What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-01 compared with 2021-08-02 · 65 added, 78 removed, 117 unchanged (55% of the section changed)

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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, 2021 and 2020.

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, 2021 and 2020.

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, 2021 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, 2021 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 3 – Summary of Significant Accounting Policies” to the consolidated financial statements included therein.

For the six months ended June 30, 2021, there were no material changes to these policies.

For the nine months ended September 30, 2021, there were no material changes to these policies.

Alexander’s, Inc.

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We are managed by, and our properties are leased and developed by, Vornado Realty Trust (“Vornado”) (NYSE:

We have seven properties in the greater New York City metropolitan area.

As of September 30, 2021, we had seven properties in the greater New York City metropolitan area, including 30.3 acres of land located in Paramus, New Jersey (“Paramus Property”) which we sold in October 2021.

We compete with a large number of property owners and developers.

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Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due.

COVID-19 Pandemic

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

Although substantially all our retail tenants are currently open and operating and previous government restrictions have been lifted, there continue to be economic conditions and other factors that adversely affect the financial health of our retail tenants.

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

We have made the policy election available to us based on the Financial Accounting Standards Board’s (“FASB”) guidance for leases during the COVID-19 pandemic, which allows us to continue recognizing rental revenue for rent deferral agreements and to recognize rent abatements as a reduction to rental revenue in the period granted for qualifying deferrals and abatements.

Overall, we have collected approximately 97% of the rent due from our tenants for the quarter ended June 30, 2021, including 100% from our office tenant, approximately 93% from our retail tenants, and approximately 98% from our residential tenants.

Quarter Ended June 30, 2021 Financial Results Summary

Net income for the quarter ended June 30, 2021 was $25,898,000, or $5.05 per diluted share, compared to $12,331,000, or $2.41 per diluted share in the prior year’s quarter.

Net income for the quarter ended June 30, 2021 included $9,124,000, or $1.78 per diluted share, of income as a result of a net gain on the sale of a parcel of land in the Bronx, New York (“Bronx Land Parcel”).

Funds from operations (“FFO”) (non-GAAP) for the quarter ended June 30, 2021 was $21,133,000, or $4.12 per diluted share, compared to $17,995,000 or $3.51 per diluted share in the prior year’s quarter.

Six Months Ended June 30, 2021 Financial Results Summary

Net income for the six months ended June 30, 2021 was $43,780,000, or $8.55 per diluted share, compared to $16,903,000, or $3.30 per diluted share in the prior year’s six months.

Net income for the six months ended June 30, 2021 included $9,124,000, or $1.78 per diluted share, of income as a result of a net gain on the sale of real estate.

Funds from operations (“FFO”) (non-GAAP) for the six months ended June 30, 2021 was $46,914,000, or $9.16 per diluted share, compared to $41,739,000 or $8.15 per diluted share in the prior year’s six months.

Quarter Ended September 30, 2021 Financial Results Summary

Net income for the quarter ended September 30, 2021 was $11,401,000, or $2.22 per diluted share, compared to $6,604,000, or $1.29 per diluted share in the prior year’s quarter.

Funds from operations (“FFO”) (non-GAAP) for the quarter ended September 30, 2021 was $21,181,000, or $4.13 per diluted share, compared to $15,363,000 or $3.00 per diluted share in the prior year’s quarter.

Nine Months Ended September 30, 2021 Financial Results Summary

Net income for the nine months ended September 30, 2021 was $55,181,000, or $10.77 per diluted share, compared to $23,507,000, or $4.59 per diluted share in the prior year’s nine months.

FFO (non-GAAP) for the nine months ended September 30, 2021 was $68,095,000, or $13.29 per diluted share, compared to $57,102,000 or $11.15 per diluted share in the prior year’s nine months.

Square Footage, Occupancy and Leasing Activity

As of June 30, 2021, our portfolio was comprised of seven properties aggregating 2,455,000 square feet, of which 2,219,000 square feet was in service and 236,000 square feet (primarily the former Century 21 space at our Rego Park II property and a portion of the former Sears space at our Rego Park I property) was out of service for redevelopment.

Excluding residential, the in service square feet was 95% occupied as of June 30, 2021.

The in service residential square feet was 83% occupied as of June 30, 2021.

As of September 30, 2021, our portfolio was comprised of seven properties aggregating 2,454,000 square feet, of which 2,218,000 square feet was in service and 236,000 square feet (primarily the former Century 21 space at our Rego Park II property and a portion of the former Sears space at our Rego Park I property) was out of service for redevelopment.

Excluding residential square feet, the in service square feet was 96% occupied as of September 30, 2021.

The in service residential square feet was 93% occupied as of September 30, 2021.

Real Estate Sales

On June 4, 2021, we sold a parcel of land in the Bronx, New York (“Bronx Land Parcel”) for $10,000,000.

Net proceeds from the sale were $9,291,000 after closing costs, the financial statement gain was $9,124,000 and the tax gain was $9,123,000.

On October 4, 2021, we sold our Paramus Property to IKEA Property, Inc.

(“IKEA”), the tenant at the property, for $75,000,000, pursuant to IKEA’s purchase option contained in the lease.

Net proceeds from the sale were $4,580,000 after closing costs and the repayment of the $68,000,000 mortgage loan.

The financial statement gain was $60,826,000, which will be recognized in the fourth quarter of 2021, and the tax gain was $63,898,000.

Prior to the sale, the Paramus Property had annual rental revenues of $7,200,000, annual operating expenses of $3,200,000 and annual interest and debt expense of $3,300,000.

We do not expect to pay a special dividend related to these transactions.

Overview - continued

Sale of Real Estate

On June 4, 2021, we sold the Bronx Land Parcel for $10,000,000.

Net proceeds from the sale were $9,291,000, the financial statement gain was $9,124,000 and the tax gain was $9,100,000.

We do not expect to pay a special dividend related to this transaction.

Significant Tenant

Bloomberg L.P.

(“Bloomberg”) accounted for revenue of $57,513,000 and $53,180,000 for the six months ended June 30, 2021 and 2020, respectively, representing approximately 53% of our total revenues in each period.

(“Bloomberg”) accounted for revenue of $85,057,000 and $80,696,000 for the nine months ended September 30, 2021 and 2020, respectively, representing approximately 54% and 56% 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, 2021, compared to June 30, 2020

Results of Operations – Three Months Ended September 30, 2021, compared to September 30, 2020

Rental Revenues

Rental revenues were $51,388,000 in the quarter ended June 30, 2021, compared to $45,478,000 in the prior year’s quarter, an increase of $5,910,000.

This was primarily due to (i) $4,247,000 from write-offs in the prior year related to receivables arising from the straight-lining of rents from certain of our retail tenants who were put on a cash basis given the probability of collecting the rent due under the lease agreements, (ii) $1,323,000 of higher revenue from these retail tenants put on a cash basis and (iii) $1,820,000 from higher revenue from new tenants, partially offset by (iv) $2,049,000 from retail tenant vacancies at our 731 Lexington Avenue property.

Rental revenues were $48,950,000 in the quarter ended September 30, 2021, compared to $43,499,000 in the prior year’s quarter, an increase of $5,451,000.

This was primarily due to (i) $6,590,000 from write-offs in the prior year related to receivables arising from the straight-lining of rents from certain of our retail tenants who were put on a cash basis given the probability of collecting the rent due under the lease agreements and (ii) $2,130,000 of higher revenue from new tenants, partially offset by (iii) $3,707,000 from retail tenant vacancies at our 731 Lexington Avenue and Rego Park II properties.

Operating Expenses

Operating expenses were $23,422,000 in the quarter ended June 30, 2021, compared to $19,778,000 in the prior year’s quarter, an increase of $3,644,000.

This was primarily due to higher operating expenses subject to recovery, including real estate taxes and common area maintenance.

Operating expenses were $21,433,000 in the quarter ended September 30, 2021, compared to $22,448,000 in the prior year’s quarter, a decrease of $1,015,000.

This was primarily due to lower operating expenses subject to recovery, including real estate taxes and common area maintenance.

Depreciation and Amortization

Depreciation and amortization was $8,132,000 in the quarter ended June 30, 2021, compared to $7,633,000 in the prior year’s quarter, an increase of $499,000.

Depreciation and amortization was $9,008,000 in the quarter ended September 30, 2021, compared to $7,587,000 in the prior year’s quarter, an increase of $1,421,000.

This was primarily due to the acceleration of amortization of the deferred leasing commission at our Paramus property.

General and Administrative Expenses

General and administrative expenses were $1,823,000 in the quarter ended June 30, 2021, compared to $2,111,000 in the prior year’s quarter, a decrease of $288,000.

This was primarily due to lower stock-based compensation expense related to an initial award of deferred stock units with a fair value of $150,000 granted to a newly appointed member of our Board of Directors in the prior year and lower professional fees.

General and administrative expenses were $1,272,000 in the quarter ended September 30, 2021, compared to $1,386,000 in the prior year’s quarter, a decrease of $114,000.

This was primarily due to lower professional fees.

Interest and Other Income, net

Interest and other income, net was $151,000 in the quarter ended June 30, 2021, compared to $710,000 in the prior year’s quarter, a decrease of $559,000.

This was primarily due to $396,000 of lower interest income due to a decrease in average interest rates and $183,000 of lower dividend income from The Macerich Company (“Macerich”).

Interest and other income, net was $157,000 in the quarter ended September 30, 2021, compared to $220,000 in the prior year’s quarter, a decrease of $63,000.

This was primarily due to $81,000 of lower interest income due to a decrease in average interest rates.

Interest and Debt Expense

Interest and debt expense was $5,086,000 in the quarter ended June 30, 2021, compared to $6,172,000 in the prior year’s quarter, a decrease of $1,086,000.

This was primarily due to $1,102,000 of lower interest expense due to a decrease in LIBOR.

Interest and debt expense was $5,124,000 in the quarter ended September 30, 2021, compared to $4,463,000 in the prior year’s quarter, an increase of $661,000.

This was primarily due to $632,000 of higher interest expense due to the financing of The Alexander apartment tower in October 2020.

Change in Fair Value of Marketable Securities

Change in fair value of marketable securities was income of $3,698,000 in the quarter ended June 30, 2021, compared to income of $1,837,000 in the prior year’s quarter, an increase of $1,861,000.

This was due to the change in Macerich’s share price during the periods.

Net Gain on Sale of Real Estate

Net gain on sale of real estate was $9,124,000 in the quarter ended June 30, 2021, resulting from the sale of the Bronx Land Parcel.

Results of Operations – Six Months Ended June 30, 2021, compared to June 30, 2020

Change in fair value of marketable securities was an expense of $869,000 in the quarter ended September 30, 2021, compared to an expense of $1,231,000 in the prior year’s quarter, a decrease of $362,000.

This was due to the change in The Macerich Company’s (“Macerich”) share price during the periods.

Results of Operations – Nine Months Ended September 30, 2021, compared to September 30, 2020

Rental Revenues

Rental revenues were $107,541,000 in the six months ended June 30, 2021, compared to $99,588,000 in the prior year’s six months, an increase of $7,953,000.

This was primarily due to $4,247,000 from write-offs in the prior year related to receivables arising from the straight-lining of rents from certain of our retail tenants who were put on a cash basis and $2,750,000 of lease termination fee income from a retail tenant at our 731 Lexington Avenue property.

Rental revenues were $156,491,000 in the nine months ended September 30, 2021, compared to $143,087,000 in the prior year’s nine months, an increase of $13,404,000.

This was primarily due to (i) $10,837,000 from write-offs in the prior year related to receivables arising from the straight-lining of rents from certain of our retail tenants who were put on a cash basis, (ii) $6,436,000 of higher revenue from new tenants and (iii) $4,836,000 from write-offs in the prior year related to receivables from retail tenants who were put on a cash basis, partially offset by (iv) $9,604,000 from retail tenant vacancies at our 731 Lexington Avenue and Rego Park II properties.

Operating Expenses

Operating expenses were $47,222,000 in the six months ended June 30, 2021, compared to $41,531,000 in the prior year’s six months, an increase of $5,691,000.

Operating expenses were $68,655,000 in the nine months ended September 30, 2021, compared to $63,979,000 in the prior year’s nine months, an increase of $4,676,000.

This was primarily due to higher operating expenses subject to recovery, including real estate taxes and common area maintenance.

Depreciation and Amortization

Depreciation and amortization was $16,674,000 in the six months ended June 30, 2021, compared to $15,542,000 in the prior year’s six months, an increase of $1,132,000.

Depreciation and amortization was $25,682,000 in the nine months ended September 30, 2021, compared to $23,129,000 in the prior year’s nine months, an increase of $2,553,000.

This was primarily due to the acceleration of amortization of the deferred leasing commission at our Paramus property.

General and Administrative Expenses

General and administrative expenses were $3,366,000 in the six months ended June 30, 2021, compared to $3,562,000 in the prior year’s six months, a decrease of $196,000.

General and administrative expenses were $4,638,000 in the nine months ended September 30, 2021, compared to $4,948,000 in the prior year’s nine months, a decrease of $310,000.

Interest and Other Income, net

Interest and other income, net was $323,000 in the six months ended June 30, 2021, compared to $2,253,000 in the prior year’s six months, a decrease of $1,930,000.

Interest and other income, net was $480,000 in the nine months ended September 30, 2021, compared to $2,473,000 in the prior year’s nine months, a decrease of $1,993,000.

This was primarily due to $1,514,000 of lower interest income due to a decrease in average interest rates and $499,000 of lower dividend income from Macerich.

Interest and Debt Expense

Interest and debt expense was $10,226,000 in the six months ended June 30, 2021, compared to $14,745,000 in the prior year’s six months, a decrease of $4,519,000.

This was primarily due to $4,659,000 of lower interest expense due to a decrease in LIBOR.

Interest and debt expense was $15,350,000 in the nine months ended September 30, 2021, compared to $19,208,000 in the prior year’s nine months, a decrease of $3,858,000.

This was primarily due to (i) $4,414,000 of lower interest expense due to a decrease in LIBOR and (ii) $1,276,000 of lower amortization of debt issuance costs, partially offset by (iii) $1,875,000 of higher interest expense due to the financing of The Alexander apartment tower in October 2020.

Change in Fair Value of Marketable Securities

Change in fair value of marketable securities was income of $4,280,000 in the six months ended June 30, 2021, compared to an expense of $9,558,000 in the prior year’s six months, an increase to income of $13,838,000.

Change in fair value of marketable securities was income of $3,411,000 in the nine months ended September 30, 2021, compared to an expense of $10,789,000 in the prior year’s nine months, an increase to income of $14,200,000.

This was due to the change in Macerich’s share price during the periods.

Net Gain on Sale of Real Estate

Net gain on sale of real estate was $9,124,000 in the six months ended June 30, 2021, resulting from the sale of the Bronx Land Parcel.

Net gain on sale of real estate was $9,124,000 in the nine months ended September 30, 2021, resulting from the sale of the Bronx Land Parcel.

Liquidity and Capital Resources

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Our properties provide us with a relatively consistent stream of cash flow that enables us to pay our operating expenses, interest expense, recurring capital expenditures and cash dividends to stockholders.

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.

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, 2021, we had $479,360,000 of liquidity comprised of $469,056,000 of cash and cash equivalents and restricted cash and $10,304,000 of marketable securities.

As of September 30, 2021, we had $479,206,000 of liquidity comprised of $469,771,000 of cash and cash equivalents and restricted cash and $9,435,000 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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Consequently, we will continue to evaluate our liquidity and financial position on an ongoing basis.

Six Months Ended June 30, 2021

Cash and cash equivalents and restricted cash were $469,056,000 as of June 30, 2021, compared to $449,877,000 as of December 31, 2020, an increase of $19,179,000.

This increase resulted from (i) $62,519,000 of net cash provided by operating activities and (ii) $2,805,000 of net cash provided by investing activities, partially offset by (iii) $46,145,000 of net cash used in financing activities.

Nine Months Ended September 30, 2021

Cash and cash equivalents and restricted cash were $469,771,000 as of September 30, 2021, compared to $449,877,000 as of December 31, 2020, an increase of $19,894,000.

This increase resulted from (i) $90,919,000 of net cash provided by operating activities, partially offset by (ii) $69,205,000 of net cash used in financing activities and (iii) $1,820,000 of net cash used in investing activities.

Net cash provided by operating activities of $90,919,000 was comprised of (i) net income of $55,181,000, (ii) adjustments for non-cash items of $22,249,000 and (iii) the net change in operating assets and liabilities of $13,489,000.

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $26,923,000, (ii) straight-lining of rental income of $7,411,000 and (iii) stock-based compensation of $450,000, partially offset by (iv) net gain on sale of real estate of $9,124,000 and (v) the change in fair value of marketable securities of $3,411,000.

Net cash provided by investing activities was comprised of (i) proceeds from the sale of real estate of $9,291,000 and (ii) the return of short-term investments of $3,600,000, partially offset by (iii) construction in progress and real estate additions of $10,086,000.

Net cash used in financing activities of $69,205,000 was primarily comprised of dividends paid of $69,160,000.

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.

Net cash used in investing activities was comprised of (i) construction in progress and real estate additions of $14,711,000, partially offset by (ii) proceeds from the sale of real estate of $9,291,000 and (iii) the return of short-term investments of $3,600,000.

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.

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If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties.

In 2001, we leased 30.3 acres of land in Paramus, New Jersey to IKEA Property, Inc (“IKEA”).

The lease contains a fixed-price purchase option granting IKEA the right to purchase the property in October 2021 for $75,000,000.

The property is encumbered by a $68,000,000 interest-only mortgage loan with a fixed rate of 4.72%, which matures on October 4, 2021.

The annual triple-net rent is the sum of $700,000 plus the amount of interest on the mortgage loan.

On May 13, 2021, IKEA exercised its purchase option.

We anticipate closing the sale in the fourth quarter of 2021 and expect to receive net cash proceeds of approximately $4,000,000 after repayment of the mortgage loan and closing costs.

We expect to recognize a financial statement gain of approximately $60,000,000 and a tax gain of approximately $63,000,000.

We do not expect to pay a special dividend related to this transaction.

Rego Park I Litigation

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Letters of Credit

Approximately $960,000 of standby letters of credit were issued and outstanding as of June 30, 2021.

Approximately $960,000 of standby letters of credit were issued and outstanding as of September 30, 2021.

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, 2021 and 2020

FFO (non-GAAP) for the quarter ended June 30, 2021 was $21,133,000, or $4.12 per diluted share, compared to $17,995,000, or $3.51 per diluted share in the prior year’s quarter.

FFO (non-GAAP) for the six months ended June 30, 2021 was $46,914,000, or $9.16 per diluted share, compared to $41,739,000, or $8.15 per diluted share in the prior year’s six months.

FFO (non-GAAP) for the three and nine months ended September 30, 2021 and 2020

FFO (non-GAAP) for the quarter ended September 30, 2021 was $21,181,000, or $4.13 per diluted share, compared to $15,363,000, or $3.00 per diluted share in the prior year’s quarter.

FFO (non-GAAP) for the nine months ended September 30, 2021 was $68,095,000, or $13.29 per diluted share, compared to $57,102,000, or $11.15 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

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(Amounts in thousands, except share and per share amounts) 2021 2020 2021 2020

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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