September 30, 2020, compared to September 30, 2019

Rental Revenues

Rental revenues were $99,588,000 in the six months ended June 30, 2020 , compared to $112,710,000 in the prior year’s six months, a decrease of $13,122,000.

This decrease was primarily due to (i) $6,012,000 from retail tenant vacancies at our 731 Lexington Avenue property, (ii) $4,314,000 from the write-off of receivables arising from the straight-lining of rents from certain of our retail tenants and (iii) $1,022,000 of lower rental income from certain of our retail tenants which were deemed uncollectible.

Rental revenues were $143,087,000 in the nine months ended September 30, 2020, compared to $170,470,000 in the prior year’s nine months, a decrease of $27,383,000.

This decrease was primarily due to (i) $10,837,000 from the write-off of receivables arising from the straight-lining of rents from certain of our retail tenants, of which $5,919,000 is attributable to Century 21, (ii) $9,045,000 from retail tenant vacancies at our 731 Lexington Avenue property and (iii) $4,836,000 of lower rental income from certain of our retail tenants which were deemed uncollectible, of which $2,716,000 is attributable to Century 21.

Operating Expenses

Operating expenses were $41,531,000 in the six months ended June 30, 2020 , compared to $43,516,000 in the prior year’s six months, a decrease of $1,985,000.

Operating expenses were $63,979,000 in the nine months ended September 30, 2020, compared to $66,905,000 in the prior year’s nine months, a decrease of $2,926,000.

This decrease was primarily due to lower reimbursable operating expenses.

Depreciation and Amortization

Depreciation and amortization was $15,542,000 in the six months ended June 30, 2020 , compared to $15,697,000 in the prior year’s six months, a decrease of $155,000.

Depreciation and amortization was $23,129,000 in the nine months ended September 30, 2020, compared to $23,528,000 in the prior year’s nine months, a decrease of $399,000.

General and Administrative Expenses

General and administrative expenses were $3,562,000 in the six months ended June 30, 2020 , compared to $3,138,000 in the prior year’s six months, an increase of $424,000.

General and administrative expenses were $4,948,000 in the nine months ended September 30, 2020, compared to $4,471,000 in the prior year’s nine months, an increase of $477,000.

Interest and Other Income, net

Interest and other income, net was $2,253,000 in the six months ended June 30, 2020 , compared to $4,353,000 in the prior year’s six months, a decrease of $2,100,000.

This decrease was primarily due to $2,404,000 of lower interest income due to a decrease in average interest rates, partially offset by $433,000 of higher interest income due to an increase in average investment balances.

Interest and other income, net was $2,473,000 in the nine months ended September 30, 2020, compared to $6,428,000 in the prior year’s nine months, a decrease of $3,955,000.

This decrease was primarily due to $3,924,000 of lower interest income due to a decrease in average interest rates.

Interest and Debt Expense

Interest and debt expense was $14,745,000 in the six months ended June 30, 2020, compared to $20,324,000 in the prior year’s six months, a decrease of $5,579,000.

This decrease was primarily due to $6,525,000 of lower interest expense due to a decrease in LIBOR, partially offset by $1,204,000 of higher interest expense due to an increase in average debt balances.

Interest and debt expense was $19,208,000 in the nine months ended September 30, 2020, compared to $30,096,000 in the prior year’s nine months, a decrease of $10,888,000.

This decrease was primarily due to (i) $11,274,000 of lower interest expense due to a decrease in LIBOR and (ii) $1,448,000 of lower amortization of debt issuance costs, partially offset by (iii) $1,664,000 of higher interest expense due to an increase in average debt balances.

Change in Fair Value of Marketable Securities

Change in fair value of marketable securities was an expense of $9,558,000 in the six months ended June 30, 2020, consisting of $9,607,000 resulting from a decrease in Macerich’s share price of $17.95 on 535,265 shares owned, partially offset by $49,000 resulting from an increase in Macerich’s share price of $1.67 on 29,347 shares owned.

Change in fair value of marketable securities was an expense of $5,240,000 in the prior year’s six months, resulting from a decrease in Macerich’s share price of $9.79 on 535,265 shares owned.

Change in fair value of marketable securities was an expense of $10,789,000 in the nine months ended September 30, 2020, consisting of $10,774,000 resulting from a decrease in Macerich’s share price of $20.13 on 535,265 shares owned and $15,000 resulting from a decrease in Macerich’s share price of $0.51 on 29,347 shares owned.

Change in fair value of marketable securities was an expense of $6,257,000 in the prior year’s nine months, resulting from a decrease in Macerich’s share price of $11.69 on 535,265 shares owned.

Liquidity and Capital Resources

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As a result of the COVID-19 pandemic, in limited circumstances, we have agreed to and may continue to agree to rent deferrals and abatements for certain of our tenants.

On September 10, 2020, Century 21, which leases 135,000 square feet at our Rego Park II shopping center ($6,400,000 of annual revenue), filed for Chapter 11 bankruptcy.

Other sources of liquidity to fund cash requirements include our existing cash, proceeds from financings, including mortgage or construction loans secured by our properties and proceeds from asset sales.

As of June 30, 2020, we have $458,330,000 of liquidity comprised of $453,265,000 of cash and cash equivalents and restricted cash and $5,065,000 of marketable securities.

As of September 30, 2020, we had $373,612,000 of liquidity comprised of $369,778,000 of cash and cash equivalents and restricted cash and $3,834,000 of marketable securities.

We anticipate that cash flows from continuing operations over the next twelve months, together with existing cash balances, will be adequate to fund our business operations, cash dividends to stockholders, debt amortization and capital expenditures.

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However, there can be no assurance that additional financing or capital will be available to refinance our debt, or that the terms will be acceptable or advantageous to us.

The non-recourse mortgage loan for the retail condominiums of our 731 Lexington Avenue property matures on August 5, 2020;

we are in discussions with the lender.

The challenges posed by the COVID-19 pandemic and the impact on our business and cash flows are evolving rapidly and cannot be predicted at this time but that impact could be material.

Consequently, we will continue to evaluate our liquidity and financial position on an ongoing basis.

Six Months Ended June 30, 2020

Cash and cash equivalents and restricted cash were $453,265,000 as of June 30, 2020 , compared to $313,977,000 as of December 31, 2019, an increase of $139,228,000.

This increase resulted from (i) $99,541,000 of net cash provided by financing activities and (ii) $52,756,000 of net cash provided by operating activities, partially offset by (iii) $13,009,000 of net cash used in investing activities.

Net cash provided by financing activities of $99,541,000 was primarily comprised of proceeds from the reduction of our participation in our Rego Park II mortgage loan of $145,708,000, partially offset by dividends paid of $46,068,000.

Nine Months Ended September 30, 2020

Cash and cash equivalents and restricted cash were $369,778,000 as of September 30, 2020, compared to $313,977,000 as of December 31, 2019, an increase of $55,801,000.

This increase resulted from (i) $55,521,000 of net cash provided by operating activities and (ii) $23,910,000 of net cash provided by financing activities, partially offset by (iii) $23,630,000 of net cash used in investing activities.

Net cash provided by operating activities of $55,521,000 was comprised of (i) net income of $23,507,000 and (ii) adjustments for non-cash items of $59,157,000, partially offset by (iii) the net change in operating assets and liabilities of $27,143,000.

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $17,792,000, (ii) the change in fair value of marketable securities of $9,558,000, (iii) straight-lining of rental income of $8,820,000, (iv) write-off of tenant receivables of $1,022,000 and (v) stock based compensation expense of $600,000, partially offset by (vi) $214,000 of dividends received in stock from Macerich.

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $25,554,000, (ii) straight-lining of rental income of $18,306,000, (iii) the change in fair value of marketable securities of $10,789,000, (iv) write-off of tenant receivables of $4,122,000 and (v) stock-based compensation expense of $600,000, partially offset by (vi) $214,000 of dividends received in stock from Macerich.

Net cash provided by financing activities of $23,910,000 was primarily comprised of (i) proceeds from the reduction of our participation in our Rego Park II mortgage loan of $145,708,000, partially offset by (ii) dividends paid of $69,118,000 and (iii) debt repayments of $50,000,000.

Net cash used in investing activities was comprised of construction in progress and real estate additions of $23,630,000.

Six Months Ended June 30, 2019

Cash and cash equivalents and restricted cash were $289,322,000 as of June 30, 2019 , compared to $289,495,000 as of December 31, 2018, a decrease of $173,000.

This decrease resulted from (i) $46,070,000 of net cash used in financing activities and (ii) $4,901,000 of net cash used in investing activities, partially offset by (iii) $50,798,000 of net cash provided by operating activities.

Nine Months Ended September 30, 2019

Cash and cash equivalents and restricted cash were $313,777,000 as of September 30, 2019, compared to $289,495,000 as of December 31, 2018, an increase of $24,282,000.

This increase resulted from (i) $99,953,000 of net cash provided by operating activities, partially offset by (ii) $69,105,000 of net cash used in financing activities and (iii) $6,566,000 of net cash used in investing activities.

Net cash provided by operating activities of $99,953,000 was comprised of (i) net income of $45,641,000, (ii) adjustments for non-cash items of $36,002,000 and (iii) the net change in operating assets and liabilities of $18,310,000.

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $27,401,000, (ii) the change in fair value of marketable securities of $6,257,000, (iii) straight-lining of rental income of $1,950,000 and (iv) stock-based compensation expense of $394,000.

Net cash used in financing activities was primarily comprised of dividends paid of $69,090,000.

Net cash used in investing activities was comprised of construction in progress and real estate additions of $6,566,000.

Net cash provided by operating activities of $50,798,000 was comprised of (i) net income of $29,148,000 and (ii) adjustments for non-cash items of $25,225,000, partially offset by (iii) the net change in operating assets and liabilities of $3,575,000.

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $18,278,000, (ii) the change in fair value of marketable securities of $5,240,000, (iii) straight-lining of rental income of $1,313,000 and (iv) stock-based compensation expense of $394,000.

Liquidity and Capital Resources - continued

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On February 16, 2018, the New York City Tax Appeals Tribunal (the “Tribunal”) overturned the January 2017 determination.

The Vornado joint venture appealed the Tribunal’s decision to the Appellate Division of the Supreme Court of the

State of New York and on April 25, 2019, the Tribunal’s decision was unanimously upheld.

The Vornado joint venture appealed the Tribunal’s decision to the Appellate Division of the Supreme Court of the State of New York and on April 25, 2019, the Tribunal’s decision was unanimously upheld.

The Vornado joint venture filed a motion to reargue the Appellate Division’s decision or for leave to appeal to the New York State Court of Appeals.

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Letters of Credit

Approximately $1,030,000 of standby letters of credit were issued and outstanding as of June 30, 2020 .

Approximately $1,030,000 of standby letters of credit were issued and outstanding as of September 30, 2020.

There are various other legal actions against us in the ordinary course of business.

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A reconciliation of our net income to FFO is provided below.

FFO (non-GAAP) for the three and six months ended June 30, 2020 and 2019

FFO (non-GAAP) for the quarter ended June 30, 2020 was $17,995,000, or $3.51 per diluted share, compared to $24,305,000, or $4.75 per diluted share in the prior year’s quarter.

FFO (non-GAAP) for the six months ended June 30, 2020 was $41,739,000, or $8.15 per diluted share, compared to $49,836,000, or $9.74 per diluted share in the prior year’s six months.

FFO (non-GAAP) for the three and nine months ended September 30, 2020 and 2019

FFO (non-GAAP) for the quarter ended September 30, 2020 was $15,363,000, or $3.00 per diluted share, compared to $25,208,000, or $4.92 per diluted share in the prior year’s quarter.

FFO (non-GAAP) for the nine months ended September 30, 2020 was $57,102,000, or $11.15 per diluted share, compared to $75,044,000, or $14.66 per diluted share in the prior year’s nine months.

The following table reconciles our net income to FFO (non-GAAP):

Three Months Ended

Six Months Ended

Three Months Ended Nine Months Ended

September 30, September 30,

(Amounts in thousands, except share and per share amounts) 2020 2019 2020 2019

Net income $ 6,604 $ 16,493 $ 23,507 $ 45,641

Depreciation and amortization of real property 7,528 7,698 22,806 23,146

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis