ALEXANDER'S, INC. Certain statements contained in this Quarterly Report constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition, results of operations and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "estimates," "intends," "plans," "would," "may" or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine these items are beyond our ability to control or predict. 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 endedDecember 31, 2022 . Currently, some of these factors are the increase in interest rates and inflation and the continuing effect of the COVID-19 pandemic on our business, financial condition, results of operations, cash flows, operating performance and the effect that these factors have had and may continue to have on our tenants, the global, national, regional and local economies and financial markets and the real estate market in general. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference. 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 months endedMarch 31, 2023 and 2022. The preparation of financial statements in conformity with accounting principles generally accepted inthe 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 endedMarch 31, 2023 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 endedDecember 31, 2022 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 three months endedMarch 31, 2023 , there were no material changes to these policies. 16
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Overview
Alexander's, Inc. (NYSE: ALX) is a real estate investment trust ("REIT"), incorporated inDelaware , engaged in leasing, managing, developing and redeveloping its properties. All references to "we," "us," "our," "Company" and "Alexander's" refer toAlexander'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 six properties inNew York City . We compete with a large number of property owners and developers. 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. 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
Net income for the quarter endedMarch 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 endedMarch 31, 2023 was$18,633,000 , or$3.63 per diluted share, compared to$21,785,000 or$4.25 per diluted share in the prior year's quarter.
Square Footage, Occupancy and Leasing Activity
Our portfolio was comprised of six properties aggregating 2,454,000 square feet.
As of
Significant Tenant
Bloomberg L.P. ("Bloomberg") accounted for revenue of$29,516,000 and$27,518,000 for the three months endedMarch 31, 2023 and 2022, respectively, representing approximately 56% of our rental revenues in each period. No other tenant accounted for more than 10% of our rental revenues. If we were to lose Bloomberg as a tenant, or if Bloomberg were to be unable to fulfill its obligations under its lease, it would adversely affect our results of operations and financial condition. 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. Asset Held For Sale OnMarch 8, 2023 , we entered into an agreement to sell the Rego Park III land parcel inQueens, 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
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Results of Operations - Three Months Ended
Rental Revenues
Rental revenues were
Operating Expenses
Operating expenses were
Depreciation and Amortization
Depreciation and amortization was$7,478,000 for the three months endedMarch 31, 2023 , compared to$7,351,000 for the prior year's three months, an increase of$127,000 .
General and Administrative Expenses
General and administrative expenses were
Interest and Other Income
Interest and other income was$4,319,000 for the three months endedMarch 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 inU.S. Treasury bills.
Interest and Debt Expense
Interest and debt expense was$12,253,000 for the three months endedMarch 31, 2023 , compared to$4,415,000 for the prior year's three months, an increase of$7,838,000 . This was primarily due to increases in LIBOR and SOFR rates. 18 --------------------------------------------------------------------------------
Liquidity and Capital Resources
Cash Flows
Rental revenue is our primary source of cash flow and is dependent on a number of factors, including the occupancy level and rental rates of our properties, as well as our tenants' ability to pay their rents. Our properties provide us with a relatively consistent stream of cash flow that enables us to pay our operating expenses, interest expense, recurring capital expenditures and cash dividends to stockholders. 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 ofMarch 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 inU.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. 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
Cash and cash equivalents and restricted cash were$376,876,000 as ofMarch 31, 2023 , compared to$214,478,000 as ofDecember 31, 2022 , an increase of$162,398,000 . This increase resulted from (i)$164,772,000 of net cash provided by investing activities and (ii)$20,736,000 of net cash provided by operating activities, partially offset by (iii)$23,110,000 of net cash used in financing activities.
Net cash provided by investing activities of
Net cash provided by operating activities of$20,736,000 was comprised of (i) net income of$11,226,000 , (ii) adjustments for non-cash items of$11,707,000 , partially offset by (iii) the net change in operating assets and liabilities of$2,197,000 . The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of$7,899,000 , (ii) straight-lining of rents of$2,067,000 and (iii) other non-cash adjustments of$1,741,000 .
Net cash used in financing activities of
For the Three Months Ended
Cash and cash equivalents and restricted cash were$491,472,000 as ofMarch 31, 2022 , compared to$483,505,000 as ofDecember 31, 2021 , an increase of$7,967,000 . This increase resulted from (i)$32,185,000 of net cash provided by operating activities, partially offset by (ii)$23,060,000 of net cash used in financing activities and (iii)$1,158,000 of net cash used in investing activities. Net cash provided by operating activities of$32,185,000 was comprised of (i) net income of$14,532,000 , (ii) adjustments for non-cash items of$9,901,000 and (iii) the net change in operating assets and liabilities of$7,752,000 . The adjustments for non-cash items were comprised of 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
Net cash used in investing activities was comprised of construction in progress
and real estate additions of
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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. FiftyNinth 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 throughDecember 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
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.
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--------------------------------------------------------------------------------Funds from Operations ("FFO") (non-GAAP)
FFO is computed in accordance with the definition adopted by theBoard of Governors of theNational Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of certain real estate assets, real estate impairment losses, depreciation and amortization expense from real estate assets and other specified items, including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures employed by other companies. A reconciliation of our net income to FFO is provided below.
FFO (non-GAAP) for the quarters ended
FFO (non-GAAP) for the quarter endedMarch 31, 2023 was$18,633,000 , or$3.63 per diluted share, compared to$21,785,000 , or$4.25 per diluted share in the prior year's quarter.
The following table reconciles our net income to FFO (non-GAAP):
For the Quarter Ended March 31,
(Amounts in thousands, except share and per share amounts) 2023 2022
Net income $ 11,226 $ 14,532
Depreciation and amortization of real property 7,407 7,253
FFO (non-GAAP)
$ 18,633
FFO per diluted share (non-GAAP) $ 3.63$ 4.25 Weighted average shares used in computing FFO per diluted share 5,127,086 5,124,478 21
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