What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-04 compared with 2024-08-05 · 57 added, 57 removed, 107 unchanged (52% 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, 2024 and 2023.

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, 2024 and 2023.

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, 2024 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, 2024 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 six months ended June 30, 2024, there were no material changes to these estimates or policies.

For the nine months ended September 30, 2024, there were no material changes to these estimates or policies.

Alexander’s, Inc.

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Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding these and other factors that may materially affect our results.

Three Months Ended June 30, 2024 Financial Results Summary

Net income for the three months ended June 30, 2024 was $8,380,000, or $1.63 per diluted share, compared to $64,147,000 or $12.51 per diluted share in the prior year’s three months.

Net income for the three 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.

Funds from operations (“FFO”) (non-GAAP) for the three months ended June 30, 2024 was $17,009,000, or $3.31 per diluted share, compared to $18,208,000 or $3.55 per diluted share in the prior year’s three months.

Six Months Ended June 30, 2024 Financial Results Summary

Net income for the six months ended June 30, 2024 was $24,489,000, or $4.77 per diluted share, compared to $75,373,000 or $14.70 per diluted share in 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, 2024 was $42,541,000, or $8.29 per diluted share, compared to $36,841,000 or $7.18 per diluted share in the prior year’s six months.

Three Months Ended September 30, 2024 Financial Results Summary

Net income for the three months ended September 30, 2024 was $6,678,000, or $1.30 per diluted share, compared to $10,754,000 or $2.10 per diluted share in the prior year’s three months.

Funds from operations (“FFO”) (non-GAAP) for the three months ended September 30, 2024 was $14,582,000, or $2.84 per diluted share, compared to $18,623,000 or $3.63 per diluted share in the prior year’s three months.

Nine Months Ended September 30, 2024 Financial Results Summary

Net income for the nine months ended September 30, 2024 was $31,167,000, or $6.07 per diluted share, compared to $86,127,000 or $16.79 per diluted share in the prior year’s nine months.

Net income for the nine months ended September 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 nine months ended September 30, 2024 was $57,123,000, or $11.13 per diluted share, compared to $55,464,000 or $10.81 per diluted share in the prior year’s nine months.

Financing Activity

On June 11, 2024, we entered into a four-month extension of the $500,000,000 interest-only mortgage loan on the office condominium of our 731 Lexington Avenue property and simultaneously paid down the principal balance by $10,000,000 to $490,000,000.

The interest-only mortgage loan remains at the Prime rate (8.50% as of June 30, 2024) through the extended loan maturity of October 11, 2024.

On September 30, 2024, we entered into a new $400,000,000 mortgage loan on the office condominium portion of 731 Lexington Avenue.

The interest-only loan has a fixed rate of 5.04% and matures in October 2028.

The loan is prepayable, at the Company’s option, with no penalty, beginning in October 2026.

The new loan replaces the previous $490,000,000 loan that bore interest at the Prime Rate and was scheduled to mature in October 2024.

Real Estate Sale

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Our portfolio is comprised of five properties aggregating 2,456,000 square feet.

As of June 30, 2024, the commercial occupancy rate was 92.1% and the residential occupancy rate was 98.7%.

As of September 30, 2024, the commercial occupancy rate was 92.1% and the residential occupancy rate was 96.5%.

On December 3, 2022, IKEA closed its 112,000 square foot store at our Rego Park I property under a lease that was set to expire in December 2030.

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Bloomberg L.P.

(“Bloomberg”) accounted for revenue of $60,946,000 and $59,177,000 for the six months ended June 30, 2024 and 2023, respectively, representing approximately 53% and 56% of our rental revenues in each period, respectively.

(“Bloomberg”) accounted for revenue of $93,179,000 and $89,863,000 for the nine months ended September 30, 2024 and 2023, respectively, representing approximately 55% of our rental revenues in each period.

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

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On May 3, 2024, Alexander’s and Bloomberg entered into an agreement to extend the leases covering approximately 947,000 square feet at our 731 Lexington Avenue property that were scheduled to expire in February 2029 for a term of eleven years to February 2040.

Results of Operations – Three Months Ended June 30, 2024, compared to June 30, 2023

Results of Operations – Three Months Ended September 30, 2024, compared to September 30, 2023

Rental Revenues

Rental revenues were $53,392,000 for the three months ended June 30, 2024, compared to $53,673,000 for the prior year’s three months, a decrease of $281,000.

This was primarily due to (i) $1,081,000 of lower rental revenue from IKEA’s lease expiration at Rego Park I and (ii) $1,001,000 of lower lease termination fee income, partially offset by (iii) $1,163,000 of higher straight-line rental revenue from Bloomberg’s lease extension at 731 Lexington Avenue and (iv) $857,000 of higher reimbursable operating expenses and capital expenditures.

Rental revenues were $55,675,000 for the three months ended September 30, 2024, compared to $55,413,000 for the prior year’s three months, an increase of $262,000.

This was primarily due to (i) $1,740,000 of higher straight-line rental revenue from Bloomberg’s lease extension at 731 Lexington Avenue and (ii) $775,000 of higher lease termination fee income, partially offset by (iii) $1,523,000 of lower rental revenue from IKEA’s lease expiration at Rego Park I and (iv) $416,000 of lower operating expense reimbursements.

Operating Expenses

Operating expenses were $24,991,000 for the three months ended June 30, 2024, compared to $24,818,000 for the prior year’s three months, an increase of $173,000 .

This was primarily due to higher non-reimbursable operating expenses.

Operating expenses were $26,446,000 for the three months ended September 30, 2024, compared to $25,593,000 for the prior year’s three months, an increase of $853,000 .

This was primarily due to higher real estate tax expense.

Depreciation and Amortization

Depreciation and amortization was $8,697,000 for the three months ended June 30, 2024, compared to $8,081,000 for the prior year’s three months, an increase of $616,000.

This was primarily due to $347,000 of higher amortization expense associated with leasing commissions paid in connection with Bloomberg’s lease extension at 731 Lexington Avenue and $336,000 of higher depreciation expense on capital projects placed into service .

Depreciation and amortization was $7,972,000 for the three months ended September 30, 2024, compared to $7,933,000 for the prior year’s three months, an increase of $39,000.

General and Administrative Expenses

General and administrative expenses were $2,159,000 for the three months ended June 30, 2024, compared to $1,906,000 for the prior year’s three months, an increase of $253,000 .

This was primarily due to higher professional fees.

General and administrative expenses were $1,423,000 for the three months ended September 30, 2024, compared to $1,580,000 for the prior year’s three months, a decrease of $157,000 .

This was primarily due to lower professional fees.

Interest and Other Income

Interest and other income was $7,054 ,000 for the three months ended June 30, 2024, compared to $4,523,000 for the prior year’s three months, an increase of $2,531,000.

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

Interest and other income was $6,105,000 for the three months ended September 30, 2024, compared to $6,622,000 for the prior year’s three months, a decrease of $517,000 .

This was primarily due to a decrease in average cash balances.

Interest and Debt Expense

Interest and debt exp ense was $16,219,000 for the three months ended June 30, 2024, compared to $13,196,000 for the prior year’s three months, an increase of $3,023,000.

This was primarily due to $1,990,000 of higher interest rate cap premium amortization and $876,000 of higher interest expense resulting from increases in rates.

Net Gain on Sale of Real Estate

Net gain on sale of real estate was $53,952,000 for the prior year’s three months, resulting from the sale of the Rego Park III land parcel in Queens, New York.

Results of Operations – Six Months Ended June 30, 2024, compared to June 30, 2023

Interest and debt exp ense was $19,261,000 for the three months ended September 30, 2024, compared to $16,175,000 for the prior year’s three months, an increase of $3,086,000 .

This was primarily due to higher interest rates, additional costs associated with the refinancing of our office condominium at 731 Lexington Avenue and higher deferred debt issuance cost amortization, partially offset by lower interest rate cap premium amortization.

Results of Operations – Nine Months Ended September 30, 2024, compared to September 30, 2023

Rental Revenues

Rental revenues were $114,789,000 for the six months ended June 30, 2024, compared to $106,614,000 for the prior year’s six months, an increase of $8,175,000.

This was primarily due to (i) $6,641,000 of higher rental revenue from IKEA’s lease modification at Rego Park I, (ii) $1,163,000 of higher straight-line rental revenue from Bloomberg’s lease extension at 731 Lexington Avenue and (iii) $1,620,000 of higher reimbursable operating expenses and capital expenditures, partially offset by (iv) $651,000 of lower lease termination fee income.

Rental revenues were $170,464,000 for the nine months ended September 30, 2024, compared to $162,027,000 for the prior year’s nine months, an increase of $8,437,000.

This was primarily due to (i) $5,117,000 of higher rental revenue from IKEA’s lease modification at Rego Park I, (ii) $2,903,000 of higher straight-line rental revenue from Bloomberg’s lease extension at 731 Lexington Avenue and (iii) $1,204,000 of higher reimbursable operating expenses and capital expenditures, partially offset by (iv) $875,000 of lower rental revenue from Bed Bath & Beyond’s lease rejection at Rego Park I.

Operating Expenses

Operating expenses were $50,254,000 for the six months ended June 30, 2024, compared to $49,762,000 for the prior year’s six months, an increase of $492,000 .

This was primarily due to higher non-reimbursable operating expenses.

Operating expenses were $76,700,000 for the nine months ended September 30, 2024, compared to $75,355,000 for the prior year’s nine months, an increase of $1,345,000 .

This was primarily due to higher real estate tax expense.

Depreciation and Amortization

Depreciation and amortization was $18,174,000 for the six months ended June 30, 2024, compared to $15,559,000 for the prior year’s six months, an increase of $2,615,000.

This was due to (i) $1,304,000 of higher depreciation expense on capital projects placed into service, (ii) $964,000 of accelerated depreciation and amortization related to IKEA’s lease modification at Rego Park I and (iii) $347,000 of higher amortization expense associated with leasing commissions paid in connection with Bloomberg’s lease extension at 731 Lexington Avenue.

Depreciation and amortization was $26,146,000 for the nine months ended September 30, 2024, compared to $23,492,000 for the prior year’s nine months, an increase of $2,654,000.

This was primarily due to (i) $1,748,000 of higher depreciation expense on capital projects placed into service and (ii) $840,000 of accelerated depreciation and amortization related to IKEA’s lease modification at Rego Park I.

General and Administrative Expenses

General and administrative expenses were $3,635,000 for the six months ended June 30, 2024, compared to $3,265,000 for the prior year’s six months, an increase of $370,000 .

General and administrative expenses were $5,058,000 for the nine months ended September 30, 2024, compared to $4,845,000 for the prior year’s nine months, an increase of $213,000 .

This was primarily due to higher professional fees.

Interest and Other Income

Interest and other income was $14,216 ,000 for the six months ended June 30, 2024, compared to $8,842,000 for the prior year’s six months, an increase of $5,374,000.

Interest and other income was $20,321,000 for the nine months ended September 30, 2024, compared to $15,464,000 for the prior year’s nine months, an increase of $4,857,000 .

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

Interest and Debt Expense

Interest and debt exp ense was $32,453,000 for the six months ended June 30, 2024, compared to $25,449,000 for the prior year’s six months, an increase of $7,004,000.

This was primarily due to $5,086,000 of higher interest rate cap premium amortization and $1,746,000 of higher interest expense resulting from increases in rates.

Interest and debt exp ense was $51,714,000 for the nine months ended September 30, 2024, compared to $41,624,000 for the prior year’s nine months, an increase of $10,090,000 .

This was primarily due to higher interest rates, additional costs associated with the refinancing of our office condominium at 731 Lexington Avenue, higher interest rate cap premium amortization and higher deferred debt issuance cost amortization.

Net Gain on Sale of Real Estate

Net gain on sale of real estate was $53,952,000 for the prior year’s six months, resulting from the sale of the Rego Park III land parcel in Queens, New York.

Net gain on sale of real estate was $53,952,000 for the prior year’s nine months, resulting from the sale of the Rego Park III land parcel in Queens, New York.

Liquidity and Capital Resources

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The sources of liquidity to fund these cash requirements include rental revenue, which is our primary source of cash flow and is dependent upon the occupancy and rental rates of our properties, as well as our existing cash, proceeds from financings, including mortgage or construction loans secured by our properties and proceeds from asset sales.

As of June 30, 2024, we had $524,377,000 of liquidity comprised of cash and cash equivalents and restricted cash.

As of September 30, 2024, we had $397,176,000 of liquidity comprised of cash and cash equivalents and restricted cash.

Recent increases 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.

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

For the Six Months Ended June 30, 2024

Cash and cash equivalents and restricted cash were $524,377,000 as of June 30, 2024, compared to $552,977,000 as of December 31, 2023, a decr ease of $28,600,000.

This decrease resulted from (i) $57,308,000 of net cash used in financing activities, partially offset by (ii) $28,327,000 of net cash provided by operating activities and (iii) $381,000 of net cash provided by investing activities.

Net cash used in financing activities of $57,308,000 was comprised of (i) $46,176,000 of dividends paid, (ii) $10,000,000 of debt repayments and (iii) $1,132,000 of debt issuance costs.

For the Nine Months Ended September 30, 2024

Cash and cash equivalents and restricted cash were $397,176,000 as of September 30, 2024, compared to $552,977,000 as of December 31, 2023, a decr ease of $155,801,000 .

This decrease resulted from (i) $175,824,000 of net cash used in financing activities and (ii) $3,273,000 of net cash used in investing activities, partially offset by (iii) $23,296,000 of net cash provided by operating activities.

Net cash used in financing activities of $175,824,000 was comprised of (i) $500,000,000 of debt repayments, (ii) $69,277,000 of dividends paid and (iii) $6,547,000 of debt issuance costs, partially offset by (iv) proceeds from borrowing of $400,000,000 .

Net cash used in investing activities of $3,273,000 was comprised of $9,836,000 of construction in progress and real estate additions, partially offset by proceeds from an interest rate cap of $6,563,000.

Net cash provided by operating activit ies of $23,296,000 was comprised of (i) net income of $31,167,000 and (ii) adjustments for non-cash items of $45,349,000, partially offset by (iii) the net change in operating assets and liabilities of $53,220,000 .

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $28,470,000 , (ii) straight-lining of rents of $11,880,000 , (iii) interest rate cap premium amortization of $6,213,000 and (iv) stock-based compensation expense of $450,000 , partially offset by (v) other non-cash adjustments of $1,664,000 .

Net cash provided by investing activities of $381,000 was comprised of $6,563,000 of proceeds from an interest rate cap, partially offset by construction in progress and real estate additions of $6,182,000.

For the Six Months Ended June 30, 2023

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

For the Nine Months Ended September 30, 2023

Cash and cash equivalents and restricted cash were $529,081,000 as of September 30, 2023, compared to $214,478,000 as of December 31, 2022, an increase of $314,603,000.

This increase resulted from (i) $319,537,000 of net cash provided by investing activities and (ii) $64,367,000 of net cash provided by operating activities, partially offset by (iii) $69,301,000 of net cash used in financing activities.

Net cash provided by investing activities of $319,537,000 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.

Treasury bills, (ii) $67,821,000 of proceeds from sale of real estate and (iii) $1,889,000 of proceeds from an interest rate cap, partially offset by (iv) the purchase of an interest rate cap of $11,258,000 and (v) construction in progress and real estate additions of $3,796,000.

Net cash provided by operating activities of $64,367,000 was comprised of (i) net income of $86,127,000, partially offset by (ii) the net change in operating assets and liabilities of $4,322,000 and (iii) adjustments for non-cash items of $17,438,000.

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 $24,771,000, (iii) straight-lining of rents of $5,949,000, (iv) interest rate cap premium amortization of $4,049,000, (v) other non-cash adjustments of $1,295,000 and (vi) stock-based compensation expense of $450,000.

Net cash used in financing activities of $69,301,000 was comprised of dividends paid of $69,232,000 and debt issuance costs of $69,000.

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Letters of Credit

Approximately $900,000 of standby letters of credit were issued and outstanding as of June 30, 2024.

Approximately $900,000 of standby letters of credit were issued and outstanding as of September 30, 2024.

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 three and six months ended June 30, 2024 and 2023

FFO (non-GAAP) for the three months ended June 30, 2024 was $17,009,000, or $3.31 per diluted share, compared to $18,208,000, or $3.55 per diluted share in the prior year’s three months.

FFO (non-GAAP) for the six months ended June 30, 2024 was $42,541,000, or $8.29 per diluted share, compared to $36,841,000, or $7.18 per diluted share in the prior year’s six months.

FFO (non-GAAP) for the three and nine months ended September 30, 2024 and 2023

FFO (non-GAAP) for the three months ended September 30, 2024 was $14,582,000, or $2.84 per diluted share, compared to $18,623,000, or $3.63 per diluted share in the prior year’s three months.

FFO (non-GAAP) for the nine months ended September 30, 2024 was $57,123,000, or $11.13 per diluted share, compared to $55,464,000, or $10.81 per diluted share in the prior year’s nine months.

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

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

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

(Amounts in thousands, except share and per share amounts) 2024 2023 2024 2023

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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