What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-07-31 compared with 2023-05-01 · 78 added, 46 removed, 81 unchanged (60% of the section changed)

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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.

Currently, some of these factors are the impacts of 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.

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 months ended March 31, 2023 and 2022.

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

The results of operations for the three and six months ended June 30, 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 three months ended March 31, 2023, there were no material changes to these policies.

For the six months ended June 30, 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 hav e six properties in New York City.

We have five properties in New York City.

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.

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.

Our business has been, and may continue to be, affected by the increase in inflation and interest rates, and other uncertainties including the potential for an economic downturn.

These factors could have a material impact on our business, financial condition, results of operations and cash flows.

Quarter Ended June 30, 2023 Financial Results Summary

Net income for the quarter ended June 30, 2023 was $64,147,000 , or $12.51 pe r diluted share, compared to $14,814,000, or $2.89 per diluted share for the prior year’s quarter.

Net income for the quarter ended June 30, 2023 included $53,952,000, or $10.52 per diluted share, of income as a result of a net gain from the sale of the Rego Park III land parcel.

Funds from operations (“FFO”) (non-GAAP) for the quarter ended June 30, 2023 wa s $18,208,000, or $3.55 per diluted share, compared to $22,122,000 or $4.32 per diluted share for the prior year’s quarter.

Six Months Ended June 30, 2023 Financial Results Summary

Net income for the six months ended June 30, 2023 was $75,373,000, or $14.70 p er diluted share, compared to $29,346,000, or $5.73 per diluted share for the prior year’s six months.

Net income for the six months ended June 30, 2023 included $53,952,000, or $10.52 per diluted share, of income as a result of a net gain from the sale of the Rego Park III land parcel.

FFO (non-GAAP) for the six months ended June 30, 2023 was $3 6,841,000, or $7.18 per diluted share, compared to $43,907,000 or $8.57 per diluted share for the prior year’s six months.

Real Estate Sale

On May 19, 2023, we sold 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.

Net proceeds from the sale were $67,821,000 after closing costs and the financial statement gain was $53,952,000.

On June 9, 2023 we exercised our remaining one-year extension option on the $500,000,000 interest-only mortgage loan on the office condominium of our 731 Lexington Avenue property.

The interest rate on the loan remained at LIBOR plus 0.90% through July 15, 2023 and then is at the Prime Rate through loan maturity on June 11, 2024.

In addition, in June 2023, we purchased an interest rate cap for $11,258,000, which capped LIBOR at 6.00% through July 15, 2023 and then the Prime Rate (8.25% as of June 30, 2023) at 6.00% through loan maturity.

Square Footage, Occupancy and Leasing Activity

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%.

As a result of the sale of our Rego Park III land parcel, our portfolio is now comprised of five properties aggregating 2,455,000 square feet.

As of June 30, 2023, the commercial occupancy rate was 87.3 % and residential occupancy rate was 97.1%.

Overview - continued

Significant Tenant

Bloomberg L.P.

(“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.

(“Bloomberg”) accounted for revenue of $59,177,000 and $55,909,000 for the six months ended June 30, 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.

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

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

Results of Operations – Three Months Ended June 30, 2023, compared to June 30, 2022

Rental Revenues

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.

Rental revenues wer e $53,673,000 for t he three months ended June 30, 2023, compared to $49,824,000 for the prior year’s three months, an increase of $3,849,000.

This was primarily due to (i) $1,756,000 of higher real estate tax reimbursements due to higher real estate tax expense, (ii) $1,099,000 of higher revenue due to leasing activity and (iii) $572,000 of higher lease termination fee income.

Operating Expenses

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 .

Operating expenses we re $24,818,000 for the three months ended June 30, 2023, compared to $21,372,000 for the prior year’s three months, an increase of $3,446,000.

This was primarily due to higher real estate tax expense.

Depreciation and Amortization

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.

Depreciation and amortization was $8,081,000 for the three months ended June 30, 2023, compared to $7,413,000 for the prior year’s three months, an increase of $668,000.

This was primarily due to higher depreciation expense on capital projects at Rego Park I placed into service during the second quarter of 2023.

General and Administrative Expenses

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 .

General and administrative expenses were $1,906,000 for the three months ended June 30, 2023, compared to $1,916,000 for the prior year’s three months, a decrease of $10,000.

Interest and Other Income

Interest and other income was $4,523,000 for the three months ended June 30, 2023, compared to $1,173,000 for the prior year’s thr ee months, an increase of $3,350,000.

This was primarily due to an increase in average interest rates.

Interest and Debt Expense

Interest and debt expense wa s $13,196,000 for the three months ended June 30, 2023, compared to $5,482,000 for the prior year’s three months, an increase of $7,714,000.

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

Net Gain on Sale of Real Estate

Net gain on sale of real estate wa s $53,952,000 fo r the three months ended June 30, 2023, resulting from the sale of the Rego Park III land parcel in Queens, New York.

Results of Operations – Six Months Ended June 30, 2023, compared to June 30, 2022

Rental Revenues

Rental revenues wer e $106,614,000 for the six months ended June 30, 2023, compared to $99,039,000 for the prior year’s six months, an increase of $7,575,000.

This was primarily due to (i) $3,291,000 of higher real estate tax reimbursements due to higher real estate tax expense, (ii) $2,843,000 of higher revenue due to leasing activity, (iii) $572,000 of higher lease termination fee income and (iv) $242,000 of higher revenue due to an increase in average monthly rents at The Alexander apartment tower.

Operating Expenses

Operating expenses were $49,762,000 for the six months ended June 30, 2023, compared to $42,914,000 for the prior year’s six months, an increase of $6,848,000.

This was primarily due to higher real estate tax expense.

Depreciation and Amortization

Depreciation and amortization w as $15,559,000 for the six months ended June 30, 2023, compared to $14,764,000 for the prior year’s six months, an increase of $795,000.

This was primarily due to higher depreciation expense on capital projects at Rego Park I placed into service during the second quarter of 2023.

General and Administrative Expenses

General and administrati ve expenses were $3,265,000 for the six months ended June 30, 2023, compared to $3,385,000 for the prior year’s six months, a decrease of $120,000.

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.

Treasury bills.

Interest and other income wa s $8,842,000 for the six months ended June 30, 2023, compared to $1,267,000 for the prior year’s six months, an increase of $7,575,000.

This was primarily due to an increase in average interest rates.

Interest and Debt Expense

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.

Interest and debt expense was $25,449,000 for the six months ended June 30, 2023, compared to $9,897,000 for the prior year’s six month s, an increase of $15,552,000.

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

Net Gain on Sale of Real Estate

Net gain on sale of real estate w as $53,952,000 for the s ix months ended June 30, 2023, resulting from the sale of the Rego Park III land parcel in Queens, New York.

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 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.

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.

As of June 30, 2023, we had $552,755,000 of l iquidity comprised of cash and cash equivalents and restricted cash.

The ongoing challenges posed by the increase in interest rates and inflation 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.

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.

For the Six Months Ended June 30, 2023

Cash and cash equi valents and restricted cash were $552,755,000 as of June 30, 2023, compared to $214,478,000 as of December 31, 2022, an increase of $338,277,000.

This increase resulted from (i) $318,550,000 of net cash provided by investing activities and (ii) $65,909,000 of net cash provided by operating activities, partially offset by (iii) $46,182,000 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 provided by investing activities of $318,550,000 was comprised of (i) $264,881,000 of proceeds from maturities of U.S.

Treasury bills and (ii) $67,821,000 of proceeds from sale of real estate, partially offset by (iii) the purchase of an interest rate cap of $11,258,000 and (iv) construction in progress and real estate additions of $2,894,000.

Net cash provided by operating activities of $65,909,000 was comprised of (i) net income of $75,373,000, (ii) the net change in operating assets and liabilities of $19,039,000, partially offset by (iii) adjustments for non-cash items of $28,503,000.

The adjustments for non-cash items were comprised of (i) net gain on sale of real estate of $53,952,000, partially offset by (ii) depreciation and amortization (including amortization of debt issuance costs) of $16,399,000, (iii) other non-cash adjustments of $4,431,000, (iv) straight-lining of rents of $4,169,000, and (v) stock-based compensation expense of $450,000.

Net cash used in financing activities of $46,182,000 was comprised of dividends paid of $46,144,000 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.

For the Six Months Ended June 30, 2022

Cash and cash equivalents and restricted cash were $329,498,000 as of June 30, 2022, compared to $483,505,000 as of December 31, 2021, a decrease of $154,007,000.

This decrease resulted from (i) $201,207,000 of net cash used in investing activities, (ii) $46,128,000 of net cash used in financing activities, partially offset by (iii) $93,328,000 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 $3,800,000.

Net cash used in financing activities was primarily comprised of dividends paid of $46,120,000.

Net cash provided by operating activities of $93,328,000 was comprised of (i) net income of $29,346,000, (ii) adjustments for non-cash items of $19,374,000 and (iii) the net change in operating assets and liabilities of $44,608,000.

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.

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $15,587,000, (ii) straight-lining of rents of $3,948,000 and (iii) stock-based compensation expense of $450,000, partially offset by (iv) other non-cash adjustments of $611,000.

Liquidity and Capital Resources - continued

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Letters of Credit

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

Approximately $900,000 of standby letters of credit were issued and outstanding as of June 30, 2023.

There are various legal actions brought against us from time-to-time 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 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.

FFO (non-GAAP) for the three and six months ended June 30, 2023 and 2022

FFO (non-GAAP) for the three months ended June 30, 2023 was $18,208,000, or $3.55 per diluted share, compared to $22,122,000, or $4.32 per diluted share for the prior year’s three months.

FFO (non-GAAP) for the six months ended June 30, 2023 was $36,841,000, or $7.18 per diluted share, compared to $43,907,000 or $8.57 per diluted share for the prior year’s six months.

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

For the Quarter Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

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

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Depreciation and amortization of real property 8,013 7,308 15,420 14,561

Net gain on sale of real estate (53,952) — (53,952) —

FFO (non-GAAP) $ 18,208 $ 22,122 $ 36,841 $ 43,907

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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