What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-05 compared with 2024-11-04 · 47 added, 86 removed, 78 unchanged (63% of the section changed)

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All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

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, 2024 and 2023.

We do not undertake any obligation to release publicly, any revisions to our forward-looking statements to reflect events or circumstances occurring 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, 2025.

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, 2024 are not necessarily indicative of the operating results for the full year.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the operating results for the full year.

Critical Accounting Estimates and Significant Accounting Policies

A summary of the critical accounting estimates used in the preparation of our consolidated financial statements is included in our Annual Report on Form 10-K for the year ended December 31, 2023 in “Item 7.

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, 2024, there were no material changes to these estimates or policies.

A summary of the critical accounting policies and estimates used in the preparation of our consolidated financial statements is included in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2024.

For the three months ended March 31, 2025, there were no material changes to these estimates or policies.

Alexander’s, Inc.

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We compete with a large number of real estate investors, property owners and developers, some of whom may be willing to accept lower returns on their investments.

Principal factors of competition are rents charged, tenant concessions offered, attractiveness of location, the quality of the property and the breadth and the quality of services provided.

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.

Additionally, 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.

Our business has been, and may continue to be, affected by interest rate fluctuations, the effects of inflation 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.

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Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information regarding these and other factors that may materially affect our results.

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.

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

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.

Overview - continued

Quarter Ended March 31, 2025 Financial Results Summary

Net income for the quarter ended March 31, 2025 was $12,312,000, or $2.40 per diluted share, compared to $16,109,000 or $3.14 per diluted share in the prior year’s quarter.

Funds from operations (“FFO”) (non-GAAP) for the quarter ended March 31, 2025 was $20,842,000, or $4.06 per diluted share, compared to $25,532,000 or $4.98 per diluted share in the prior year’s quarter.

Square Footage, Occupancy and Leasing Activity

Our portfolio is comprised of five properties aggregating 2,455,000 square feet.

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.

The lease included a right to terminate effective no earlier than March 16, 2026, subject to payment of rent through the termination date and an additional termination payment equal to the lesser of $10,000,000 or the amount of rent due under the remaining term.

On September 27, 2023, we entered into a lease modification agreement with IKEA which accelerated its lease termination date to April 1, 2024.

During the fourth quarter of 2023 and the first quarter of 2024, IKEA paid its remaining rent obligation through March 16, 2026 and the $10,000,000 termination payment.

As of March 31, 2025, the commercial occupancy rate was 94.7% and the residential occupancy rate was 93.9%.

On January 31, 2025, Home Depot’s 83,000 square foot lease at the retail portion of our 731 Lexington Avenue property expired.

Annual rental revenues from Home Depot were approximately $15,000,000.

In the fourth quarter of 2024, we entered into ten-year leases with Burlington and Marshalls to relocate them to our Rego Park II property in 2025 from their current location at our Rego Park I property.

Rego Park I will then be vacant and we are currently exploring sale and development opportunities for the property.

Significant Tenant

Bloomberg L.P.

(“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.

(“Bloomberg”) accounted for revenue of $32,205,000 and $29,963,000 for the three months ended March 31, 2025 and 2024, respectively, representing approximately 59% and 49% of our rental revenues in each period, respectively.

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.

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 September 30, 2024, compared to September 30, 2023

Rental Revenues

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 $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 $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 $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 $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 $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

Results of Operations – Three Months Ended March 31, 2025, compared to March 31, 2024

Rental Revenues

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.

Rental revenues were $54,915,000 for the three months ended March 31, 2025, compared to $61,397,000 for the prior year’s three months, a decrease of $6,482,000.

This wa s primarily due to (i) $8,902,000 of lower straight-line rental revenue from IKEA’s lease expiration at Rego Park I and (ii) $1,337,000 of lower straight-line rental revenue from Home Depot’s lease expiration at 731 Lexington Avenue, partially offset by (iii) $1,755,000 of payments received for tenant receivables that were previously written off and (iv) $1,740,000 of higher straight-line rental revenue from Bloomberg’s lease extension at 731 Lexington Avenue.

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.

Operating expenses were $25,564,000 for the three months ended March 31, 2025, compared to $25,263,000 for the prior year’s three months, an increase of $301,000 .

This was primarily due to $840,000 of higher real estate taxes partially offset by higher capitalized expenses of $633,000.

Depreciation and Amortization

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.

Depreciation and amortization was $8,599,000 for the three months ended March 31, 2025, compared to $9,477,000 for the prior year’s three months, a decrease of $878,000.

This was due to a decrease of $1,110,000 associated with the accelerated depreciation and amortization related to IKEA’s lease expiration at Rego Park I in the prior year’s three months, partially offset by $232,000 of higher depreciation expense on capital projects placed into service.

General and Administrative Expenses

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.

General and administrative expenses were $1,591,000 for the three months ended March 31, 2025, compared to $1,476,000 for the prior year’s three months, an increase of $115,000 .

This was primarily due to higher consulting fees.

Interest and Other Income

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 other income was $3,945 ,000 for the three months ended March 31, 2025 , compared to $7,162,000 for the prior year’s three months, a decrease of $3,217,000.

This was primarily due to a decrease in average interest rates and investment balances.

Interest and Debt Expense

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 nine months, resulting from the sale of the Rego Park III land parcel in Queens, New York.

Interest and debt exp ense was $10,794,000 for the three months ended March 31, 2025 , compared to $16,234,000 for the prior year’s three months, a decrease of $5,440,000.

This was primarily due to (i) $3,225,000 of lower interest rate cap premium amortization, (ii) $1,500,000 from the downsize of the 731 Lexington Office loan in September 2024 and (iii) $1,105,000 from lower rates, partially offset by (iv) $390,000 of higher deferred debt issuance cost amortization.

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 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.

As of March 31, 2025, we had $377,645,000 of liquidity comprised of cash and cash equivalents and restricted cash.

The ongoing challenges posed by fluctuations in interest rates and the effects of 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 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 .

For the Three Months Ended March 31, 2025

Cash and cash equivalents and restricted cash were $377,645,000 as of March 31, 2025, compared to $393,836,000 as of December 31, 2024, a decr ease of $16,191,000.

This decrease resulted from (i) $23,890,000 of net cash used in financing activities and (ii) $8,021,000 of net cash used in investing activities, partially offset by (iii) $15,720,000 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 used in financing activities of $23,890,000 was comprised of $23,101,000 of dividends paid and $789,000 of debt repayments.

Net cash used in investing activities of $8,021,000 was comprised of construction in progress and real estate additions.

Net cash provided by operating activit ies of $15,720,000 was comprised of (i) net income of $12,312,000 and (ii) adjustments for non-cash items of $12,743,000, partially offset by (iii) the net change in operating assets and liabilities of $9,335,000 .

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 .

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, (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.

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $9,389,000, (ii) other non-cash adjustments of $2,158,000, (iii) straight-lining of rents of $1,020,000 and (iv) interest rate cap premium amortization of $176,000.

For the Three Months Ended March 31, 2024

Cash and cash equivalents and restricted cash were $547,399,000 as of March 31, 2024, compared to $552,977,000 as of December 31, 2023, a decr ease of $5,578,000.

This decrease resulted from (i) $23,088,000 of net cash used in financing activities, partially offset by (ii) $16,825,000 of net cash provided by operating activities and (iii) $685,000 of net cash provided by investing activities.

Net cash used in financing activities of $23,088,000 was comprised of dividends paid.

Net cash provided by operating activit ies of $16,825,000 was comprised of (i) net income of $16,109,000 and (ii) adjustments for non-cash items of $19,853,000, partially offset by (iii) the net change in operating assets and liabilities of $19,137,000 .

The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $9,917,000, (ii) straight-lining of rents of $9,355,000 and (iii) interest rate cap premium amortization of $3,401,000, partially offset by (iv) other non-cash adjustments of $2,820,000.

Net cash provided by investing activities of $685,000 was comprised of $3,160,000 of proceeds from an interest rate cap, partially offset by construction in progress and real estate additions of $2,475,000.

Liquidity and Capital Resources - continued

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

Letters of Credit

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 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.

FFO (non-GAAP) for the quarters ended March 31, 2025 and 2024

FFO (non-GAAP) for the quarter ended March 31, 2025 was $20,842,000, or $4.06 per diluted share, compared to $25,532,000 or $4.98 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) 2025 2024

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Depreciation and amortization of real property 8,530 9,423

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

FFO (non-GAAP) $ 20,842 $ 25,532

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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