Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 915K
2: EX-15 Letter re: Unaudited Interim Financial Info HTML 16K
3: EX-31.1 Certification -- §302 - SOA'02 HTML 20K
4: EX-31.2 Certification -- §302 - SOA'02 HTML 20K
5: EX-32.1 Certification -- §906 - SOA'02 HTML 18K
6: EX-32.2 Certification -- §906 - SOA'02 HTML 18K
12: R1 Cover HTML 68K
13: R2 Consolidated Balance Sheets (Unaudited) HTML 113K
14: R3 Consolidated Balance Sheets (Unaudited) HTML 39K
(Parenthetical)
15: R4 Consolidated Statements of Income (Unaudited) HTML 77K
16: R5 Consolidated Statements of Income (Unaudited) HTML 21K
(Parenthetical)
17: R6 Consolidated Statements of Comprehensive Income HTML 37K
(Unaudited)
18: R7 Consolidated Statements of Changes in Equity HTML 58K
(Unaudited)
19: R8 Consolidated Statements of Changes in Equity HTML 19K
(Unaudited) - Parenthetical
20: R9 Consolidated Statements of Cash Flows (Unaudited) HTML 108K
21: R10 Consolidated Statements of Cash Flows (Unaudited) HTML 19K
(Parenthetical)
22: R11 Organization HTML 19K
23: R12 Basis of Presentation HTML 21K
24: R13 Recently Issued Accounting Literature HTML 30K
25: R14 Revenue Recognition HTML 45K
26: R15 Related Party Transactions HTML 40K
27: R16 Mortgages Payable HTML 34K
28: R17 Stock-Based Compensation HTML 21K
29: R18 Fair Value Measurements HTML 52K
30: R19 Commitments and Contingencies HTML 24K
31: R20 Earnings Per Share HTML 31K
32: R21 Basis of Presentation (Policies) HTML 31K
33: R22 Revenue Recognition (Tables) HTML 43K
34: R23 Related Party Transactions (Tables) HTML 34K
35: R24 Mortgages Payable (Tables) HTML 38K
36: R25 Fair Value Measurements (Tables) HTML 50K
37: R26 Earnings Per Share (Tables) HTML 31K
38: R27 Organization - Additional Information (Detail) HTML 18K
39: R28 Basis of Presentation - Additional Information HTML 18K
(Detail)
40: R29 Revenue Recognition - Disaggregation of Revenue HTML 38K
(Details)
41: R30 Revenue Recognition - Components of Lease Revenue HTML 24K
(Details)
42: R31 Revenue Recognition - Narrative (Details) HTML 33K
43: R32 Related Party Transactions - Additional HTML 66K
Information (Detail)
44: R33 Related Party Transactions - Summary of Fees to HTML 32K
Vornado (Detail)
45: R34 Mortgages Payable - Summary of Outstanding HTML 46K
Mortgages Payable (Detail)
46: R35 Mortgages Payable - Additional Information HTML 38K
(Detail)
47: R36 Stock-Based Compensation - Additional Information HTML 34K
(Detail)
48: R37 Fair Value Measurements - Financial Assets and HTML 59K
Liabilities Measured at Fair Value (Detail)
49: R38 Fair Value Measurements - Financial Assets and HTML 29K
Liabilities Not Measured at Fair Value (Detail)
50: R39 Commitments and Contingencies - Additional HTML 51K
Information (Detail)
51: R40 Earnings Per Share - Narrative (Details) HTML 19K
52: R41 Earnings Per Share - Schedule of Earnings Per HTML 47K
Share, Basic and Diluted (Detail)
55: XML IDEA XML File -- Filing Summary XML 93K
53: XML XBRL Instance -- alx-20220630_htm XML 950K
54: EXCEL IDEA Workbook of Financial Reports XLSX 77K
8: EX-101.CAL XBRL Calculations -- alx-20220630_cal XML 114K
9: EX-101.DEF XBRL Definitions -- alx-20220630_def XML 320K
10: EX-101.LAB XBRL Labels -- alx-20220630_lab XML 952K
11: EX-101.PRE XBRL Presentations -- alx-20220630_pre XML 560K
7: EX-101.SCH XBRL Schema -- alx-20220630 XSD 104K
56: JSON XBRL Instance as JSON Data -- MetaLinks 264± 384K
57: ZIP XBRL Zipped Folder -- 0000003499-22-000020-xbrl Zip 232K
(Exact name of registrant as specified in its charter)
iDelaware
i51-0100517
(State or other jurisdiction of incorporation or organization)
(I.R.S.
Employer Identification Number)
i210 Route 4 East,
iParamus,
iNew
Jersey
i07652
(Address of principal executive offices)
(Zip Code)
i(201)
i587-8541
(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
iCommon Stock, $1 par value per share
iALX
iNew
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. ☑iYes ☐ 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). ☑iYes ☐ 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.
☐
Large Accelerated Filer
☑
iAccelerated
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 June 30, 2022, there were i5,107,290 shares of common stock, par value $1 per share, outstanding.
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 isix properties in the
New York City metropolitan area.
2.iBasis of Presentation
i
The
accompanying consolidated financial statements are unaudited and include the accounts of Alexander’s and its consolidated subsidiaries. All adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission (the “SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December
31, 2021, as filed with the SEC.
We have made estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the operating results for the full year.
Our investments in U.S. Treasury bills are accounted for as available-for-sale debt instruments and are recorded at fair value in “investments in U.S. Treasury bills” on our consolidated balance sheet as of June 30, 2022. See Note 8 - Fair Value
Measurements for information on our investments in U.S. Treasury bills.
We operate in ione reportable segment.
3.iRecently
Issued Accounting Literature
iIn March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04 establishing Accounting Standards Codification (“ASC”) Topic 848, Reference Rate Reform and in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope (collectively, “ASC 848”). ASC 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other
contracts. The guidance in ASC 848 is optional and may be elected over time as reference rate reform activities occur. We have elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
4.iRevenue
Recognition
i
The following is a summary of revenue sources for the three and six months ended June 30, 2022 and 2021.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4.Revenue Recognition - continued
i
The components of lease revenues for the three and six months ended June 30, 2022 and 2021
are as follows:
For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Amounts in thousands)
2022
2021
2022
2021
Fixed
lease revenues
$
i33,418
$
i32,233
$
i65,621
$
i66,043
Variable
lease revenues
i14,293
i16,671
i28,898
i37,272
Lease
revenues
$
i47,711
$
i48,904
$
i94,519
$
i103,315
/
Bloomberg
L.P. (“Bloomberg”) accounted for revenue of $i55,909,000 and $i57,513,000 for the six months ended June 30, 2022 and 2021, respectively, representing
approximately i56% and i53% 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.
5.iRelated
Party Transactions
Vornado
As of June 30, 2022, Vornado owned i32.4% 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) $i2,800,000, (ii) i2% of gross revenue from the Rego Park II shopping center, (iii) $i0.50
per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue and (iv) $i354,000, escalating at i3% per annum, for
managing the common area of 731 Lexington Avenue. Vornado is also entitled to a development fee equal to i6% of development costs, as defined.
Leasing and Other Agreements
Vornado also provides us with leasing services for a fee of i3%
of rent for the first ten years of a lease term, i2% of rent for the eleventh through the twentieth year of a lease term, and i1% 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 i1% 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 i3%
of gross proceeds, as defined, for asset sales less than $i50,000,000 and i1% of gross proceeds, as defined, for asset sales of $i50,000,000
or more.
We also have agreements with Building Maintenance Services LLC, a wholly owned subsidiary of Vornado, to supervise (i) cleaning, engineering and security services at our 731 Lexington Avenue property and (ii) security services at our Rego Park I and Rego Park II properties and The Alexander apartment tower.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5.Related Party Transactions - continued
i
The
following is a summary of fees incurred to Vornado under the various agreements discussed above.
For the Three Months Ended June 30,
For the Six Months Ended June 30,
(Amounts
in thousands)
2022
2021
2022
2021
Company management fees
$
i700
$
i700
$
i1,400
$
i1,400
Development
fees
i—
i46
i3
i79
Leasing
fees
i—
i28
i1,318
i439
Commission
on sale of real estate
i—
i300
i—
i300
Property
management, cleaning, engineering and security fees
i1,547
i1,379
i2,816
i2,811
$
i2,247
$
i2,453
$
i5,537
$
i5,029
/
As
of June 30, 2022, the amounts due to Vornado were $i837,000 for management, property management, cleaning, engineering and security fees; and $i144,000
for development fees. As of December 31, 2021, the amounts due to Vornado were $i669,000 for management, property management, cleaning, engineering and security fees; $i141,000
for development fees; and $i69,000 for leasing fees.
6.iMortgages
Payable
i
The following is a summary of our outstanding mortgages payable as of June 30, 2022 and December 31, 2021. We may refinance our maturing debt as it comes due or choose to pay it down.
Deferred
debt issuance costs, net of accumulated amortization of $i15,306 and $i14,551, respectively
(i6,184)
(i6,931)
$
i1,090,360
$
i1,089,613
(1)Interest
at iLIBOR plus i0.90%. Maturity represents the extended maturity based on our unilateral right to extend.
(2)Interest at iLIBOR
plus i1.40% which was swapped to a fixed rate of i1.72% through May 2025.
(3)Interest at iLIBOR
plus i1.35%.
/
7.iStock-Based
Compensation
iWe account for stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). Our 2016 Omnibus Stock Plan (the “Plan”) provides for grants of incentive and non-qualified stock options, restricted stock, stock appreciation rights, deferred stock units (“DSUs”) and performance shares, as defined, to the directors, officers and employees of the Company
and Vornado.
In May 2022, we granted each of the members of our Board of Directors i326 DSUs with a market value of $i75,000
per grant. The grant date fair value of these awards was $i56,250 per grant, or $i450,000
in the aggregate, in accordance with ASC 718. The DSUs entitle the holders to receive shares of the Company’s common stock without the payment of any consideration. The DSUs vested immediately and accordingly, were expensed on the date of grant, but the shares of common stock underlying the DSUs are not deliverable to the grantee until the grantee is no longer serving on the Company’s Board of Directors. As of June 30, 2022, there were i19,796
DSUs outstanding and i485,991 shares were available for future grant under the Plan.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
8.iFair Value Measurements
iASC
Topic 820, Fair Value Measurement (“ASC 820”) defines fair value and establishes a framework for measuring fair value. ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities as well as certain U.S. Treasury securities that are highly liquid and are actively traded in secondary markets; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize
the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in our assessment of fair value.
Financial Assets and Liabilities Measured at Fair Value
i
Financial assets measured at fair value on our consolidated balance sheet as of June 30, 2022 consist of U.S. Treasury bills (classified as available-for-sale) and interest rate derivatives, which are presented in
the table below based on their level in the fair value hierarchy. There were no financial liabilities measured at fair value as of June 30, 2022.
Interest
rate derivatives (included in other assets)
i21,970
i—
i21,970
i—
$
i219,339
$
i197,369
$
i21,970
$
i—
(1)During
the three months ended June 30, 2022, we purchased $i197,407 of U.S. Treasury bills with an aggregate face value of $i200,000.
As of June 30, 2022, our investments in U.S. Treasury bills have an aggregate amortized cost of $i198,018 and have remaining maturities of less than one year.
Financial assets measured at fair value on our consolidated balance sheet as of December 31, 2021 consist of interest rate derivatives, which are presented in the table below based on their level in the fair value hierarchy.
There were no financial liabilities measured at fair value as of December 31, 2021.
Interest rate derivatives (included in other assets)
$
i7,545
$
i—
$
i7,545
$
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. iThe
table below summarizes the carrying amounts and fair values of these financial instruments as of June 30, 2022 and December 31, 2021.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
9.iCommitments and Contingencies
Insurance
We
maintain general liability insurance with limits of $ii300,000,000/
per occurrence and per property, of which the first $ii30,000,000/
includes communicable disease coverage, and all-risk property and rental value insurance coverage with limits of $i1.7 billion per occurrence, including coverage for acts of terrorism, with sub-limits for certain perils such as floods and earthquakes on each of our properties and excluding communicable disease coverage.
Fifty Ninth Street Insurance Company, LLC (“FNSIC”), our wholly owned consolidated subsidiary, acts as a direct insurer for coverage for acts of terrorism, including nuclear, biological,
chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance Act of 2002, as amended to date and which has been extended through December 2027. Coverage for acts of terrorism (including NBCR acts) is up to $ii1.7/
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 $i294,000 deductible and i20%
of the balance of a covered loss, and the Federal government is responsible for the remaining i80% 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.
Letters of Credit
Approximately $i900,000
of standby letters of credit were issued and outstanding as of June 30, 2022.
Other
In January 2022, New World Mall LLC, the sub-tenant at our Flushing property, exercised its ione remaining i10-year
extension option through January 2037. As a result, we remeasured our related ground lease liability to include our i10-year extension option and recorded an estimated incremental right-of-use asset and lease liability of approximately $ii17,000,000/
which is included in “other assets” and “other liabilities,” respectively, on our consolidated balance sheet as of June 30, 2022.
There are various legal actions pending 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.
10.iEarnings
Per Share
iThe 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 iino/
potentially dilutive securities outstanding during the three and six months ended June 30, 2022 and 2021.
For the Three Months Ended June 30,
For
the Six Months Ended June 30,
(Amounts in thousands, except share and per share amounts)
2022
2021
2022
2021
Net income
$
i14,814
$
i25,898
$
i29,346
$
i43,780
Weighted
average shares outstanding – basic and diluted
ii5,125,710/
ii5,123,255/
ii5,125,098/
ii5,122,733/
Net
income per common share – basic and diluted
$
ii2.89/
$
ii5.05/
$
ii5.73/
$
ii8.55/
/
13
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Alexander’s, Inc.
Results of Review of Interim Financial Information
We have reviewed the accompanying consolidated balance sheet of Alexander’s, Inc. and subsidiaries (the “Company”) as of June 30, 2022, the related consolidated statements of income, comprehensive income, and changes in equity, for the three-month and six-month periods ended June 30, 2022 and 2021, and of cash flows for the six-month periods ended June
30, 2022 and 2021, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, 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 14, 2022, 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, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
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.
Currently, one of the most significant factors is the ongoing adverse effect of the COVID-19 pandemic on our business, financial condition, results of operations, cash flows, operating performance and the effect it
has 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. The extent of the impact of the COVID-19 pandemic will continue to depend on future developments, including vaccination rates among the population, the efficacy and durability of vaccines against emerging variants, and governmental and tenant responses thereto, which continue to be uncertain but the impact could be material. Moreover, you are cautioned that the COVID-19 pandemic will heighten many of the risks identified in “Item 1A. – Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2021.
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, 2021. 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 six months ended June 30, 2022 and 2021. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the operating results for the full year.
Critical
Accounting Estimates and Significant Accounting Policies
A summary of the critical accounting estimates used in the preparation of our consolidated financial statements is included in our Annual Report on Form 10-K for the year ended December 31, 2021 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 six months ended June 30, 2022, there were no material changes to these policies.
15
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 six properties in the 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 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.
Our business has been adversely affected by the ongoing COVID-19 pandemic. While substantially all the limitations and restrictions imposed on our retail tenants during the onset of the pandemic have been lifted, economic conditions and other factors continue to adversely affect the financial health of our retail tenants.
Quarter Ended June 30, 2022 Financial Results Summary
Net income for the quarter ended June 30, 2022 was $14,814,000, or
$2.89 per diluted share, compared to $25,898,000, or $5.05 per diluted share in the prior year’s quarter. Net income for the prior year’s quarter included $9,124,000, or $1.78 per diluted share, of income as a result of a net gain on the sale of a parcel of land in the Bronx, New York (“Bronx Land Parcel”).
Funds from operations (“FFO”) (non-GAAP) for the quarter ended June 30, 2022 was $22,122,000, or $4.32 per diluted share, compared to $21,133,000 or $4.12 per diluted share in the prior year’s quarter.
Six Months Ended June 30, 2022 Financial Results Summary
Net income for the six months ended June 30, 2022 was $29,346,000, or $5.73 per diluted share, compared to $43,780,000,
or $8.55 per diluted share in the prior year’s six months. Net income for the prior year’s six months included $9,124,000, or $1.78 per diluted share, of income as a result of a net gain on the sale of the Bronx Land Parcel.
Funds from operations (“FFO”) (non-GAAP) for the six months ended June 30, 2022 was $43,907,000, or $8.57 per diluted share, compared to $46,914,000 or $9.16 per diluted share in the prior year’s six months.
Square Footage, Occupancy and Leasing Activity
As of June 30, 2022, our portfolio was comprised of six properties aggregating 2,454,000 square feet, of which 2,241,000 square feet was in service and213,000 square feet (at our Rego Park I and Rego Park II properties)
was out of service for redevelopment. Excluding residential, the in service square feet was 96% occupied as of June 30, 2022. The in service residential square feet was 99% occupied as of June 30, 2022.
Significant Tenant
Bloomberg L.P. (“Bloomberg”) accounted for revenue of $55,909,000 and $57,513,000 for the six months ended June 30, 2022 and 2021, respectively, representing approximately 56% and 53% 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.
Rental revenues were $49,824,000 in the quarter ended June
30, 2022, compared to $51,388,000 in the prior year’s quarter, a decrease of $1,564,000. This was primarily due to (i) $1,770,000 of lower revenue due to the sale of our Paramus property in October 2021 and (ii) $1,725,000 of lower real estate tax reimbursements due to lower real estate tax expense, partially offset by (iii) $964,000 of higher revenue due to leasing activity and (iv) $728,000 of higher revenue due to higher occupancy at The Alexander apartment tower.
Operating Expenses
Operating expenses were $21,372,000 in the quarter ended June 30, 2022, compared to $23,422,000 in the prior year’s quarter, a decrease of $2,050,000. This was primarily due to lower operating expenses subject to recovery, including lower real estate taxes resulting from reductions to assessed property values.
Depreciation
and Amortization
Depreciation and amortization was $7,413,000 in the quarter ended June 30, 2022, compared to $8,132,000 in the prior year’s quarter, a decrease of $719,000. This was primarily due to the acceleration of amortization of the deferred leasing commission at our Paramus property in the prior year’s quarter.
General and Administrative Expenses
General and administrative expenses were $1,916,000 in the quarter ended June 30, 2022, compared to $1,823,000 in the prior year’s quarter, an increase of $93,000. This was primarily due to higher professional fees.
Interest and Other Income, net
Interest and other income, net was $1,173,000 in the quarter
ended June 30, 2022, compared to $151,000 in the prior year’s quarter, an increase of $1,022,000. This was primarily due to $611,000 of higher interest income from our investments in U.S. Treasury bills and $358,000 of higher interest income primarily due to an increase in average interest rates.
Interest and Debt Expense
Interest and debt expense was $5,482,000 in the quarter ended June 30, 2022, compared to $5,086,000 in the prior year’s quarter, an increase of $396,000. This was primarily due to $1,196,000 of higher interest expense due to an increase in LIBOR, partially offset by $812,000 of lower interest expense resulting from the sale of our Paramus property and related debt payoff in October 2021.
Change in Fair Value of Marketable
Securities
Change in fair value of marketable securities was income of $3,698,000 in the quarter ended June 30, 2021. This was due to the change in The Macerich Company’s (“Macerich”) common share price through the quarter ended June 30, 2021. We sold our Macerich common shares in December 2021.
Net Gain on Sale of Real Estate
Net gain on sale of real estate was $9,124,000 in the quarter ended June 30, 2021, resulting from the sale of the Bronx Land Parcel.
Rental revenues were $99,039,000 in the six months ended June 30, 2022, compared to $107,541,000 in the prior year’s six months, a decrease of $8,502,000. This was primarily due to (i) $3,922,000 of lower real estate tax reimbursements due to lower real estate tax expense, (ii) $3,531,000 of lower revenue due to the sale of our Paramus property in October 2021 and (iii) $2,750,000 of lease termination fee income received in the prior year from a retail tenant at our 731 Lexington Avenue property, partially offset by (iv) $1,192,000 of higher revenue due to higher occupancy at The Alexander apartment tower.
Operating
Expenses
Operating expenses were $42,914,000 in the six months ended June 30, 2022, compared to $47,222,000 in the prior year’s six months, a decrease of $4,308,000. This was primarily due to lower operating expenses subject to recovery, including lower real estate taxes resulting from reductions to assessed property values.
Depreciation and Amortization
Depreciation and amortization was $14,764,000 in the six months ended June 30, 2022, compared to $16,674,000 in the prior year’s six months, a decrease of $1,910,000. This was primarily due to the acceleration of amortization of the deferred leasing commission at our Paramus property in the prior year’s six months.
General and Administrative Expenses
General
and administrative expenses were $3,385,000 in the six months ended June 30, 2022, compared to $3,366,000 in the prior year’s six months, an increase of $19,000.
Interest and Other Income, net
Interest and other income, net was $1,267,000 in the six months ended June 30, 2022, compared to $323,000 in the prior year’s six months, an increase of $944,000. This was primarily due to $611,000 of higher interest income from our investments in U.S. Treasury bills and $345,000 of higher interest income primarily due to an increase in average interest rates.
Interest and Debt Expense
Interest and debt expense was $9,897,000 in the six months ended June 30,
2022, compared to $10,226,000 in the prior year’s six months, a decrease of $329,000. This was primarily due $1,614,000 of lower interest expense resulting from the sale of our Paramus property and related debt payoff in October 2021, partially offset by $1,282,000 of higher interest expense due to an increase in LIBOR.
Change in Fair Value of Marketable Securities
Change in fair value of marketable securities was income of $4,280,000 in the six months ended June 30, 2021. This was due to the change in Macerich’s common share price through the six months ended June 30, 2021. We sold our Macerich common shares in December 2021.
Net Gain on Sale of Real Estate
Net gain on sale of real estate
was $9,124,000 in the six months ended June 30, 2021, resulting from the sale of the Bronx Land Parcel.
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 of June 30, 2022, we had $526,867,000 of liquidity comprised of $329,498,000 of cash and cash equivalents and restricted cash and $197,369,000 of investments in U.S. Treasury bills. 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 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. The challenges posed by the COVID-19 pandemic and the impact on our business and cash flows continue to evolve and cannot be predicted at this time but that impact could be material.
Cash and cash equivalents and restricted cash were $329,498,000 as of June 30, 2022, compared to $483,505,000 as of December 31, 2021, a decrease of $154,007,000. This decrease resulted from (i) $201,207,000 of net cash used in investing activities, (ii) $46,128,000 of net cash used in financing activities, partially offset by (iii) $93,328,000 of net cash provided by operating activities.
Net
cash used in investing activities was comprised of the purchase of U.S. Treasury bills of $197,407,000 and construction in progress and real estate additions of $3,800,000.
Net cash used in financing activities was primarily comprised of dividends paid of $46,120,000.
Net cash provided by operating activities of $93,328,000 was comprised of (i) net income of $29,346,000, (ii) adjustments for non-cash items of $19,374,000 and (iii) the net change in operating assets and liabilities of $44,608,000. The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $15,587,000, (ii) straight-lining of rental income of $3,948,000 and (iii) stock-based compensation of $450,000, partially offset by (iv) other non-cash adjustments of $611,000.
Cash and cash equivalents and restricted cash were $469,056,000 as of June 30, 2021, compared to $449,877,000 as of December 31, 2020, an increase of $19,179,000. This increase resulted from (i) $62,519,000 of net cash provided by operating activities and (ii) $2,805,000 of net cash provided by investing activities, partially offset by (iii) $46,145,000 of net cash used in financing activities.
Net cash provided by operating activities of $62,519,000 was comprised of (i) net income of $43,780,000, (ii) adjustments for non-cash items of $9,568,000 and (iii) the net change in operating assets and liabilities of $9,171,000. The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $17,503,000,
(ii) straight-lining of rental income of $5,019,000 and (iii) stock-based compensation of $450,000, partially offset by (iv) net gain on sale of real estate of $9,124,000 and (v) the change in fair value of marketable securities of $4,280,000.
Net cash provided by investing activities was comprised of (i) proceeds from the sale of real estate of $9,291,000 and (ii) the return of short-term investments of $3,600,000, partially offset by (iii) construction in progress and real estate additions of $10,086,000.
Net cash used in financing activities of $46,145,000 was primarily comprised of dividends paid of $46,100,000.
19
Liquidity and Capital Resources - continued
Commitments
and Contingencies
Insurance
We maintain general liability insurance with limits of $300,000,000 per occurrence and per property, of which the first $30,000,000 includes communicable disease coverage, and all-risk property and rental value insurance coverage with limits of $1.7 billion per occurrence, including coverage for acts of terrorism, with sub-limits for certain perils such as floods and earthquakes on each of our properties and excluding communicable disease coverage.
Fifty Ninth Street Insurance Company, LLC (“FNSIC”), our wholly owned consolidated subsidiary, acts as a direct insurer for coverage for acts of terrorism, including nuclear, biological, chemical and radiological (“NBCR”) acts, as defined by the Terrorism Risk Insurance Act of 2002, as amended to date and which has been extended
through December 2027. Coverage for acts of terrorism (including NBCR acts) is up to $1.7 billion per occurrence and in the aggregate. Coverage for acts of terrorism (excluding NBCR acts) is fully reinsured by third party insurance companies and the Federal government with no exposure to FNSIC. For NBCR acts, FNSIC is responsible for a $294,000 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.
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.
Letters of Credit
Approximately $900,000 of standby letters of credit were issued and outstanding as of June 30, 2022.
Other
In January 2022, New World Mall LLC, the sub-tenant at our Flushing property, exercised its one remaining 10-year extension
option through January 2037. As a result, we remeasured our related ground lease liability to include our 10-year extension option and recorded an estimated incremental right-of-use asset and lease liability of approximately $17,000,000 which is included in “other assets” and “other liabilities,” respectively, on our consolidated balance sheet as of June 30, 2022.
There are various legal actions pending 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.
20
Funds
from Operations (“FFO”) (non-GAAP)
FFO is computed in accordance with the 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 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 three and six months ended June 30, 2022 and 2021
FFO (non-GAAP) for the quarter ended June 30, 2022 was $22,122,000, or $4.32 per diluted share,
compared to $21,133,000, or $4.12 per diluted share in the prior year’s quarter.
FFO (non-GAAP) for the six months ended June 30, 2022 was $43,907,000, or $8.57 per diluted share, compared to $46,914,000 or $9.16 per diluted share in the prior year’s six months.
The following table reconciles our net income to FFO (non-GAAP):
For
the Three Months Ended June 30,
For the Six Months Ended June 30,
(Amounts in thousands, except share and per share amounts)
2022
2021
2022
2021
Net income
$
14,814
$
25,898
$
29,346
$
43,780
Depreciation
and amortization of real property
7,308
8,057
14,561
16,538
Net gain on sale of real estate
—
(9,124)
—
(9,124)
Change
in fair value of marketable securities
—
(3,698)
—
(4,280)
FFO (non-GAAP)
$
22,122
$
21,133
$
43,907
$
46,914
FFO
per diluted share (non-GAAP)
$
4.32
$
4.12
$
8.57
$
9.16
Weighted average shares used in computing
FFO per diluted share
5,125,710
5,123,255
5,125,098
5,122,733
21
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.
2022
2021
(Amounts
in thousands, except per share amounts)
June 30, Balance
Weighted Average Interest Rate
Effect of 1% Change in Base Rates
December 31, Balance
Weighted Average Interest Rate
Variable Rate
$
702,544
2.45%
$
7,025
$
702,544
1.14%
Fixed
Rate
394,000
1.94%
—
394,000
1.94%
$
1,096,544
2.27%
$
7,025
$
1,096,544
1.42%
Total
effect on diluted earnings per share
$
1.37
We have an interest rate cap relating to the mortgage loan on the office condominium of our 731 Lexington Avenue property with a notional amount of $500,000,000 that caps LIBOR at a rate of 6.0%.
We have an interest rate swap relating to the mortgage loan on the retail condominium of our 731 Lexington Avenue property with a notional amount of $300,000,000 that swaps LIBOR plus 1.40% for a fixed rate of 1.72% through
May 2025.
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 June 30, 2022 and December 31, 2021, the estimated fair value of our mortgages payable was $1,053,622,000 and $1,064,122,000, 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.
22
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.
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, 2021.
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.
Section 1350 Certification of the Chief Financial Officer
101
-
The
following financial information from the Alexander’s, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of changes in equity, (v) consolidated statements of cash flows and (vi) the notes to the consolidated financial statements
104
-
The
cover page from the Alexander’s, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted as iXBRL and contained in Exhibit 101
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.
