Item 1. Financial Statements
Item 1. Financial Statements
ALEXANDER’S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Amounts in thousands, except share and per share amounts)
As of
ASSETS June 30, 2023 December 31, 2022
Real estate, at cost:
Land $ 32,271 $ 33,050
Buildings and leasehold improvements 1,035,444 1,029,504
Development and construction in progress — 22,044
Total 1,067,715 1,084,598
Accumulated depreciation and amortization ( 405,268 ) ( 396,268 )
Real estate, net 662,447 688,330
Cash and cash equivalents 531,331 194,933
Restricted cash 21,424 19,545
Investments in U.S. Treasury bills — 266,963
Tenant and other receivables 5,371 4,705
Receivable arising from the straight-lining of rents 123,328 127,497
Deferred leasing costs, net, including unamortized leasing fees to Vornado
of $ 20,704 and $ 22,174 , respectively
26,481 28,490
Other assets 58,043 67,313
$ 1,428,425 $ 1,397,776
LIABILITIES AND EQUITY
Mortgages payable, net of deferred debt issuance costs $ 1,091,787 $ 1,091,051
Amounts due to Vornado 952 801
Accounts payable and accrued expenses 49,223 48,785
Other liabilities 20,819 20,640
Total liabilities 1,162,781 1,161,277
Commitments and contingencies
Preferred stock: $ 1.00 par value per share; authorized, 3,000,000 shares;
issued and outstanding, no ne
— —
Common stock: $ 1.00 par value per share; authorized, 10,000,000 shares;
issued, 5,173,450 shares; outstanding, 5,107,290 shares
5,173 5,173
Additional capital 34,315 33,865
Retained earnings 201,472 172,243
Accumulated other comprehensive income 25,052 25,586
266,012 236,867
Treasury stock: 66,160 shares, at cost
( 368 ) ( 368 )
Total equity 265,644 236,499
$ 1,428,425 $ 1,397,776
See notes to consolidated financial statements (unaudited).
4
ALEXANDER’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in thousands, except share and per share amounts)
For the Three Months Ended June 30, For the Six Months Ended June 30,
2023 2022 2023 2022
REVENUES
Rental revenues $ 53,673 $ 49,824 $ 106,614 $ 99,039
EXPENSES
Operating, including fees to Vornado of $ 1,684 , $ 1,536 , $ 3,223 and $ 2,914 , respectively
( 24,818 ) ( 21,372 ) ( 49,762 ) ( 42,914 )
Depreciation and amortization ( 8,081 ) ( 7,413 ) ( 15,559 ) ( 14,764 )
G eneral and administrative, including management fees to Vornado of $ 610 , $ 610 , $ 1,220 and $ 1,220 , respectively
( 1,906 ) ( 1,916 ) ( 3,265 ) ( 3,385 )
Total expenses ( 34,805 ) ( 30,701 ) ( 68,586 ) ( 61,063 )
Interest and other income 4,523 1,173 8,842 1,267
Interest and debt expense ( 13,196 ) ( 5,482 ) ( 25,449 ) ( 9,897 )
Net gain on sale of real estate 53,952 — 53,952 —
Net income $ 64,147 $ 14,814 $ 75,373 $ 29,346
Net income per common share - basic and diluted $ 12.51 $ 2.89 $ 14.70 $ 5.73
Weighted average shares outstanding - basic and diluted 5,128,823 5,125,710 5,127,959 5,125,098
See notes to consolidated financial statements (unaudited).
5
ALEXANDER’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(Amounts in thousands)
For the Three Months Ended June 30, For the Six Months Ended June 30,
2023 2022 2023 2022
Net income $ 64,147 $ 14,814 $ 75,373 $ 29,346
Other comprehensive income (loss):
Change in fair value of interest rate derivatives and other 3,110 1,924 ( 534 ) 13,651
Comprehensive income $ 67,257 $ 16,738 $ 74,839 $ 42,997
See notes to consolidated financial statements (unaudited).
6
ALEXANDER’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(Amounts in thousands, except per share amounts)
Additional
Capital Retained
Earnings Accumulated
Other
Comprehensive Income Treasury
Stock Total Equity
Common Stock
Shares Amount
For the Three Months Ended June 30, 2023
Balance, March 31, 2023 5,173 $ 5,173 $ 33,865 $ 160,397 $ 21,942 $ ( 368 ) $ 221,009
Net income — — — 64,147 — — 64,147
Dividends paid ($ 4.50 per common share)
— — — ( 23,072 ) — — ( 23,072 )
Change in fair value of interest rate derivatives and other — — — — 3,110 — 3,110
Deferred stock unit grants — — 450 — — — 450
Balance, June 30, 2023 5,173 $ 5,173 $ 34,315 $ 201,472 $ 25,052 $ ( 368 ) $ 265,644
For the Three Months Ended June 30, 2022
Balance, March 31, 2022 5,173 $ 5,173 $ 33,415 $ 198,347 $ 19,221 $ ( 368 ) $ 255,788
Net income — — — 14,814 — — 14,814
Dividends paid ($ 4.50 per common share)
— — — ( 23,060 ) — — ( 23,060 )
Change in fair value of interest rate derivatives and other — — — — 1,924 — 1,924
Deferred stock unit grants — — 450 — — — 450
Balance, June 30, 2022 5,173 $ 5,173 $ 33,865 $ 190,101 $ 21,145 $ ( 368 ) $ 249,916
Additional
Capital Retained
Earnings Accumulated
Other
Comprehensive Income Treasury
Stock Total Equity
Common Stock
Shares Amount
For the Six Months Ended June 30, 2023
Balance, December 31, 2022 5,173 $ 5,173 $ 33,865 $ 172,243 $ 25,586 $ ( 368 ) $ 236,499
Net income — — — 75,373 — — 75,373
Dividends paid ($ 9.00 per common share)
— — — ( 46,144 ) — — ( 46,144 )
Change in fair value of interest rate derivatives and other — — — — ( 534 ) — ( 534 )
Deferred stock unit grants — — 450 — — — 450
Balance, June 30, 2023 5,173 $ 5,173 $ 34,315 $ 201,472 $ 25,052 $ ( 368 ) $ 265,644
For the Six Months Ended June 30, 2022
Balance, December 31, 2021 5,173 $ 5,173 $ 33,415 $ 206,875 $ 7,494 $ ( 368 ) $ 252,589
Net income — — — 29,346 — — 29,346
Dividends paid ($ 9.00 per common share)
— — — ( 46,120 ) — — ( 46,120 )
Change in fair value of interest rate derivatives and other — — — — 13,651 — 13,651
Deferred stock unit grants — — 450 — — — 450
Balance, June 30, 2022 5,173 $ 5,173 $ 33,865 $ 190,101 $ 21,145 $ ( 368 ) $ 249,916
See notes to consolidated financial statements (unaudited).
7
ALEXANDER’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
For the Six Months Ended June 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2023 2022
Net income $ 75,373 $ 29,346
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including amortization of debt issuance costs 16,399 15,587
Net gain on sale of real estate ( 53,952 ) —
Straight-lining of rents 4,169 3,948
Stock-based compensation expense 450 450
Other non-cash adjustments 4,431 ( 611 )
Change in operating assets and liabilities:
Tenant and other receivables ( 666 ) 1,978
Other assets 17,666 23,699
Amounts due to Vornado 151 38
Accounts payable and accrued expenses 1,900 18,727
Other liabilities ( 12 ) 166
Net cash provided by operating activities 65,909 93,328
CASH FLOWS FROM INVESTING ACTIVITIES
Construction in progress and real estate additions ( 2,894 ) ( 3,800 )
Proceeds from sale of real estate 67,821 —
Proceeds from maturities of U.S. Treasury bills 264,881 —
Purchase of interest rate cap ( 11,258 ) —
Purchase of U.S. Treasury bills — ( 197,407 )
Net cash provided by (used in) investing activities 318,550 ( 201,207 )
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid ( 46,144 ) ( 46,120 )
Debt issuance costs ( 38 ) ( 8 )
Net cash used in financing activities ( 46,182 ) ( 46,128 )
Net increase (decrease) in cash and cash equivalents and restricted cash 338,277 ( 154,007 )
Cash and cash equivalents and restricted cash at beginning of period 214,478 483,505
Cash and cash equivalents and restricted cash at end of period $ 552,755 $ 329,498
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of period $ 194,933 $ 463,539
Restricted cash at beginning of period 19,545 19,966
Cash and cash equivalents and restricted cash at beginning of period $ 214,478 $ 483,505
Cash and cash equivalents at end of period $ 531,331 $ 310,349
Restricted cash at end of period 21,424 19,149
Cash and cash equivalents and restricted cash at end of period $ 552,755 $ 329,498
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest (net of amounts capitalized) $ 23,761 $ 8,540
NON-CASH TRANSACTIONS
Liability for real estate additions, includi ng $ 3 for development fees due
to Vornado in 2022
$ 798 $ 1,426
Write-off of fully depreciated assets 5,808 23
See notes to consolidated financial statements (unaudited).
8
ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization
Alexander’s, Inc. (NYSE: ALX) is a real estate investment trust (“REIT”), incorporated in Delaware, engaged in leasing, managing, developing and redeveloping its properties. All references to “we,” “us,” “our,” “Company” and “Alexander’s” refer to Alexander’s, Inc. and its consolidated subsidiaries. We are managed by, and our properties are leased and developed by, Vornado Realty Trust (“Vornado”) (NYSE: VNO). We have five properties in New York City.
2. Basis of Presentation
The accompanying consolidated financial statements are unaudited and include the accounts of Alexander’s and its consolidated subsidiaries. All adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (the “SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC.
We have made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated 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, 2023 are not necessarily indicative of the operating results for the full year.
We operate in one reportable segment.
3. Recently Issued Accounting Literature
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04 establishing Accounting Standards Codification (“ASC”) Topic 848, Reference Rate Reform, and in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) : Scope (collectively, “ASC 848”). ASC 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASC 848 is optional and may be elected over time as reference rate reform activities occur. We have elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”) which was issued to defer the sunset date of ASC 848 to December 31, 2024. ASU 2022-06 is effective immediately for all companies. As of June 30, 2023, we have transitioned all of our LIBOR-indexed debt and derivatives and, for our derivatives in hedge accounting relationships, utilized the elective relief in ASC 848, allowing for the continuation of hedge accounting through the transition process.
9
ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. Revenue Recognition
The following is a summary of revenue sources for the three and six months ended June 30, 2023 and 2022.
For the Three Months Ended June 30, For the Six Months Ended June 30,
(Amounts in thousands) 2023 2022 2023 2022
Lease revenues $ 51,512 $ 47,711 $ 102,548 $ 94,519
Parking revenue 1,114 1,165 2,210 2,393
Tenant services 1,047 948 1,856 2,127
Rental revenues $ 53,673 $ 49,824 $ 106,614 $ 99,039
The components of lease revenues for the three and six months ended June 30, 2023 and 2022 are as follows:
For the Three Months Ended June 30, For the Six Months Ended June 30,
(Amounts in thousands) 2023 2022 2023 2022
Fixed lease revenues $ 34,839 $ 33,418 $ 69,563 $ 65,621
Variable lease revenues 16,673 14,293 32,985 28,898
Lease revenues $ 51,512 $ 47,711 $ 102,548 $ 94,519
Bloomberg L.P. (“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. 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. In order to assist us in our continuing assessment of Bloomberg’s creditworthiness, we receive certain confidential financial information and metrics from Bloomberg. In addition, we access and evaluate financial information regarding Bloomberg from other private sources, as well as publicly available data.
5. 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 .
10
ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. Related Party Transactions
Vornado
As of June 30, 2023, Vornado owned 32.4 % of our outstanding common stock. We are managed by, and our properties are leased and developed by, Vornado, pursuant to the agreements described below, which expire in March of each year and are automatically renewable.
Management and Development Agreements
We pay Vornado an annual management fee equal to the sum of (i) $ 2,800,000 , (ii) 2 % of gross revenue from the Rego Park II shopping center, (iii) $ 0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue, and (iv) $ 365,000 , escalating at 3 % per annum, for managing the common area of 731 Lexington Avenue. Vornado is also entitled to a development fee equal to 6 % of development costs, as defined.
Leasing and Other Agreements
Vornado also provides us with leasing services for a fee of 3 % of rent for the first ten years of a lease term, 2 % of rent for the eleventh through the twentieth year of a lease term, and 1 % of rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by tenants. In the event third-party real estate brokers are used, the fees to Vornado increase by 1 % and Vornado is responsible for the fees to the third-party real estate brokers.
Vornado is also entitled to a commission upon the sale of any of our assets equal to 3 % of gross proceeds, as defined, for asset sales less than $ 50,000,000 and 1 % of gross proceeds, as defined, for asset sales of $ 50,000,000 or more (the “Sales Agreement”). Pursuant to the Sales Agreement, we paid a $ 711,000 sales commission to Vornado in the second quarter of 2023 related to the sale of the Rego Park III land parcel.
We also have agreements with Building Maintenance Services LLC, a wholly owned subsidiary of Vornado, to supervise (i) cleaning, engineering and security services at our 731 Lexington Avenue property and (ii) security services at our Rego Park I and Rego Park II properties and The Alexander apartment tower.
The following is a summary of fees incurred to Vornado under the various agreements discussed above.
For the Three Months Ended June 30, For the Six Months Ended June 30,
(Amounts in thousands) 2023 2022 2023 2022
Company management fees $ 700 $ 700 $ 1,400 $ 1,400
Development fees — — — 3
Leasing fees 129 — 170 1,318
Commission on sale of real estate 711 — 711 —
Property management, cleaning, engineering and security fees
1,550 1,547 2,959 2,816
$ 3,090 $ 2,247 $ 5,240 $ 5,537
As of June 30, 2023, the amounts due to Vornado were $ 823,000 for management, property management, cleaning, engineering and security fees and $ 129,000 for leasing fees. As of December 31, 2022, the amounts due to Vornado were $ 742,000 for management, property management, cleaning, engineering and security fees and $ 59,000 for leasing fees.
11
ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. Mortgages Payable
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.
The following is a summary of our outstanding mortgages payable as of June 30, 2023 and December 31, 2022. We may refinance our maturing debt as it comes due or choose to pay it down.
Interest Rate at June 30, 2023 Balance as of
(Amounts in thousands) Maturity June 30, 2023 December 31, 2022
First mortgages secured by:
731 Lexington Avenue, office condominium (1)(2)
Jun. 11, 2024 6.09 % $ 500,000 $ 500,000
731 Lexington Avenue, retail condominium (1)(3)
Aug. 05, 2025 1.76 % 300,000 300,000
Rego Park II shopping center (1)(4)
Dec. 12, 2025 5.60 % 202,544 202,544
The Alexander apartment tower Nov. 01, 2027 2.63 % 94,000 94,000
Total 1,096,544 1,096,544
Deferred debt issuance costs, net of accumulated
amortization of $ 16,842 and $ 16,071 , respectively
( 4,757 ) ( 5,493 )
$ 1,091,787 $ 1,091,051
(1) Interest rate listed represents the rate in effect as of June 30, 2023 based on LIBOR or SOFR as of contractual reset date plus contractual spread, adjusted for hedging instruments as applicable.
(2) Interest at LIBOR plus 0.90 % through July 15, 2023 (LIBOR was capped at 6.00 % through July 15, 2023) and then at the Prime Rate (capped at 6.00 % through loan maturity).
(3) Interest at SOFR plus 1.51 % which was swapped to a fixed rate of 1.76 % through May 2025.
(4) Interest at SOFR plus 1.45 % (SOFR is capped at 4.15 % through November 2024).
8. Stock-Based Compensation
We account for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). Our 2016 Omnibus Stock Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted stock, stock appreciation rights, deferred stock units (“DSUs”) and performance shares, as defined, to the directors, officers and employees of the Company and Vornado.
In May 2023, we granted each of the members of our Board of Directors 449 DSUs with a market value of $ 75,000 per grant. The grant date fair value of these awards was $ 56,250 per grant, or $ 450,000 in the aggregate, in accordance with ASC 718. The DSUs entitle the holders to receive shares of the Company’s common stock without the payment of any consideration. The DSUs vested immediately and accordingly, were expensed on the date of grant, but the shares of common stock underlying the DSUs are not deliverable to the grantee until the grantee is no longer serving on the Company’s Board of Directors. As of June 30, 2023, there were 23,388 DSUs outstanding and 482,399 shares were available for future grant under the Plan.
12
ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
9. Fair Value Measurements
ASC Topic 820, Fair Value Measurement (“ASC 820”) defines fair value and establishes a framework for measuring fair value. ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities as well as certain U.S. Treasury securities that are highly liquid and are actively traded in secondary markets; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in our assessment of fair value.
Financial Assets and Liabilities Measured at Fair Value
Financial assets measured at fair value on our consolidated balance sheet as of June 30, 2023 consist of interest rate derivatives, which are presented in the table below based on their level in the fair value hierarchy. There were no financial liabilities measured at fair value as of June 30, 2023.
As of June 30, 2023
(Amounts in thousands) Total Level 1 Level 2 Level 3
Interest rate derivatives (included in other assets) $ 38,407 $ — $ 38,407 $ —
Financial assets measured at fair value on our consolidated balance sheet as of December 31, 2022 consist of U.S. Treasury bills (classified as available-for-sale) and interest rate derivatives, which are presented in the table below based on their level in the fair value hierarchy. There were no financial liabilities measured at fair value as of December 31, 2022.
As of December 31, 2022
(Amounts in thousands) Total Level 1 Level 2 Level 3
Investments in U.S. Treasury bills $ 266,963 $ 266,963 $ — $ —
Interest rate derivatives (included in other assets) 29,351 — 29,351 —
$ 296,314 $ 266,963 $ 29,351 $ —
13
ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
9. Fair Value Measurements - continued
Interest Rate Derivatives
We recognize the fair value of all interest rate derivatives in “other assets” or “other liabilities” on our consolidated balance sheets and since all of our interest rate derivatives have been designated as cash flow hedges, changes in the fair value are recognized in other comprehensive income. The table below summarizes our interest rate derivatives, all of which hedge the interest rate risk attributable to the variable rate debt noted as of June 30, 2023 and December 31, 2022, respectively.
Fair Value as of As of June 30, 2023
(Amounts in thousands) June 30, 2023 December 31, 2022 Notional Amount Swapped Rate Expiration Date
Interest rate swap related to:
731 Lexington Avenue mortgage loan, retail condominium $ 24,189 $ 26,718 $ 300,000 1.76 % 05/25
Interest rate caps related to:
Rego Park II shopping center mortgage loan 3,106 2,622 202,544 (1) 11/24
731 Lexington Avenue mortgage loan, office condominium 11,112 11 500,000 (2) 06/24
Included in other assets $ 38,407 $ 29,351
(1) SOFR cap strike rate of 4.15 %.
(2) In June 2023, we purchased an interest rate cap for $ 11,258 , 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. See Note 7 - Mortgages Payable for further information.
Financial Assets and Liabilities not Measured at Fair Value
Financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash equivalents and mortgages payable. Cash equivalents are carried at cost, which approximates fair value due to their short-term maturities and are classified as Level 1. The fair value of our mortgages payable is calculated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit ratings, which are provided by a third-party specialist, and is classified as Level 2. The table below summarizes the carrying amount and fair value of these financial instruments as of June 30, 2023 and December 31, 2022.
As of June 30, 2023 As of December 31, 2022
(Amounts in thousands) Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Assets:
Cash equivalents
$ 366,143 $ 366,143 $ 47,852 $ 47,852
Liabilities:
Mortgages payable (excluding deferred debt issuance costs, net) $ 1,096,544 $ 1,054,151 $ 1,096,544 $ 1,061,221
14
ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
10. Commitments and Contingencies
Insurance
We maintain general liability insurance with limits of $ 300,000,000 per occurrence and per property, of which the first $ 30,000,000 includes communicable disease coverage, and all-risk property and rental value insurance coverage with limits of $ 1.7 billion per occurrence, including coverage for acts of terrorism, with sub-limits for certain perils such as floods and earthquakes on each of our properties and excluding communicable disease coverage.
Fifty Ninth Street Insurance Company, LLC (“FNSIC”), our wholly owned consolidated subsidiary, acts as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance Act of 2002, as amended to date and which has been extended through December 2027. Coverage for acts of terrorism (including NBCR acts) is up to $ 1.7 billion per occurrence and in the aggregate. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to FNSIC. For NBCR acts, FNSIC is responsible for a $ 298,000 deductible and 20 % of the balance of a covered loss, and the Federal government is responsible for the remaining 80 % of a covered loss. We are ultimately responsible for any loss incurred by FNSIC.
We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism or other events. However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could be material.
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. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties.
Letters of Credit
Approximately $ 900,000 of standby letters of credit were issued and outstanding as of June 30, 2023.
Other
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.
11. Earnings Per Share
The following table sets forth the computation of basic and diluted income per share, including a reconciliation of net income and the number of shares used in computing basic and diluted income per share. Basic income per share is determined using the weighted average shares of common stock (including deferred stock units) outstanding during the period. Diluted income per share is determined using the weighted average shares of common stock (including deferred stock units) outstanding during the period, and assumes all potentially dilutive securities were converted into common shares at the earliest date possible. There were no potentially dilutive securities outstanding during the three and six months ended June 30, 2023 and 2022.
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
Net income $ 64,147 $ 14,814 $ 75,373 $ 29,346
Weighted average shares outstanding – basic and diluted
5,128,823 5,125,710 5,127,959 5,125,098
Net income per common share – basic and diluted $ 12.51 $ 2.89 $ 14.70 $ 5.73
15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Alexander’s, Inc.
Results of Review of Interim Financial Information
We have reviewed the accompanying consolidated balance sheet of Alexander’s, Inc. and subsidiaries (the “Company”) as of June 30, 2023, the related consolidated statements of income, comprehensive income, and changes in equity, for the three-month and six-month periods ended June 30, 2023, and 2022, and of cash flows for the six-month periods ended June 30, 2023 and 2022, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended (not presented herein); and in our report dated February 13, 2023, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2022, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ DELOITTE & TOUCHE LLP
New York, New York
July 31, 2023
16
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.