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Alexanders Inc – ‘10-Q’ for 9/30/19

On:  Monday, 10/28/19, at 8:16am ET   ·   For:  9/30/19   ·   Accession #:  3499-19-21   ·   File #:  1-06064

Previous ‘10-Q’:  ‘10-Q’ on 7/29/19 for 6/30/19   ·   Next:  ‘10-Q’ on 5/4/20 for 3/31/20   ·   Latest:  ‘10-Q’ on 10/30/23 for 9/30/23

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  As Of               Filer                 Filing    For·On·As Docs:Size

10/28/19  Alexanders Inc                    10-Q        9/30/19   71:5.3M

Quarterly Report   —   Form 10-Q   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    672K 
 2: EX-15.1     Letter re: Unaudited Interim Financial Info --      HTML     22K 
                exhibit151                                                       
 3: EX-31.1     Certification -- §302 - SOA'02                      HTML     28K 
 4: EX-31.2     Certification -- §302 - SOA'02                      HTML     28K 
 5: EX-32.1     Certification -- §906 - SOA'02                      HTML     22K 
 6: EX-32.2     Certification -- §906 - SOA'02                      HTML     22K 
24: R1          Document and Entity Information                     HTML     74K 
47: R2          Consolidated Balance Sheets (Unaudited)             HTML    112K 
71: R3          Consolidated Balance Sheets (Unaudited)             HTML     44K 
                (Parenthetical)                                                  
33: R4          Consolidated Statements of Income (Unaudited)       HTML     68K 
22: R5          Consolidated Statements of Income (Unaudited)       HTML     25K 
                (Parenthetical)                                                  
45: R6          Consolidated Statements of Comprehensive Income     HTML     34K 
                (Unaudited)                                                      
69: R7          Consolidated Statements of Changes in Equity        HTML     57K 
                (Unaudited)                                                      
32: R8          Consolidated Statements of Changes in Equity        HTML     23K 
                (Unaudited) - Parenthetical                                      
25: R9          Consolidated Statements of Cash Flows (Unaudited)   HTML    110K 
20: R10         Consolidated Statements of Cash Flows               HTML     23K 
                (Parenthetical)                                                  
29: R11         Organization                                        HTML     24K 
63: R12         Basis of Presentation                               HTML     28K 
39: R13         Recently Issued Accounting Literature               HTML     29K 
21: R14         Revenue Recognition                                 HTML     52K 
30: R15         Related Party Transactions                          HTML     51K 
64: R16         Marketable Securities                               HTML     26K 
40: R17         Discontinued Operations                             HTML     26K 
19: R18         Significant Tenant                                  HTML     25K 
31: R19         Mortgages Payable                                   HTML     49K 
60: R20         Stock-Based Compensation                            HTML     25K 
54: R21         Fair Value Measurements                             HTML     62K 
15: R22         Leases                                              HTML    112K 
37: R23         Commitments and Contingencies                       HTML     33K 
61: R24         Earnings Per Share                                  HTML     55K 
55: R25         Basis of Presentation (Policies)                    HTML     48K 
16: R26         Revenue Recognition (Tables)                        HTML     50K 
38: R27         Related Party Transactions (Tables)                 HTML     42K 
62: R28         Mortgages Payable (Tables)                          HTML     54K 
53: R29         Fair Value Measurements (Tables)                    HTML     62K 
42: R30         Leases (Tables)                                     HTML     66K 
67: R31         Earnings Per Share (Tables)                         HTML     56K 
27: R32         Organization - Additional Information (Detail)      HTML     23K 
18: R33         Basis of Presentation - Additional Information      HTML     40K 
                (Detail)                                                         
41: R34         Recently Issued Accounting Literature - Additional  HTML     27K 
                Information (Detail)                                             
66: R35         Revenue Recognition - Disaggregation of Revenue     HTML     34K 
                (Details)                                                        
26: R36         Revenue Recognition - Components of Lease Revenue   HTML     29K 
                (Details)                                                        
17: R37         Related Party Transactions - Additional             HTML     79K 
                Information (Detail)                                             
43: R38         Related Party Transactions - Summary of Fees to     HTML     34K 
                Vornado (Detail)                                                 
65: R39         Marketable Securities - Additional Information      HTML     36K 
                (Detail)                                                         
50: R40         Discontinued Operations - Narrative (Details)       HTML     26K 
59: R41         Significant Tenant - Additional Information         HTML     42K 
                (Detail)                                                         
36: R42         Mortgages Payable - Summary of Outstanding          HTML     51K 
                Mortgages Payable (Detail)                                       
14: R43         Mortgages Payable - Additional Information          HTML     41K 
                (Detail)                                                         
49: R44         Stock-Based Compensation - Additional Information   HTML     34K 
                (Detail)                                                         
58: R45         Fair Value Measurements - Financial Assets and      HTML     32K 
                Liabilities Measured at Fair Value (Detail)                      
35: R46         Fair Value Measurements - Financial Assets and      HTML     33K 
                Liabilities Not Measured at Fair Value (Detail)                  
13: R47         Leases - Lessor Narrative (Details)                 HTML     29K 
51: R48         Leases - Future Base Rental Revenue for Topic 842   HTML     35K 
                (Details)                                                        
56: R49         Leases - Future Base Rental Revenue for Topic 840   HTML     34K 
                (Details)                                                        
68: R50         Leases - Lessee Narrative (Details)                 HTML     36K 
44: R51         Leases - Future Lease Payments Under Operating      HTML     41K 
                Lease for Topic 842 (Details)                                    
23: R52         Leases - Future Lease Payments Under Operating      HTML     37K 
                Lease for Topic 840 (Details)                                    
34: R53         Commitments and Contingencies - Additional          HTML    106K 
                Information (Detail)                                             
70: R54         Earnings Per Share - Narrative (Details)            HTML     23K 
46: R55         Earnings Per Share - Schedule of Earnings Per       HTML     45K 
                Share, Basic and Diluted (Detail)                                
28: XML         IDEA XML File -- Filing Summary                      XML    121K 
57: XML         XBRL Instance -- alx10-q93019_htm                    XML   1.18M 
12: EXCEL       IDEA Workbook of Financial Reports                  XLSX     62K 
 8: EX-101.CAL  XBRL Calculations -- alx-20190930_cal                XML    163K 
 9: EX-101.DEF  XBRL Definitions -- alx-20190930_def                 XML    452K 
10: EX-101.LAB  XBRL Labels -- alx-20190930_lab                      XML   1.26M 
11: EX-101.PRE  XBRL Presentations -- alx-20190930_pre               XML    761K 
 7: EX-101.SCH  XBRL Schema -- alx-20190930                          XSD    144K 
52: JSON        XBRL Instance as JSON Data -- MetaLinks              271±   395K 
48: ZIP         XBRL Zipped Folder -- 0000003499-19-000021-xbrl      Zip    196K 


‘10-Q’   —   Quarterly Report


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM  i 10-Q
(Mark one) 
 i 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended:     i September 30, 2019                                                
Or
 i 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from:
 
to
 
Commission File Number:
 i ALEXANDERS INC
(Exact name of registrant as specified in its charter)
 i Delaware
  
 i 51-0100517
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification Number)
 
 
 
 
 
 i 210 Route 4 East,
 i  Paramus,
 i New Jersey
  
 i 07652
(Address of principal executive offices)
  
(Zip Code)
 i (201)
 i 587-8541
(Registrant’s telephone number, including area code)
N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
 i Common Stock, $1 par value per share
 
 i ALX
 
 i New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    i Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   i Yes ☐ No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 i Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer 
 i 
Smaller Reporting Company
 
 
 i 
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  i  Yes  No
As of October 25, 2019, there were  i 5,107,290 shares of common stock, par value $1 per share, outstanding.
 
        



ALEXANDER’S, INC.
INDEX
 
 
Page Number
PART I.
Financial Information
 
 
 
 
Item 1.
Financial Statements:
 
 
 
 
 
Consolidated Balance Sheets (Unaudited) as of September 30, 2019 and December 31, 2018
 
 
 
 
Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018
 
 
 
 
Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018
 
 
 
 
Consolidated Statements of Changes in Equity (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018
 
 
 
 
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2019 and 2018
 
 
 
 
Notes to Consolidated Financial Statements (Unaudited)
 
 
 
 
Report of Independent Registered Public Accounting Firm
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
 
PART II.
Other Information
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
 
 
 
 
 
Signatures
 

3


PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
ALEXANDER’S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Amounts in thousands, except share and per share amounts)
ASSETS
 
 
Real estate, at cost:
 
 
 
 
Land
 
$
 i 44,971

 
$
 i 44,971

Buildings and leasehold improvements
 
 i 981,136

 
 i 978,474

Development and construction in progress
 
 i 9,414

 
 i 4,246

Total
 
 i 1,035,521


 i 1,027,691

Accumulated depreciation and amortization
 
( i 317,751
)
 
( i 297,421
)
Real estate, net
 
 i 717,770


 i 730,270

Cash and cash equivalents
 
 i 304,229

 
 i 283,056

Restricted cash
 
 i 9,548

 
 i 6,439

Marketable securities
 
 i 16,909

 
 i 23,166

Tenant and other receivables
 
 i 5,624

 
 i 4,075

Receivable arising from the straight-lining of rents
 
 i 166,839

 
 i 168,789

Deferred leasing costs, net, including unamortized leasing fees to Vornado
of $32,591 and $31,039, respectively
 
 i 41,583

 
 i 40,669

Other assets
 
 i 20,881

 
 i 29,085

 
 
$
 i 1,283,383


$
 i 1,285,549

LIABILITIES AND EQUITY
 
 
 
 
Mortgages payable, net of deferred debt issuance costs
 
$
 i 969,673

 
$
 i 965,826

Amounts due to Vornado
 
 i 4,638

 
 i 708

Accounts payable and accrued expenses
 
 i 38,973

 
 i 30,889

Other liabilities
 
 i 8,008

 
 i 3,034

Total liabilities
 
 i 1,021,292


 i 1,000,457

 
 
 
 
 
Commitments and contingencies
 
 i 
 
 i 
 
 
 
 
 
Preferred stock: $1.00 par value per share; authorized, 3,000,000 shares;
issued and outstanding, none
 
 i 

 
 i 

Common stock: $1.00 par value per share; authorized, 10,000,000 shares; issued, 5,173,450 shares; outstanding, 5,107,290 shares
 
 i 5,173

 
 i 5,173

Additional capital
 
 i 32,365

 
 i 31,971

Retained earnings
 
 i 224,994

 
 i 248,443

Accumulated other comprehensive loss
 
( i 73
)
 
( i 127
)
 
 
 i 262,459


 i 285,460

Treasury stock: 66,160 shares, at cost
 
( i 368
)
 
( i 368
)
Total equity
 
 i 262,091


 i 285,092

 
 
$
 i 1,283,383


$
 i 1,285,549


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)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
REVENUES
 
 
 
 
 
 
 
 
Rental revenues
 
$
 i 57,760

 
$
 i 59,125

 
$
 i 170,470

 
$
 i 175,258

EXPENSES
 
 
 
 
 
 
 
 
Operating, including fees to Vornado of $1,310, $1,158, $3,930 and $3,433, respectively
 
( i 23,389
)
 
( i 26,419
)
 
( i 66,905
)
 
( i 70,207
)
Depreciation and amortization
 
( i 7,831
)
 
( i 8,225
)
 
( i 23,528
)
 
( i 25,208
)
General and administrative, including management fees to Vornado of $595 and $1,785 in each three and nine month period, respectively
 
( i 1,333
)
 
( i 1,126
)
 
( i 4,471
)
 
( i 4,078
)
Total expenses
 
( i 32,553
)
 
( i 35,770
)

( i 94,904
)

( i 99,493
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and other income, net
 
 i 2,075

 
 i 3,813

 
 i 6,428

 
 i 8,581

Interest and debt expense
 
( i 9,772
)
 
( i 11,341
)
 
( i 30,096
)
 
( i 32,115
)
Change in fair value of marketable securities
 
( i 1,017
)
 
( i 824
)
 
( i 6,257
)
 
( i 5,561
)
Income from continuing operations
 
 i 16,493

 
 i 15,003


 i 45,641


 i 46,670

Loss from discontinued operations (see Note 7)
 
 i 

 
 i 

 
 i 

 
( i 23,797
)
Net income
 
$
 i 16,493

 
$
 i 15,003

 
$
 i 45,641

 
$
 i 22,873

 
 
 
 
 
 
 
 
 
Income per common share – basic and diluted:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
 i 3.22

 
$
 i 2.93

 
$
 i 8.92

 
$
 i 9.12

Loss from discontinued operations (see Note 7)
 
 i 

 
 i 

 
 i 

 
( i 4.65
)
Net income per common share
 
$
 i 3.22

 
$
 i 2.93

 
$
 i 8.92

 
$
 i 4.47

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding 
 
 i 5,118,698

 
 i 5,117,347

 
 i 5,118,030

 
 i 5,116,667

See notes to consolidated financial statements (unaudited).

5


ALEXANDER’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(Amounts in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Net income
 
$
 i 16,493

 
$
 i 15,003

 
$
 i 45,641

 
$
 i 22,873

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Change in fair value of interest rate cap
 
 i 22

 
( i 1
)
 
 i 54

 
( i 5
)
Comprehensive income
 
$
 i 16,515


$
 i 15,002


$
 i 45,695


$
 i 22,868

See notes to consolidated financial statements (unaudited).

6


ALEXANDER’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(Amounts in thousands)
 
 
 
 
Additional  
Capital
 
Retained  
Earnings  
 
Accumulated    
Other
Comprehensive Loss
 
Treasury  
Stock
 
Total Equity
 
Common Stock
 
Shares  
 
Amount  
Three Months Ended September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2019
 
 i 5,173

 
$
 i 5,173

 
$
 i 32,365

 
$
 i 231,535

 
$
( i 95
)
 
$
( i 368
)
 
$
 i 268,610

Net income
 

 

 

 
 i 16,493

 

 

 
 i 16,493

Dividends paid ($4.50 per common share)
 

 

 

 
( i 23,034
)
 

 

 
( i 23,034
)
Change in fair value of interest rate cap
 

 

 

 

 
 i 22

 

 
 i 22

 
 i 5,173

 
$
 i 5,173

 
$
 i 32,365

 
$
 i 224,994

 
$
( i 73
)
 
$
( i 368
)
 
$
 i 262,091

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2018
 
 i 5,173

 
$
 i 5,173

 
$
 i 31,971

 
$
 i 269,525

 
$
( i 130
)
 
$
( i 368
)
 
$
 i 306,171

Net income
 

 

 

 
 i 15,003

 

 

 
 i 15,003

Dividends paid ($4.50 per common share)
 

 

 

 
( i 23,028
)
 

 

 
( i 23,028
)
Change in fair value of interest rate cap
 

 

 

 

 
( i 1
)
 

 
( i 1
)
 
 i 5,173

 
$
 i 5,173

 
$
 i 31,971

 
$
 i 261,500

 
$
( i 131
)
 
$
( i 368
)
 
$
 i 298,145

 
 
 
 
Additional  
Capital
 
Retained  
Earnings  
 
Accumulated    
Other
Comprehensive (Loss) Income
 
Treasury  
Stock
 
Total Equity
 
 
Common Stock
 
 
 
Shares  
 
Amount  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 i 5,173

 
$
 i 5,173

 
$
 i 31,971

 
$
 i 248,443

 
$
( i 127
)
 
$
( i 368
)
 
$
 i 285,092

Net income
 

 

 

 
 i 45,641

 

 

 
 i 45,641

Dividends paid ($13.50 per common share)
 

 

 

 
( i 69,090
)
 

 

 
( i 69,090
)
Change in fair value of interest rate cap
 

 

 

 

 
 i 54

 

 
 i 54

Deferred stock unit grants
 

 

 
 i 394

 

 

 

 
 i 394

 
 i 5,173


$
 i 5,173


$
 i 32,365


$
 i 224,994


$
( i 73
)

$
( i 368
)

$
 i 262,091

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 i 5,173

 
$
 i 5,173

 
$
 i 31,577

 
$
 i 302,543

 
$
 i 5,030

 
$
( i 368
)
 
$
 i 343,955

Net income
 

 

 

 
 i 22,873

 

 

 
 i 22,873

Dividends paid ($13.50 per common share)
 

 

 

 
( i 69,072
)
 

 

 
( i 69,072
)
Cumulative effect of change in accounting principle
 

 

 

 
 i 5,156

 
( i 5,156
)
 

 
 i 

Change in fair value of interest rate cap
 

 

 

 

 
( i 5
)
 

 
( i 5
)
Deferred stock unit grants
 

 

 
 i 394

 

 

 

 
 i 394

 
 i 5,173


$
 i 5,173


$
 i 31,971


$
 i 261,500


$
( i 131
)

$
( i 368
)

$
 i 298,145

See notes to consolidated financial statements (unaudited).

7


ALEXANDER’S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
 
Nine Months Ended September 30,
CASH FLOWS FROM OPERATING ACTIVITIES
2019
 
2018
Net income
$
 i 45,641

 
$
 i 22,873

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization, including amortization of debt issuance costs
 i 27,401

 
 i 29,323

Straight-lining of rental income
 i 1,950

 
 i 5,589

Stock-based compensation
 i 394

 
 i 394

Change in fair value of marketable securities
 i 6,257

 
 i 5,561

Changes in operating assets and liabilities:
 
 
 
Tenant and other receivables, net
( i 1,549
)
 
( i 938
)
Other assets
 i 7,957

 
 i 11,622

Amounts due to Vornado
 i 3,981

 
( i 2,075
)
Accounts payable and accrued expenses
 i 8,375

 
( i 5,835
)
Other liabilities
( i 454
)
 
 i 139

Net cash provided by operating activities
 i 99,953


 i 66,653

 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Construction in progress and real estate additions
( i 6,566
)
 
( i 2,514
)
Repayment of Rego Park II loan participation
 i 

 
 i 2,300

Net cash used in investing activities
( i 6,566
)

( i 214
)
 
 
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Dividends paid
( i 69,090
)
 
( i 69,072
)
Debt issuance costs
( i 15
)
 
( i 185
)
Debt repayments
 i 

 
( i 159,460
)
Proceeds from borrowing
 i 

 
 i 78,246

Net cash used in financing activities
( i 69,105
)

( i 150,471
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents and restricted cash
 i 24,282

 
( i 84,032
)
Cash and cash equivalents and restricted cash at beginning of period
 i 289,495

 
 i 393,279

Cash and cash equivalents and restricted cash at end of period
$
 i 313,777


$
 i 309,247

 
 
 
 
 
 
 
 
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
 
 
 
Cash and cash equivalents at beginning of period
$
 i 283,056

 
$
 i 307,536

Restricted cash at beginning of period
 i 6,439

 
 i 85,743

Cash and cash equivalents and restricted cash at beginning of period
$
 i 289,495


$
 i 393,279

 
 
 
 
Cash and cash equivalents at end of period
$
 i 304,229

 
$
 i 303,710

Restricted cash at end of period
 i 9,548

 
 i 5,537

Cash and cash equivalents and restricted cash at end of period
$
 i 313,777


$
 i 309,247

 
 
 
 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
 
 
Cash payments for interest
$
 i 26,898

 
$
 i 27,728

 
 
 
 
 
 
 
 
NON-CASH TRANSACTIONS
 
 
 
Lease liability arising from the recognition of right-of-use asset
$
 i 5,428

 
$
 i 

Reclassification of prepaid real estate taxes to construction in progress for property in redevelopment
 i 1,466

 
 i 

Liability for real estate additions, including $18 and $26 for development fees due to Vornado in 2019 and 2018, respectively
 i 233

 
 i 36

Write-off of fully amortized and/or depreciated assets
 i 

 
 i 13,791

See notes to consolidated financial statements (unaudited).

8

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


 
1.
 i 
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  i seven properties in the greater New York City metropolitan area.
 
2.
 i 
Basis of Presentation
 i 
The accompanying consolidated financial statements are unaudited and include the accounts of Alexander’s and its consolidated subsidiaries. All intercompany amounts have been eliminated. In our opinion, 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 condensed 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, 2018, 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 nine months ended September 30, 2019 are not necessarily indicative of the operating results for the full year.
Subsequent to the issuance of our consolidated financial statements for the year ended December 31, 2018, we determined that the $ i 195,708,000 participation in our Rego Park II shopping center mortgage loan was incorrectly classified as an asset, presented as “Rego Park II loan participation,” instead of as a reduction to “mortgages payable, net of deferred debt issuance costs” on our consolidated balance sheet as of December 31, 2018. On December 12, 2018, we refinanced this mortgage loan and the interest rate on the existing loan participation was adjusted to equal the interest rate on the refinanced loan. Consequently, we should have considered $ i 195,708,000 of the Rego Park II shopping center mortgage loan liability extinguished as the participation interest is considered the reacquisition of our debt. Accordingly, our consolidated balance sheet for the year ended December 31, 2018 has been restated to reclassify $ i 195,708,000 from “Rego Park II loan participation” to “mortgages payable, net of deferred debt issuance costs.” This reclassification had no impact to our consolidated statements of income, comprehensive income or changes in equity for the three and nine months ending September 30, 2018 or our consolidated statement of cash flows for the nine months ending September 30, 2018.
Certain prior year balances have been reclassified in order to conform to the current period presentation. For the three and nine months ended September 30, 2018, “property rentals” of $ i 38,250,000 and $ i 115,109,000, respectively, and “expense reimbursements” of $ i 20,875,000 and $ i 60,149,000, respectively, were grouped into “rental revenues” on our consolidated statements of income in accordance with Accounting Standards Codification (“ASC”) Topic 205 Presentation of Financial Statements.
 / 
We operate in  i one reportable segment. 

9

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


3.
 i 
Recently Issued Accounting Literature
 i 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an update (“ASU 2016-02”) establishing ASC Topic 842, Leases (“ASC 842”), as amended by subsequent ASUs on the topic, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessees to apply a two-method approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase. Lessees are required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months. Lease liabilities equal the present value of future lease payments. Right-of-use assets equal the lease liabilities adjusted for accrued rent expense, initial direct costs, lease incentives and prepaid lease payments. Leases with a term of 12 months or less will be accounted for similar to the previously existing guidance for operating leases. Lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases. The accounting applied by the lessor is largely unchanged from that applied under ASC Topic 840, Leases (“ASC 840”). We adopted this standard effective January 1, 2019 using the modified retrospective approach. In transitioning to ASC 842, we elected to use the practical expedient package available to us and did not elect to use hindsight. These elections have been applied consistently to all of our leases. On January 1, 2019, for our Flushing property ground lease, which is classified as an operating lease, we recorded a right-of-use asset of $ i 5,058,000 (included in “other assets”) and a lease liability of $ i 5,428,000 (included in “other liabilities”) (see Note 12 - Leases). Under ASC 842, we must assess on an individual lease basis whether it is probable that we will collect the future lease payments. We consider the tenant’s payment history and current credit status when assessing collectability. When collectability is not deemed probable we write-off the tenant’s receivables, including straight-line rent receivable, and limit lease income to cash received. Changes to the collectability of our operating leases are recorded as adjustments to “rental revenues” on our consolidated statements of income.
 
In August 2018, the FASB issued an update (“ASU 2018-13”) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement to ASC Topic 820, Fair Value Measurement (“ASC 820”). ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, and/or adding certain disclosures. ASU 2018-13 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2019. We elected to early adopt ASU 2018-13 effective January 1, 2019. The adoption of this update did not have a material impact on our consolidated financial statements and disclosures.
 
In October 2018, the FASB issued an update (“ASU 2018-16”) Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes to ASC Topic 815, Derivatives and Hedging. ASU 2018-16 expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate based on SOFR as an eligible benchmark interest rate. ASU 2018-16 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. We adopted this update effective January 1, 2019. The adoption of this update did not have a material impact on our consolidated financial statements.
 / 

10

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


4.
 i 
Revenue Recognition
 i 
Our rental revenues include revenues from the leasing of space to tenants at our properties and revenues from parking and tenant services. We have the following revenue recognition policies:  

Lease revenues from the leasing of space to tenants at our properties. Revenues derived from base rent are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements. We commence rental revenue recognition when the underlying asset is available for use by the lessee. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease. Revenues derived from the reimbursement of real estate taxes, insurance expenses and common area maintenance expenses are generally recognized in the same period as the related expenses are incurred. As lessor, we have elected to combine the lease components (base and variable rent), non-lease components (reimbursements of common area maintenance expenses) and reimbursement of real estate taxes and insurance expenses from our operating lease agreements and account for the components as a single lease component in accordance with ASC 842.

Parking revenue arising from the rental of parking spaces at our properties.  This income is recognized as the services are transferred in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

Tenant services is revenue arising from sub-metered electric, elevator and other services provided to tenants at their request. This revenue is recognized as the services are transferred in accordance with ASC 606.
 i 
The following is a summary of revenue sources for the three and nine months ended September 30, 2019 and 2018.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Amounts in thousands)
 
2019
 
2018
 
2019
 
2018
Lease revenues
 
$
 i 55,267

 
$
 i 56,839

 
$
 i 163,597

 
$
 i 168,359

Parking revenue
 
 i 1,366

 
 i 1,406

 
 i 4,222

 
 i 4,121

Tenant services
 
 i 1,127

 
 i 880

 
 i 2,651

 
 i 2,778

Rental revenues
 
$
 i 57,760

 
$
 i 59,125

 
$
 i 170,470

 
$
 i 175,258


 / 

 i 
The components of lease revenues for the three and nine months ended September 30, 2019 are as follows:
(Amounts in thousands)
 
Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
Fixed lease revenues
 
$
 i 36,025

 
$
 i 107,657

Variable lease revenues
 
 i 19,242

 
 i 55,940

Lease revenues
 
$
 i 55,267

 
$
 i 163,597


 / 


11

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


5.
 i 
Related Party Transactions
Vornado
As of September 30, 2019, Vornado owned  i 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) $ i 2,800,000, (ii)  i 2% of gross revenue from the Rego Park II shopping center, (iii) $ i 0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue and (iv) $ i 324,000, escalating at  i 3% per annum, for managing the common area of 731 Lexington Avenue. Vornado is also entitled to a development fee equal to  i 6% of development costs, as defined.
Leasing and Other Agreements
Vornado also provides us with leasing services for a fee of  i 3% of rent for the first ten years of a lease term,  i 2% of rent for the eleventh through the twentieth year of a lease term, and  i 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  i 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  i 3% of gross proceeds, as defined, for asset sales less than $ i 50,000,000 and  i 1% of gross proceeds, as defined, for asset sales of $ i 50,000,000 or more.
We also have agreements with Building Maintenance Services, 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.
 i 
The following is a summary of fees to Vornado under the various agreements discussed above.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Amounts in thousands)
 
2019
 
2018
 
2019
 
2018
Company management fees
 
$
 i 700

 
$
 i 700

 
$
 i 2,100

 
$
 i 2,100

Development fees
 
 i 

 
 i 17

 
 i 29

 
 i 26

Leasing fees
 
 i 1,422

 
 i 13

 
 i 4,168

 
 i 13

Property management, cleaning, engineering and security fees
 
 i 1,239

 
 i 1,012

 
 i 3,683

 
 i 2,977

 
 
$
 i 3,361


$
 i 1,742


$
 i 9,980


$
 i 5,116


 / 
As of September 30, 2019, the amounts due to Vornado were $ i 3,871,000 for leasing fees; $ i 699,000 for management, property management, cleaning, engineering and security fees; and $ i 68,000 for development fees. As of December 31, 2018, the amounts due to Vornado were $ i 549,000 for management, property management, cleaning, engineering and security fees; $ i 146,000 for development fees; and $ i 13,000 for leasing fees.
Toys “R” Us, Inc. (“Toys”)

Our affiliate, Vornado, owned  i 32.5% of Toys as of December 31, 2018. On February 1, 2019, in connection with the Toys Chapter 11 bankruptcy, the plan of reorganization for Toys was declared effective and Vornado’s ownership in Toys was canceled and Toys’ Board of Directors was dissolved. Joseph Macnow, Vornado’s Executive Vice President and Chief Financial Officer and Wendy A. Silverstein, a member of our Board of Directors, represented Vornado as members of Toys’ Board of Directors. Also in connection with the Toys Chapter 11 bankruptcy, Toys rejected its  i 47,000 square foot lease at our Rego Park II shopping center ($ i 2,600,000 of annual revenue) effective June 30, 2018 and possession of the space was returned to us.
 

12

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


6.
 i 
Marketable Securities
As of September 30, 2019 and December 31, 2018, we owned  i 535,265 common shares of The Macerich Company (“Macerich”) (NYSE: MAC). These shares have an economic cost of $ i 56.05 per share, or $ i 30,000,000 in the aggregate. As of September 30, 2019 and December 31, 2018, the fair value of these shares was $ i 16,909,000 and $ i 23,166,000, respectively, based on Macerich’s closing share price of $ i 31.59 per share and $ i 43.28 per share, respectively. These shares are included in “marketable securities” on our consolidated balance sheets and are classified as available-for-sale. i  Available-for-sale securities are presented at fair value on our consolidated balance sheets and gains and losses resulting from the mark-to-market of these securities are recognized in current period earnings.
7.
 i Discontinued Operations
In 2012, we sold the Kings Plaza Regional Shopping Center (“Kings Plaza”) and paid real property transfer taxes to New York City in connection with the sale. In 2015, the New York City Department of Finance (“NYC DOF”) issued a Notice of Determination to us assessing an additional New York City real property transfer tax amount, including interest.
In 2014, in a case with similar facts, the NYC DOF issued a Notice of Determination to a Vornado joint venture assessing an additional New York City real property transfer tax amount, including interest. In January 2017, a New York City administrative law judge made a determination upholding the Vornado joint venture’s position that such additional real property transfer taxes were not due. On February 16, 2018, the New York City Tax Appeals Tribunal (the “Tribunal”) overturned the January 2017 determination. The Vornado joint venture appealed the Tribunal’s decision to the Appellate Division of the Supreme Court of the State of New York and on April 25, 2019, the Tribunal’s decision was unanimously upheld. On June 20, 2019, the Vornado joint venture filed a motion to reargue the Appellate Division’s decision with the appellate court.
Based on the precedent of the Tribunal’s decision, we accrued an expense for the potential additional real property transfer taxes of $ i 23,797,000 ($ i 15,874,000 of real property transfer tax and $ i 7,923,000 of interest) during the three months ended March 31, 2018. On April 5, 2018, we paid this amount in order to stop the interest from accruing.
As the results related to Kings Plaza were previously classified as discontinued operations, we have classified the expense as “loss from discontinued operations” on our consolidated statement of income for the nine months ended September 30, 2018 in accordance with the provisions of ASC Topic 360, Property, Plant and Equipment.

8.
 i 
Significant Tenant
Bloomberg L.P. (“Bloomberg”) accounted for revenue of $ i 81,314,000 and $ i 80,024,000 for the nine months ended September 30, 2019 and 2018, respectively, representing approximately  i 48% and  i 46% of our total revenues in each period, respectively. No other tenant accounted for more than  i 10% of our total 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.

On June 28, 2019, we entered into a lease agreement with Bloomberg for an additional  i 49,000 square feet at our 731 Lexington Avenue property.

13

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


9.
 i 
Mortgages Payable
 i 
The following is a summary of our outstanding mortgages payable as of September 30, 2019 and December 31, 2018. We may refinance our maturing debt as it comes due or choose to repay it.
 
 
 
 
 
 
Balance at
(Amounts in thousands)
 
Maturity
 
Interest Rate at September 30, 2019
 
 
First mortgages secured by:
 
 
 
 
 
 
 
 
Paramus
 
Oct. 2021
 
 i 4.72%
 
$
 i 68,000

 
$
 i 68,000

731 Lexington Avenue, retail condominium(1)
 
Aug. 2022
 
 i 3.47%
 
 i 350,000

 
 i 350,000

731 Lexington Avenue, office condominium(2)
 
Jun. 2024
 
 i 2.93%
 
 i 500,000

 
 i 500,000

Rego Park II shopping center(3)
 
Dec. 2025
 
 i 3.39%
 
 i 56,836

 
 i 56,836

Total
 
 i 974,836


 i 974,836

Deferred debt issuance costs, net of accumulated amortization of $13,074 and $9,212, respectively
 
 
 
 
 
( i 5,163
)
 
( i 9,010
)
 
 
 
 
 
 
$
 i 969,673


$
 i 965,826

                                                                               
(1)
Interest at  i LIBOR plus  i 1.40%. Maturity date represents the extended maturity based on our conditional right to extend.
(2)
Interest at  i LIBOR plus  i 0.90%. Maturity date represents the extended maturity based on our unilateral right to extend.
 / 
(3)
Interest at  i LIBOR plus  i 1.35%. The amount of this loan is net of our $ i 195,708 loan participation (see Note 2 - Basis of Presentation).

10.
 i 
Stock-Based Compensation
We account for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation. 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 2019, we granted each of the members of our Board of Directors  i 193 DSUs with a grant date fair value of $ i 56,250 per grant, or $ i 394,000 in the aggregate. 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 September 30, 2019, there were  i 11,408 DSUs outstanding and  i 494,379 shares were available for future grant under the Plan.


14

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


11.
 i 
Fair Value Measurements
 i 
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; 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
 i 
Financial assets measured at fair value on our consolidated balance sheets as of September 30, 2019 and December 31, 2018, consist of marketable securities, which are presented in the table below based on their level in the fair value hierarchy, and an interest rate cap, which fair value was insignificant as of September 30, 2019 and December 31, 2018. There were no financial liabilities measured at fair value as of September 30, 2019 and December 31, 2018.
 
 
(Amounts in thousands)
 
Total      
 
Level 1      
 
Level 2      
 
Level 3      
Marketable securities
 
$
 i 16,909

 
$
 i 16,909

 
$
 i 

 
$
 i 

 
 
(Amounts in thousands)
 
Total
 
Level 1
 
Level 2
 
Level 3
Marketable securities
 
$
 i 23,166

 
$
 i 23,166

 
$
 i 

 
$
 i 


 / 
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.  i The table below summarizes the carrying amounts and fair values of these financial instruments as of September 30, 2019 and December 31, 2018.
 
 
 
(Amounts in thousands)
 
Carrying  Amount
 
Fair    
Value
 
Carrying    
Amount
 
Fair    
Value
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Cash equivalents
 
$
 i 270,062

 
$
 i 270,062

 
$
 i 173,858

 
$
 i 173,858

Liabilities:
 
 
 
 
 
 
 
 
Mortgages payable (excluding deferred debt  issuance costs, net)
 
$
 i 974,836

 
$
 i 973,000

 
$
 i 974,836

 
$
 i 969,000

 

15

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


12.
 i  i 
Leases
 / 
As Lessor
We lease space to tenants under operating leases in an office building and in retail centers.  The rental terms range from approximately  i 5 to  i 25 years.  The leases provide for the payment of fixed base rents payable monthly in advance as well as reimbursements of real estate taxes, insurance and maintenance costs.  Retail leases may also provide for the payment by the lessee of additional rents based on a percentage of their sales. We also lease residential space at The Alexander apartment tower with  i 1 or  i 2 year lease terms. We have elected to account for lease revenues (including fixed and variable rent) and the reimbursement of common area maintenance expenses as a single lease component presented as “rental revenues” in our consolidated statements of income.
 
 i 
Future undiscounted cash flows under our non-cancelable operating leases are as follows:
 
 
Under ASC 842
(Amounts in thousands)
 
For the remainder of 2019
 
$
 i 34,563

For the year ending December 31,
 
 
2020
 
 i 139,268

2021
 
 i 131,505

2022
 
 i 123,894

2023
 
 i 125,257

2024
 
 i 133,429

Thereafter
 
 i 613,983

  i 
 
 
Under ASC 840
(Amounts in thousands)
 
For the year ending December 31,
 
 
2019
 
$
 i 138,784

2020
 
 i 131,647

2021
 
 i 120,450

2022
 
 i 111,532

2023
 
 i 111,962

Thereafter
 
 i 671,111


 / 
These amounts do not include reimbursements or additional rents based on a percentage of retail tenants’ sales.

16

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


12.
Leases - continued

As Lessee
We are the lessee under a ground lease at our Flushing property, classified as an operating lease, which expires in 2027 and has  i one  i 10-year extension option. On January 1, 2019, we recorded a right-of-use asset and lease liability related to this ground lease equal to the present value of the remaining minimum lease payments. As of September 30, 2019, the right-of-use asset of $ i 4,663,000 and the lease liability of $ i 4,993,000, are included in “other assets” and “other liabilities,” respectively, on our consolidated balance sheet. The discount rate applied to measure the right-of-use asset and lease liability is based on the incremental borrowing rate (“IBR”) for the property of  i 4.53%. We initially consider the general economic environment and factor in various financing and asset specific adjustments so that the IBR is appropriate to the intended use of the underlying lease. As we did not elect to apply hindsight, the lease term assumption determined under ASC 840 was carried forward and applied in calculating our lease liability recorded under ASC 842.
 
 i 
Future lease payments under this operating lease, excluding the extension option, are as follows:
 
 
Under ASC 842
(Amounts in thousands)
 
For the remainder of 2019
 
$
 i 200

For the year ending December 31,
 
 
2020
 
 i 800

2021
 
 i 800

2022
 
 i 800

2023
 
 i 800

2024
 
 i 800

Thereafter
 
 i 1,600

Total undiscounted cash flows
 
 i 5,800

Present value discount
 
( i 807
)
Lease liability as of September 30, 2019
 
$
 i 4,993


 / 
 i 
 
 
Under ASC 840
(Amounts in thousands)
 
For the year ending December 31,
 
 
2019
 
$
 i 800

2020
 
 i 800

2021
 
 i 800

2022
 
 i 800

2023
 
 i 800

Thereafter
 
 i 2,467


 / 

We recognize rent expense as a component of “operating” expenses on our consolidated statements of income on a straight-line basis. Rent expense was $ i 186,000 and $ i 559,000 in each three and nine month period ended September 30, 2019 and 2018, respectively. Cash paid for rent expense was $ i 200,000 and $ i 600,000 in each three and nine month period ended September 30, 2019 and 2018, respectively.

17

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)


13.
 i 
Commitments and Contingencies
Insurance
We maintain general liability insurance with limits of $ i 300,000,000 per occurrence and per property, and all-risk property and rental value insurance coverage with limits of $ i 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.
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 Program Reauthorization Act, which expires in December 2020. Coverage for acts of terrorism (including NBCR acts) is up to $ i 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 $ i 323,000 deductible and  i 19% of the balance of a covered loss, and the Federal government is responsible for the remaining  i 81% 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.
Our mortgage loans are non-recourse to us and 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.
Paramus
In 2001, we leased 30.3 acres of land located in Paramus, New Jersey to IKEA Property, Inc. The lease has a purchase option in 2021 for $ i 75,000,000. The property is encumbered by a $ i 68,000,000 interest-only mortgage loan, with a fixed rate of  i 4.72%, which matures in October 2021. The annual triple-net rent is the sum of $ i 700,000 plus the amount of interest on the mortgage loan. If the purchase option is exercised, we will receive net cash proceeds of approximately $ i 7,000,000 and recognize a gain on sale of land of approximately $ i 60,000,000. If the purchase option is not exercised, the triple-net rent for the last  i 20 years would include debt service sufficient to fully amortize $ i 68,000,000 over the remaining  i 20-year lease term.
Rego Park I Litigation
In June 2014, Sears Roebuck and Co. (“Sears”) filed a lawsuit in the Supreme Court of the State of New York against Vornado and us (and certain of our subsidiaries) with regard to the  i 195,000 square foot store that Sears leased at our Rego Park I property alleging that the defendants are liable for harm that Sears has suffered as a result of (a) water intrusions into the premises, (b)  i two fires in February 2014 that caused damages to those premises, and (c) alleged violations of the Americans with Disabilities Act in the premises’ parking garage. Sears asserted various causes of actions for damages and sought to compel compliance with landlord’s obligations to repair the premises and to provide security, and to compel us to abate a nuisance that Sears claims was a cause of the water intrusions into its premises. In addition to injunctive relief, Sears sought, among other things, damages of not less than $ i 4,000,000 and future damages it estimated would not be less than $ i 25,000,000. In March 2016, Sears withdrew its claim for future damages leaving a remaining claim for property damages, which we estimate to be approximately $ i 650,000 based on information provided by Sears. We intend to defend the remaining claim vigorously. The amount or range of reasonably possible losses, if any, is not expected to be greater than $ i 650,000.
On April 4, 2017, Sears closed its store at Rego Park I ($ i 10,300,000 of annual revenue). On October 15, 2018, Sears filed for Chapter 11 bankruptcy relief and rejected its lease resulting in an automatic stay of this case.
Letters of Credit
Approximately $ i 1,030,000 of standby letters of credit were issued and outstanding as of September 30, 2019.
Other
There are various other legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters in the aggregate will not have a material effect on our financial position, results of operations or cash flows. 

18

ALEXANDER’S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)



14.
 i 
Earnings Per Share
 i 
The following table sets forth the computation of basic and diluted income per share. Basic income per share is determined using the weighted average shares of common stock outstanding during the period. Diluted income per share is determined using the weighted average shares of common stock outstanding during the period, and assumes all potentially dilutive securities were converted into common shares at the earliest date possible. There were  i no potentially dilutive securities outstanding during the three and nine months ended September 30, 2019 and 2018.    
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Amounts in thousands, except share and per share amounts)
 
2019
 
2018
 
2019
 
2018
Income from continuing operations
 
$
 i 16,493

 
$
 i 15,003

 
$
 i 45,641

 
$
 i 46,670

Loss from discontinued operations (see Note 7)
 
 i 

 
 i 

 
 i 

 
( i 23,797
)
Net income
 
$
 i 16,493

 
$
 i 15,003

 
$
 i 45,641

 
$
 i 22,873

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding – basic and diluted
 
 i 5,118,698

 
 i 5,117,347

 
 i 5,118,030

 
 i 5,116,667

 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
 i 3.22

 
$
 i 2.93

 
$
 i 8.92

 
$
 i 9.12

Loss from discontinued operations (see Note 7)
 
 i 

 
 i 

 
 i 

 
( i 4.65
)
Net income per common share – basic and diluted
 
$
 i 3.22

 
$
 i 2.93

 
$
 i 8.92

 
$
 i 4.47


 / 

19


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 September 30, 2019, the related consolidated statements of income, comprehensive income and changes in equity for the three-month and nine-month periods ended September 30, 2019 and 2018, and cash flows for the nine-month periods ended September 30, 2019 and 2018, and the related notes (collectively referred to as the “interim financial information”). Based on our review, 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, 2018, 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 11, 2019, 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, 2018, 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 review 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

Parsippany, New Jersey October 28, 2019


20


ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 involve risks, uncertainties and assumptions. 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. These forward-looking statements represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. 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 ended December 31, 2018. 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 and nine months ended September 30, 2019 and 2018. 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, 2019 are not necessarily indicative of the operating results for the full year.
Critical Accounting Policies
A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2018 in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 2 – Summary of Significant Accounting Policies” to the consolidated financial statements included therein. For the nine months ended September 30, 2019, there were no material changes to these policies, other than the adoption of Accounting Standards Update 2016-02, described in “Part I - Financial Information, Item 1 - Financial Statements, Note 3 - Recently Issued Accounting Literature” of this Quarterly Report on Form 10-Q.

21


Overview
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 seven properties in the greater New York City metropolitan area.
We compete with a large number of property owners and developers. Our success depends upon, among other factors, trends of the world, 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 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.
Quarter Ended September 30, 2019 Financial Results Summary
Net income for the quarter ended September 30, 2019 was $16,493,000, or $3.22 per diluted share, compared to $15,003,000, or $2.93 per diluted share in the prior year’s quarter.
Funds from operations (“FFO”) (non-GAAP) for the quarter ended September 30, 2019 was $25,208,000, or $4.92 per diluted share, compared to $23,945,000 or $4.68 per diluted share in the prior year’s quarter.
Nine Months Ended September 30, 2019 Financial Results Summary
Net income for the nine months ended September 30, 2019 was $45,641,000, or $8.92 per diluted share, compared to $22,873,000 or $4.47 per diluted share in the prior year’s nine months. Net income for the nine months ended September 30, 2018 included $23,797,000, or $4.65 per diluted share, of expense for potential additional New York City real property transfer taxes on the 2012 sale of Kings Plaza Regional Shopping Center (“Kings Plaza”).
FFO (non-GAAP) for the nine months ended September 30, 2019 was $75,044,000, or $14.66 per diluted share, compared to $53,271,000, or $10.41 per diluted share in the prior year’s nine months. FFO (non-GAAP) for the nine months ended September 30, 2018 included $23,797,000, or $4.65 per diluted share, of expense for the Kings Plaza transfer taxes.
Square Footage, Occupancy and Leasing Activity
As of September 30, 2019, our portfolio was comprised of seven properties aggregating 2,449,000 square feet, of which 2,254,000 square feet was in service and 195,000 square feet (the former Sears space at our Rego Park I property) was out of service due to redevelopment. The in service square feet was 99.5% occupied as of September 30, 2019.
On September 23, 2019, we entered into a 10-year lease agreement with IKEA for 112,500 square feet at our Rego Park I shopping center, replacing a significant portion of the space formerly occupied by Sears. IKEA has the option to terminate this lease after the fifth year of the lease term subject to payment to us of the lesser of $10,000,000 or the amount of rent due under the remaining term.
Significant Tenant
Bloomberg L.P. (“Bloomberg”) accounted for revenue of $81,314,000 and $80,024,000 for the nine months ended September 30, 2019 and 2018, respectively, representing approximately 48% and 46% of our total revenues in each period, respectively. No other tenant accounted for more than 10% of our total 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.
On June 28, 2019, we entered into a lease agreement with Bloomberg for an additional 49,000 square feet at our 731 Lexington Avenue property.



22


Results of Operations – Three Months Ended September 30, 2019, compared to September 30, 2018
Rental Revenues
Rental revenues were $57,760,000 in the quarter ended September 30, 2019, compared to $59,125,000 in the prior year’s quarter, a decrease of $1,365,000. This decrease was primarily due to the Sears vacancy effective October 2018 at our Rego Park I property.
Operating Expenses
Operating expenses were $23,389,000 in the quarter ended September 30, 2019, compared to $26,419,000 in the prior year’s quarter, a decrease of $3,030,000. This decrease was primarily due to bad debt expense in the prior year’s quarter of $3,540,000, primarily due to the Sears lease termination.
Depreciation and Amortization
Depreciation and amortization was $7,831,000 in the quarter ended September 30, 2019, compared to $8,225,000 in the prior year’s quarter, a decrease of $394,000. This decrease was primarily due to acceleration of amortization in the prior year’s quarter related to the Sears lease termination.
General and Administrative Expenses
General and administrative expenses were $1,333,000 in the quarter ended September 30, 2019, compared to $1,126,000 in the prior year’s quarter, an increase of $207,000. This increase was primarily due to higher professional fees.
Interest and Other Income, net
Interest and other income, net was $2,075,000 in the quarter ended September 30, 2019, compared to $3,813,000 in the prior year’s quarter, a decrease of $1,738,000. This decrease was primarily due to $990,000 of lower interest income due to a decrease in average investment balances and $668,000 of lower interest income due to a decrease in average interest rates.
Interest and Debt Expense
Interest and debt expense was $9,772,000 in the quarter ended September 30, 2019, compared to $11,341,000 in the prior year’s quarter, a decrease of $1,569,000. This decrease was primarily due to $1,692,000 of lower interest expense from our Rego Park II shopping center loan (on December 12, 2018, we refinanced this $252,544,000 mortgage loan and GAAP required that our $195,708,000 loan participation be treated as an extinguishment of debt).
Change in Fair Value of Marketable Securities
Change in fair value of marketable securities was an expense of $1,017,000 in the quarter ended September 30, 2019, resulting from The Macerich Company’s (“Macerich”) closing share prices of $31.59 and $33.49 as of September 30, 2019 and June 30, 2019, respectively, on 535,265 shares owned. Change in fair value of marketable securities was an expense of $824,000 in the prior year’s quarter, resulting from Macerich’s closing share prices of $55.29 and $56.83 as of September 30, 2018 and June 30, 2018, respectively, on 535,265 shares owned.








23


Results of Operations – Nine Months Ended September 30, 2019, compared to September 30, 2018
Rental Revenues
Rental revenues were $170,470,000 in the nine months ended September 30, 2019, compared to $175,258,000 in the prior year’s nine months, a decrease of $4,788,000. This decrease was primarily due to the Sears vacancy effective October 2018 at our Rego Park I property.
Operating Expenses
Operating expenses were $66,905,000 in the nine months ended September 30, 2019, compared to $70,207,000 in the prior year’s nine months, a decrease of $3,302,000. This decrease was primarily due to bad debt expense in the prior year’s nine months of $4,335,000, primarily due to the Sears lease termination.
Depreciation and Amortization
Depreciation and amortization was $23,528,000 in the nine months ended September 30, 2019, compared to $25,208,000 in the prior year’s nine months, a decrease of $1,680,000. This decrease was primarily due to acceleration of depreciation and amortization in the prior year’s nine months related to the Toys lease termination.
General and Administrative Expenses
General and administrative expenses were $4,471,000 in the nine months ended September 30, 2019, compared to $4,078,000 in the prior year’s nine months, an increase of $393,000. This increase was primarily due to higher professional fees.
Interest and Other Income, net
Interest and other income, net was $6,428,000 in the nine months ended September 30, 2019, compared to $8,581,000 in the prior year’s nine months, a decrease of $2,153,000. This decrease was primarily due to $4,017,000 of lower interest income due to a decrease in average investment balances, partially offset by $1,600,000 of expense in the prior year’s nine months from a litigation settlement and $456,000 of higher interest income due to an increase in average interest rates.
Interest and Debt Expense
Interest and debt expense was $30,096,000 in the nine months ended September 30, 2019, compared to $32,115,000 in the prior year’s nine months, a decrease of $2,019,000. This decrease was primarily due to $5,276,000 of lower interest expense from our Rego Park II shopping center loan (on December 12, 2018, we refinanced this $252,544,000 mortgage loan and GAAP required that our $195,708,000 loan participation be treated as an extinguishment of debt), partially offset by $3,089,000 of higher interest expense resulting from an increase in average interest rates.

Change in Fair Value of Marketable Securities
Change in fair value of marketable securities was an expense of $6,257,000 in the nine months ended September 30, 2019, resulting from Macerich’s closing share prices of $31.59 and $43.28 as of September 30, 2019 and December 31, 2018, respectively, on 535,265 shares owned. Change in fair value of marketable securities was an expense of $5,561,000 in the prior year’s nine months, resulting from Macerich’s closing share prices of $55.29 and $65.68 as of September 30, 2018 and December 31, 2017, respectively, on 535,265 shares owned.
Loss from Discontinued Operations
Loss from discontinued operations was $23,797,000 in the nine months ended September 30, 2018. The loss was due to an expense for potential additional real property transfer taxes from the 2012 sale of Kings Plaza. See “Part I - Financial Information, Item 1 - Financial Statements, Note 7 - Discontinued Operations.”



24


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. We anticipate that cash flows 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 amortization and capital expenditures. We may refinance our maturing debt as it comes due or choose to repay it.
Nine Months Ended September 30, 2019
Cash and cash equivalents and restricted cash were $313,777,000 as of September 30, 2019, compared to $289,495,000 as of December 31, 2018, an increase of $24,282,000. This increase resulted from (i) $99,953,000 of net cash provided by operating activities, partially offset by (ii) $69,105,000 of net cash used in financing activities and (iii) $6,566,000 of net cash used in investing activities.
Net cash provided by operating activities of $99,953,000 was comprised of (i) net income of $45,641,000, (ii) adjustments for non-cash items of $36,002,000 and (iii) the net change in operating assets and liabilities of $18,310,000. The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $27,401,000, (ii) the change in fair value of marketable securities of $6,257,000, (iii) straight-lining of rental income of $1,950,000 and (iv) stock-based compensation expense of $394,000.
Net cash used in financing activities was primarily comprised of dividends paid of $69,090,000.
Net cash used in investing activities was comprised of construction in progress and real estate additions of $6,566,000.
Nine Months Ended September 30, 2018
Cash and cash equivalents and restricted cash were $309,247,000 as of September 30, 2018, compared to $393,279,000 as of December 31, 2017, a decrease of $84,032,000. This decrease resulted from (i) $150,471,000 of net cash used in financing activities and (ii) $214,000 of net cash used in investing activities, partially offset by (iii) $66,653,000 of net cash provided by operating activities.
Net cash used in financing activities of $150,471,000 was primarily comprised of debt repayments of $81,214,000 (primarily the refinancing and subsequent repayment of the mortgage loan on our Rego Park I shopping center) and dividends paid of $69,072,000.
Net cash used in investing activities of $214,000 was comprised of construction in progress and real estate additions of $2,514,000, partially offset by principal repayment proceeds from the Rego Park II loan participation of $2,300,000.
Net cash provided by operating activities of $66,653,000 was comprised of (i) net income of $22,873,000, (ii) adjustments for non-cash items of $40,867,000 and (iii) the net change in operating assets and liabilities of $2,913,000. The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $29,323,000, (ii) the change in fair value of marketable securities of $5,561,000, (iii) straight-lining of rental income of $5,589,000 and (iv) stock-based compensation expense of $394,000.
Commitments and Contingencies
Insurance
We maintain general liability insurance with limits of $300,000,000 per occurrence and per property, 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.

25


Liquidity and Capital Resources - continued
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 Program Reauthorization Act, which expires in December 2020. 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 $323,000 deductible and 19% of the balance of a covered loss, and the Federal government is responsible for the remaining 81% 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.
Our mortgage loans are non-recourse to us and 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.
Paramus
In 2001, we leased 30.3 acres of land located in Paramus, New Jersey to IKEA Property, Inc. The lease has a purchase option in 2021 for $75,000,000. The property is encumbered by a $68,000,000 interest-only mortgage loan, with a fixed rate of 4.72%, which matures in October 2021. The annual triple-net rent is the sum of $700,000 plus the amount of interest on the mortgage loan. If the purchase option is exercised, we will receive net cash proceeds of approximately $7,000,000 and recognize a gain on sale of land of approximately $60,000,000. If the purchase option is not exercised, the triple-net rent for the last 20 years would include debt service sufficient to fully amortize $68,000,000 over the remaining 20-year lease term.
Rego Park I Litigation
In June 2014, Sears Roebuck and Co. (“Sears”) filed a lawsuit in the Supreme Court of the State of New York against Vornado and us (and certain of our subsidiaries) with regard to the 195,000 square foot store that Sears leased at our Rego Park I property alleging that the defendants are liable for harm that Sears has suffered as a result of (a) water intrusions into the premises, (b) two fires in February 2014 that caused damages to those premises, and (c) alleged violations of the Americans with Disabilities Act in the premises’ parking garage. Sears asserted various causes of actions for damages and sought to compel compliance with landlord’s obligations to repair the premises and to provide security, and to compel us to abate a nuisance that Sears claims was a cause of the water intrusions into its premises. In addition to injunctive relief, Sears sought, among other things, damages of not less than $4,000,000 and future damages it estimated would not be less than $25,000,000. In March 2016, Sears withdrew its claim for future damages leaving a remaining claim for property damages, which we estimate to be approximately $650,000 based on information provided by Sears. We intend to defend the remaining claim vigorously. The amount or range of reasonably possible losses, if any, is not expected to be greater than $650,000. On October 15, 2018, Sears filed for Chapter 11 bankruptcy relief and rejected its lease resulting in an automatic stay of this case.
Tenant Matters
On April 13, 2019, Kohl’s closed its 133,000 square foot store at our Rego Park II shopping center. Kohl’s plans to sublease its store and remains obligated to us under its lease which expires in January 2031.
Letters of Credit
Approximately $1,030,000 of standby letters of credit were issued and outstanding as of September 30, 2019.
Other
There are various other legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters in the aggregate will not have a material effect on our financial position, results of operations or cash flows.


26


Funds from Operations (“FFO”) (non-GAAP)

FFO is computed in accordance with the December 2018 restated definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”).  NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciable 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.

In accordance with the NAREIT December 2018 restated definition of FFO, we have elected to exclude the mark-to-market adjustments of marketable securities from the calculation of FFO. Our FFO for the three and nine months ended September 30, 2018 has been adjusted to exclude $824,000, or $0.16 per diluted share, and $5,561,000, or $1.09 per diluted share, of expense, respectively, from the change in fair value of marketable securities previously reported.
FFO (non-GAAP) for the three and nine months ended September 30, 2019 and 2018
FFO (non-GAAP) for the quarter ended September 30, 2019 was $25,208,000, or $4.92 per diluted share, compared to $23,945,000, or $4.68 per diluted share in the prior year’s quarter.
FFO (non-GAAP) for the nine months ended September 30, 2019 was $75,044,000, or $14.66 per diluted share, compared to $53,271,000, or $10.41 per diluted share in the prior year’s nine months. FFO (non-GAAP) for the nine months ended September 30, 2018 included $23,797,000, or $4.65 per diluted share, of expense for potential additional New York City real property transfer taxes on the 2012 sale of Kings Plaza.
The following table reconciles our net income to FFO (non-GAAP):
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
(Amounts in thousands, except share and per share amounts)
 
2019
 
 
2018
 
2019
 
2018
Net income
 
$
16,493

 
 
$
15,003

 
$
45,641

 
$
22,873

Depreciation and amortization of real property
 
7,698

 
 
8,118

 
23,146

 
24,837

Change in fair value of marketable securities
 
1,017

 
 
824

 
6,257

 
5,561

FFO (non-GAAP)
 
$
25,208

 
 
$
23,945

 
$
75,044

 
$
53,271

 
 
 
 
 
 
 
 
 
 
FFO per diluted share (non-GAAP)
 
$
4.92

 
 
$
4.68

 
$
14.66

 
$
10.41

 
 
 
 
 
 
 
 
 
 
Weighted average shares used in computing FFO per diluted share
 
5,118,698

 
 
5,117,347

 
5,118,030

 
5,116,667



27


Item 3.
Quantitative and Qualitative Disclosures About Market Risk
We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. Our exposure to a change in interest rates is summarized in the table below. 
 
 
2019
 
2018
(Amounts in thousands, except per share amounts)
 
September 30,  Balance    
 
Weighted
Average
Interest Rate
 
Effect of 1%
Change in
  Base Rates  
 
December 31,
Balance
 
Weighted
Average
Interest Rate
Variable Rate
 
$
906,836

 
3.17%
 
$
9,068

 
$
906,836

 
3.55%
Fixed Rate
 
68,000

 
4.72%
 

 
68,000

 
4.72%
 
 
$
974,836

 
3.28%
 
$
9,068

 
$
974,836

 
3.64%
 
 
 
 
 
 
 
 
 
 
 
Total effect on diluted earnings per share
 
 
 
 
 
$
1.77

 
 
 
 
As of September 30, 2019, we have an interest rate cap with a notional amount of $500,000,000 that caps LIBOR at a rate of 6.0%.
Fair Value of Debt
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. As of September 30, 2019 and December 31, 2018, the estimated fair value of our mortgages payable was $973,000,000 and $969,000,000, respectively. Our fair value estimates, which are made at the end of the reporting period, may be different from the amounts that may ultimately be realized upon the disposition of our financial instruments. 

Item 4.
Controls and Procedures
(a) Disclosure Controls and Procedures:  Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting: There have not been any changes in our internal control over financial reporting during the fiscal quarter to which this Quarterly Report on Form 10-Q relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

28


PART II.
OTHER INFORMATION

Item 1.
Legal Proceedings
We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, the outcome of such matters in the aggregate will not have a material effect on our financial condition, results of operations or cash flows.
For a discussion of the litigation concerning our Rego Park I property, see “Part I – Financial Information, Item 1 – Financial Statements, Note 13 – Commitments and Contingencies.”

Item 1A.
Risk Factors
There have been no material changes in our “Risk Factors” as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
None.

Item 3.
Defaults Upon Senior Securities
None.

Item 4.
Mine Safety Disclosures
Not applicable.

Item 5.
Other Information
None.

Item 6.
Exhibits
Exhibits required by Item 601 of Regulation S-K are filed herewith and are listed in the attached Exhibit Index.

29


EXHIBIT INDEX
Exhibit
No.
 
 
 
-
Letter regarding unaudited interim financial information
 
 
 
 
 
-
Rule 13a-14 (a) Certification of the Chief Executive Officer
 
 
 
 
 
-
Rule 13a-14 (a) Certification of the Chief Financial Officer
 
 
 
 
 
-
Section 1350 Certification of the Chief Executive Officer
 
 
 
 
 
-
Section 1350 Certification of the Chief Financial Officer
 
 
 
 
 
101.INS
-
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
 
 
 
 
 
101.SCH
-
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
101.CAL
-
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
101.DEF
-
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
101.LAB
-
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
101.PRE
-
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 


30


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
ALEXANDER’S, INC.
 
 
(Registrant)
 
 
 
By:
 
 
 
 
Chief Financial Officer (duly authorized officer and principal financial and accounting officer)


31

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
12/31/20
12/31/1910-K,  5
12/15/19
Filed on:10/28/19
10/25/19
For Period end:9/30/19
9/23/19
6/30/1910-Q
6/28/19
6/20/19
4/25/19
4/13/19
2/11/1910-K,  SC 13G/A
2/1/19
1/1/19
12/31/1810-K
12/15/18
12/12/188-K
10/15/18
9/30/1810-Q
6/30/1810-Q
4/5/18
3/31/1810-Q
2/16/18
12/31/1710-K
4/4/17
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