What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-01 compared with 2022-10-31 · 55 added, 97 removed, 72 unchanged (68% of the section changed)

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Forward-looking statements are not guarantees of future performance.

They involve risks, uncertainties and assumptions.

They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties.

Our future results, financial condition, results of operations and business may differ materially from those expressed in these forward-looking statements.

You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Quarterly Report on Form 10-Q.

These forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties.

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

Currently, some of the factors are the ongoing adverse effect of the COVID-19 pandemic, the increase in interest rates and inflation on our business, financial condition, results of operations, cash flows, operating performance and the effect that these factors have 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 continue to depend on future developments, including vaccination rates among the population, the efficacy and durability of vaccines against emerging variants, and governmental and tenant responses thereto, which continue to be uncertain but the impact could be material.

Moreover, you are cautioned that the COVID-19 pandemic will heighten many of the risks identified in “Item 1A.

– Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2021.

For a further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A.

– Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

For a further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Currently, some of these factors are the increase in interest rates and inflation and the continuing effect of the COVID-19 pandemic on our business, financial condition, results of operations, cash flows, operating performance and the effect that these factors have 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.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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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 nine months ended September 30, 2022 and 2021.

Management’s Discussion and Analysis of Financial Condition and Results of Operations include a discussion of our consolidated financial statements for the three months ended March 31, 2023 and 2022.

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 nine months ended September 30, 2022 are not necessarily indicative of the operating results for the full year.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results for the full year.

Critical Accounting Estimates and Significant Accounting Policies

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a summary of our significant accounting policies is included in “Note 2 – Summary of Significant Accounting Policies” to the consolidated financial statements included therein.

For the nine months ended September 30, 2022, there were no material changes to these policies.

For the three months ended March 31, 2023, 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 six properties in the New York City metropolitan area.

We hav e six properties in New York City.

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

Our success depends upon, among other factors, trends of the world, national and local economies, the financial condition and operating results of current and prospective tenants and customers, the availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation, population and employment trends, zoning laws, and our ability to lease, sublease or sell our properties, at profitable levels.

Our success depends upon, among other factors, trends of the global, national and local economies, the financial condition and operating results of current and prospective tenants and customers, the availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation, population and employment trends, zoning laws, and our ability to lease, sublease or sell our properties, at profitable levels.

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

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

While substantially all the limitations and restrictions imposed on our retail tenants during the onset of the pandemic have been lifted, economic conditions and other factors continue to adversely affect the financial health of our retail tenants.

Quarter Ended September 30, 2022 Financial Results Summary

Net income for the quarter ended September 30, 2022 was $15,109,000, or $2.95 per diluted share, compared to $11,401,000 or $2.22 per diluted share in the prior year’s quarter.

Funds from operations (“FFO”) (non-GAAP) for the quarter ended September 30, 2022 was $22,544,000, or $4.40 per diluted share, compared to $21,181,000 or $4.13 per diluted share in the prior year’s quarter.

Nine Months Ended September 30, 2022 Financial Results Summary

Net income for the nine months ended September 30, 2022 was $44,455,000, or $8.67 per diluted share, compared to $55,181,000, or $10.77 per diluted share in the prior year’s nine months.

FFO (non-GAAP) for the nine months ended September 30, 2022 was $66,451,000, or $12.96 per diluted share, compared to $68,095,000 or $13.29 per diluted share in the prior year’s nine months.

While substantially all the limitations and restrictions imposed on our retail tenants during the onset of the COVID-19 pandemic have been lifted, economic conditions, including heightened inflation and interest rates, and other factors continue to adversely affect the financial health of our retail tenants.

Quarter Ended March 31, 2023 Financial Results Summary

Net income for the quarter ended March 31, 2023 was $11,226,000, or $2.19 per diluted share, compared to $14,532,000 or $2.84 per diluted share in the prior year’s quarter.

Funds from operations (“FFO”) (non-GAAP) for the quarter ended March 31, 2023 was $18,633,000, or $3.63 per diluted share, compared to $21,785,000 or $4.25 per diluted share in the prior year’s quarter.

Square Footage, Occupancy and Leasing Activity

As of September 30, 2022, our portfolio was comprised of six properties aggregating 2,454,000 square feet, of which 2,241,000 square feet was in service and 213,000 square feet (at our Rego Park I and Rego Park II properties) was out of service for redevelopment.

Excluding residential, the in service square feet was 96% occupied as of September 30, 2022.

The in service residential square feet was 98% occupied as of September 30, 2022.

Our portfolio was comprised of six properties aggregating 2,454,000 square feet.

As of March 31, 2023, the commercial occupancy rate was 86.9% and the residential occupancy rate was 97.4%.

Significant Tenant

Bloomberg L.P.

(“Bloomberg”) accounted for revenue of $81,536,000 and $85,057,000 for the nine months ended September 30, 2022 and 2021, respectively, representing approximately 53% and 54% of our total revenues in each period, respectively.

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

(“Bloomberg”) accounted for revenue of $29,516,000 and $27,518,000 for the three months ended March 31, 2023 and 2022, respectively, representing approximately 56% of our rental revenues in each period.

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

If we were to lose Bloomberg as a tenant, or if Bloomberg were to be unable to fulfill its obligations under its lease, it would adversely affect our results of operations and financial condition.

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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 September 30, 2022, compared to September 30, 2021

Rental Revenues

Rental revenues were $53,729,000 in the quarter ended September 30, 2022, compared to $48,950,000 in the prior year’s quarter, an increase of $4,779,000.

This wa s primarily due to (i) $2,039,000 of bankruptcy proceeds received from Century 21, a former tenant at our Rego Park II property, (ii) $1,480,000 of higher real estate tax reimbursements due to higher real estate tax expense, (iii) $1,249,000 of higher revenue due to leasing activity, (iv) $787,000 of higher revenue due to higher occupancy at The Alexander apartment tower and (v) $364,000 of higher revenue from cash basis tenants, partially offset by (vi) $1,815,000 of lower revenue due to the sale of our Paramus property in October 2021.

Operating Expenses

Operating expenses were $23,731,000 in the quarter ended September 30, 2022, compared to $21,433,000 in the prior year’s quarter, an increase of $2,298,000.

This was primarily due to higher operating expenses subject to recovery, including higher real estate taxes resulting from increases to assessed property values.

Depreciation and Amortization

Depreciation and amortization was $7,508,000 in the quarter ended September 30, 2022, compared to $9,008,000 in the prior year’s quarter, a decrease of $1,500,000.

This was primarily due to the acceleration of amortization of the deferred leasing commission at our Paramus property in the prior year’s quarter.

General and Administrative Expenses

General and administrative expenses were $1,370,000 in the quarter ended September 30, 2022, compared to $1,272,000 in the prior year’s quarter, an increase of $98,000.

This was primarily due to higher professional fees.

Interest and Other Income, net

Interest and other income, net was $ 2,017,000 in the quarter ended September 30, 2022, compared to $157,000 in the prior year’s quarter, an increase of $1,860,000.

This was primarily due to $1,146,000 of higher interest income primarily due to an increase in average interest rates and $809,000 of higher interest income from our investments in U.S.

Treasury bills.

Interest and Debt Expense

Interest and debt exp ense was $8,028,000 in the quarter ended September 30, 2022, compared to $5,124,000 in the prior year’s quarter, an increase of $2,904,000.

This was primarily due to $3,740,000 of higher interest expense due to an increase in LIBOR, partially offset by $820,000 of lower interest expense resulting from the sale of our Paramus property and related debt payoff in October 2021.

Change in Fair Value of Marketable Securities

Change in fair value of marketable securities was an expense of $869,000 in the quarter ended September 30, 2021.

This was due to the change in The Macerich Company’s (“Macerich”) common share price through the quarter ended September 30, 2021.

We sold our Macerich common shares in December 2021.

Results of Operations – Nine Months Ended September 30, 2022, compared to September 30, 2021

Asset Held For Sale

On March 8, 2023, we entered into an agreement to sell the Rego Park III land parcel in Queens, New York, for $71,060,000 inclusive of consideration for Brownfield tax benefits and reimbursement of costs for plans, specifications and improvements to date.

The sale, which is subject to customary closing conditions, is expected to be completed in the second quarter of 2023.

The financial statement gain will be approximately $54,000,000.

As of March 31, 2023, the $13,794,000 carrying value of the property was classified as “Asset held for sale” on our consolidated balance sheets.

Results of Operations – Three Months Ended March 31, 2023, compared to March 31, 2022

Rental Revenues

Rental revenues were $152,768,000 in the nine months ended September 30, 2022, compared to $156,491,000 in the prior year’s nine months, a decrease of $3,723,00 0.

This was primarily due to (i) $5,346,000 of lower revenue due to the sale of our Paramus property in October 2021, (ii) $3,017,000 of lower real estate tax reimbursements due to lower real estate tax expense, (iii) $2,750,000 of lease termination fee income received in the prior year from a retail tenant at our 731 Lexington Avenue property , partially offset by (iv) $2,452,000 of higher revenue due to leasing activity, (v) $2,039,000 of bankruptcy proceeds received from Century 21, a former tenant at our Rego Park II property and (vi) $1,979,000 of higher revenue due to higher occupancy at The Alexander apartment tower.

Rental revenues were $52,941,000 for the three months ended March 31, 2023, compared to $49,215,000 for the prior year’s three months, an increase of $3,726,000.

This wa s primarily due to $1,744,000 of higher revenue due to leasing activity and $1,535,000 of higher real estate tax reimbursements due to higher real estate tax expense.

Operating Expenses

Operating expenses were $66,645,000 in the nine months ended September 30, 2022, compared to $68,655,000 in the prior year’s nine months, a decrease of $2 ,010,000.

This was primarily due to lower operating expenses subject to recovery, including lower real estate taxes during the first half of the year, resulting from reductions to assessed property values.

Operating expenses were $24,944,000 for the three months ended March 31, 2023, compared to $21,542,000 for the prior year’s three months, an increase of $3,402,000 .

This was primarily due to higher real estate tax expense.

Depreciation and Amortization

Depreciation and amortization was $22,272,000 in the nine months ended September 30, 2022, compared to $25,682,000 in the prior year’s nine months, a decrease of $3,410,000.

This was primarily due to the acceleration of amortization of the deferred leasing commission at our Paramus property in the prior year’s nine months.

Depreciation and amortization was $7,478,000 for the three months ended March 31, 2023, compared to $7,351,000 for the prior year’s three months, an increase of $127,000.

General and Administrative Expenses

General and administrative expenses were $4,755,000 in the nine months ended September 30, 2022, compared to $4,638,000 in the prior year’s nine months, an increase of $117,000.

This was primarily due to higher professional fees.

Interest and Other Income, net

Interest and other income, net was $3,284,000 in the nine months ended September 30, 2022, compared to $480,000 in the prior year’s nine months, an increase of $2,804,000.

General and administrative expenses were $1,359,000 for the three months ended March 31, 2023, compared to $1,469,000 for the prior year’s three months, a decrease of $110,000 .

This was primarily due to lower professional fees.

Interest and Other Income

Interest and other income was $4, 319,000 for the three months ended March 31, 2023, compared to $94,000 for the prior year’s three months, an increase of $4,225,000.

This was primarily due to $2,153,000 of higher interest income primarily due to an increase in average interest rates and $2,072,000 of higher interest income from our investments in U.S.

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Interest and Debt Expense

Interest and debt expense was $17,925,000 in the nine months ended September 30, 2022, compared to $15,350,000 in the prior year’s nine months, an increase of $2,575,000.

This was primarily due to $5,022,000 of higher interest expense due to an increase in LIBOR, partially offset by $2,434,000 of lower interest expense resulting from the sale of our Paramus property and related debt payoff in October 2021.

Change in Fair Value of Marketable Securities

Change in fair value of marketable securities was income of $3,411,000 in the nine months ended September 30, 2021.

This was due to the change in Macerich’s common share price through the nine months ended September 30, 2021.

We sold our Macerich common shares in December 2021.

Net Gain on Sale of Real Estate

Net gain on sale of real estate was $9,124,000 in the nine months ended September 30, 2021, resulting from the sale of a parcel of land in the Bronx, New York.

Interest and debt exp ense was $12,253,000 for the three months ended March 31, 2023, compared to $4,415,000 for the prior year’s three months, an increase of $7,838,000.

This was primarily due to increases in LIBOR and SOFR rates.

Liquidity and Capital Resources

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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 September 30, 2022, we had $482,295,000 of liquidity comprised of $284,391,000 of cash and cash equivalents and restricted cash and $197,904,000 of investments in U.S.

As of March 31, 2023, we had $476,656,000 of liquidity comprised of $376,876,000 of cash and cash equivalents and restricted cash and $99,780,000 of investments in U.S.

Treasury bills.

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.

The ongoing challenges posed by the increase in interest rates and inflation and the continuing effect of the COVID-19 pandemic could adversely affect our cash flow from continuing operations but we anticipate that cash flow 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 service and capital expenditures.

We may refinance our maturing debt as it comes due or choose to pay it down.

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 challenges posed by the COVID-19 pandemic and the impact on our business and cash flows continue to evolve and cannot be predicted at this time but that impact could be material.

For the Nine Months Ended September 30, 2022

Cash and cash equivalents and restricted cash were $284,391,000 as of September 30, 2022, compared to $483,505,000 as of December 31, 2021, a decrease of $199,114,000.

This decrease resulted from (i) $206,117,000 of net cash used in investing activities, (ii) $69,200,000 of net cash used in financing activities, partially offset by (iii) $76,203,000 of net cash provided by operating activities.

Net cash used in investing activities was comprised of the purchase of U.S.

Treasury bills of $197,407,000 and construction in progress and real estate additions of $8,710,000.

Net cash used in financing activities was primarily comprised of dividends paid of $69,192,000.

Net cash provided by operating activities of $76,203,000 was comprised of (i) net income of $44,455,000, (ii) adjustments for non-cash items of $28,568,000 and (iii) the net change in operating assets and liabilities of $3,180,000.

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $23,510,000, (ii) straight-lining of rental income of $6,028,000 and (iii) stock-based compensation of $450,000, partially offset by (iv) other non-cash adjustments of $1,420,000.

For the 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.

For the Three Months Ended March 31, 2023

Cash and cash equivalents and restricted cash were $376,876,000 as of March 31, 2023, compared to $214,478,000 as of December 31, 2022, an incr ease of $162,398,000.

This increase resulted from (i) $164,772,000 of net cash provided by investing activities and (ii) $20,736,000 of net cash provided by operating activities, partially offset by (iii) $23,110,000 of net cash used in financing activities.

Net cash provided by investing activities of $164,772,000 was comprised of $166,832,000 of proceeds from maturities of U.S.

Treasury bills, partially offset by construction in progress and real estate additions of $2,060,000.

Net cash provided by operating activit ies of $20,736,000 was comprised of (i) net income of $11,226,000, (ii) adjustments for non-cash items of $11,707,000, partially offset by (iii) the net change in operating assets and liabilities of $2,197,000 .

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $7,899,000, (ii) straight-lining of rents of $2,067,000 and (iii) other non-cash adjustments of $1,741,000.

Net cash used in financing activities of $23,110,000 was comprised of dividends paid of $23,072,000 and debt issuance costs of $38,000.

For the Three Months Ended March 31, 2022

Cash and cash equivalents and restricted cash were $491,472,000 as of March 31, 2022, compared to $483,505,000 as of December 31, 2021, an increase of $7,967,000.

This increase resulted from (i) $32,185,000 of net cash provided by operating activities, partially offset by (ii) $23,060,000 of net cash used in financing activities and (iii) $1,158,000 of net cash used in investing activities.

Net cash provided by operating activities of $32,185,000 was comprised of (i) net income of $14,532,000, (ii) adjustments for non-cash items of $9,901,000 and (iii) the net change in operating assets and liabilities of $7,752,000.

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

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.

The adjustments for non-cash items were comprised of depreciation and amortization (including amortization of debt issuance costs) of $7,762,000 and straight-lining of rents of $2,139,000.

Net cash used in financing activities was comprised of dividends paid of $23,060,000.

Net cash used in investing activities was comprised of construction in progress and real estate additions of $1,158,000.

Liquidity and Capital Resources - continued

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We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could be material.

Our mortgage loans are non-recourse to us and contain customary covenants requiring us to maintain insurance.

The principal amounts of our mortgage loans are non-recourse to us and the loans contain customary covenants requiring us to maintain insurance.

Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future.

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Letters of Credit

Approximately $900,000 of standby letters of credit were issued and outstanding as of September 30, 2022.

In January 2022, New World Mall LLC, the sub-tenant at our Flushing property, exercised its one remaining 10-year extension option through January 2037.

As a result, we remeasured our related ground lease liability to include our 10-year extension option and recorded an estimated incremental right-of-use asset and lease liability of approximately $17,000,000 which is included in “other assets” and “other liabilities,” respectively, on our consolidated balance sheet as of September 30, 2022.

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

In our opinion, the outcome of such matters in the aggregate will not have a material effect on our financial position, results of operations or cash flows.

Approximately $900,000 of standby letters of credit were issued and outstanding as of March 31, 2023.

There are various legal actions brought against us from time-to-time in the ordinary course of business.

In our opinion, the outcome of such pending matters in the aggregate will not have a material effect on our financial position, results of operations or cash flows.

Funds from Operations (“FFO”) (non-GAAP)

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

FFO (non-GAAP) for the three and nine months ended September 30, 2022 and 2021

FFO (non-GAAP) for the quarter ended September 30, 2022 was $22,544,000, or $4.40 per diluted share, compared to $21,181,000, or $4.13 per diluted share in the prior year’s quarter.

FFO (non-GAAP) for the nine months ended September 30, 2022 was $66,451,000, or $12.96 per diluted share, compared to $68,095,000 or $13.29 per diluted share in the prior year’s nine months.

FFO (non-GAAP) for the quarters ended March 31, 2023 and 2022

FFO (non-GAAP) for the quarter ended March 31, 2023 was $18,633,000, or $3.63 per diluted share, compared to $21,785,000, or $4.25 per diluted share in the prior year’s quarter.

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

For the Three Months Ended September 30, For the Nine Months Ended September 30,

For the Quarter Ended March 31,

(Amounts in thousands, except share and per share amounts) 2023 2022

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Depreciation and amortization of real property 7,407 7,253

Net gain on sale of real estate — — — (9,124)

Change in fair value of marketable securities — 869 — (3,411)

FFO (non-GAAP) $ 18,633 $ 21,785

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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