SEC Form 10-Q filed by Alexander's Inc.

5/1/23 8:07:31 AM ET

Real Estate Investment Trusts

Real Estate

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alx-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark one)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2023


☐			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:			001-06064

ALEXANDERS INC

(Exact name of registrant as specified in its charter)

Delaware

51-0100517

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

210 Route 4 East,

Paramus,

New Jersey

07652

(Address of principal executive offices)

(Zip Code)


(201)			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

Common Stock, $1 par value per share

ALX

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. ☑ 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). ☑ 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.


☐	Large Accelerated Filer	☑	Accelerated Filer
☐	Non-Accelerated Filer	☐	Smaller Reporting Company
		☐	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). ☐ Yes ☑ No

As of March 31, 2023, there were 5,107,290 shares of common stock, par value $1 per share, outstanding.

INDEX


		Page Number
PART I.	Financial Information

Item 1.	Financial Statements:

	Consolidated Balance Sheets (Unaudited) as of March 31, 2023 and December 31, 2022	4

	Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2023 and 2022	5

	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2023 and 2022	6

	Consolidated Statements of Changes in Equity (Unaudited) for the Three Months Ended March 31, 2023 and 2022	7

	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2023 and 2022	8

	Notes to Consolidated Financial Statements (Unaudited)	9

	Report of Independent Registered Public Accounting Firm	15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	22

PART II.	Other Information

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 3.	Defaults Upon Senior Securities	23

Item 4.	Mine Safety Disclosures	23

Item 5.	Other Information	23

Item 6.	Exhibits	23

Exhibit Index		24

Signatures		25

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)


	As of
ASSETS	March 31, 2023		December 31, 2022
Real estate, at cost:
Land	$	32,271	$	33,050
Buildings and leasehold improvements	1,025,226		1,029,504
Development and construction in progress	10,144		22,044
Total	1,067,641		1,084,598
Accumulated depreciation and amortization	(398,242)		(396,268)
Real estate, net	669,399		688,330
Cash and cash equivalents	356,507		194,933
Restricted cash	20,369		19,545
Investments in U.S. Treasury bills	99,780		266,963
Tenant and other receivables	5,664		4,705
Receivable arising from the straight-lining of rents	125,430		127,497
Deferred leasing costs, net, including unamortized leasing fees to Vornado of $21,388 and $22,174, respectively	27,441		28,490
Asset held for sale	13,794		—
Other assets	59,375		67,313
	$	1,377,759	$	1,397,776


LIABILITIES AND EQUITY
Mortgages payable, net of deferred debt issuance costs	$	1,091,438	$	1,091,051
Amounts due to Vornado	675		801
Accounts payable and accrued expenses	43,908		48,785
Other liabilities	20,729		20,640
Total liabilities	1,156,750		1,161,277

Commitments and contingencies

Preferred stock: $1.00 par value per share; authorized, 3,000,000 shares; issued and outstanding, none	—		—
Common stock: $1.00 par value per share; authorized, 10,000,000 shares; issued, 5,173,450 shares; outstanding, 5,107,290 shares	5,173		5,173
Additional capital	33,865		33,865
Retained earnings	160,397		172,243
Accumulated other comprehensive income	21,942		25,586
	221,377		236,867
Treasury stock: 66,160 shares, at cost	(368)		(368)
Total equity	221,009		236,499
	$	1,377,759	$	1,397,776

See notes to consolidated financial statements (unaudited).

ALEXANDER’S, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

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


	For the Three Months Ended March 31,
	2023		2022
REVENUES
Rental revenues	$	52,941	$	49,215
EXPENSES
Operating, including fees to Vornado of $1,539 and $1,378, respectively	(24,944)		(21,542)
Depreciation and amortization	(7,478)		(7,351)
General and administrative, including management fees to Vornado of $610 in each period	(1,359)		(1,469)
Total expenses	(33,781)		(30,362)

Interest and other income	4,319		94
Interest and debt expense	(12,253)		(4,415)
Net income	$	11,226	$	14,532

Net income per common share - basic and diluted	$	2.19	$	2.84

Weighted average shares outstanding - basic and diluted	5,127,086		5,124,478

See notes to consolidated financial statements (unaudited).

ALEXANDER’S, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(Amounts in thousands)


	For the Three Months Ended March 31,
	2023		2022
Net income	$	11,226	$	14,532
Other comprehensive (loss) income:

Change in fair value of interest rate derivatives and other	(3,644)		11,727
Comprehensive income	$	7,582	$	26,259

See notes to consolidated financial statements (unaudited).

ALEXANDER’S, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

(Amounts in thousands, except per share amounts)


				Additional Capital		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock		Total Equity
	Common Stock
	Shares	Amount

For the Three Months Ended March 31, 2023
Balance, December 31, 2022	5,173	$	5,173	$	33,865	$	172,243	$	25,586	$	(368)	$	236,499
Net income	—	—		—		11,226		—		—		11,226
Dividends paid ($4.50 per common share)	—	—		—		(23,072)		—		—		(23,072)
Change in fair value of interest rate derivatives and other	—	—		—		—		(3,644)		—		(3,644)
Balance, March 31, 2023	5,173	$	5,173	$	33,865	$	160,397	$	21,942	$	(368)	$	221,009

For the Three Months Ended March 31, 2022
Balance, December 31, 2021	5,173	$	5,173	$	33,415	$	206,875	$	7,494	$	(368)	$	252,589
Net income	—	—		—		14,532		—		—		14,532
Dividends paid ($4.50 per common share)	—	—		—		(23,060)		—		—		(23,060)
Change in fair value of interest rate derivatives	—	—		—		—		11,727		—		11,727
Balance, March 31, 2022	5,173	$	5,173	$	33,415	$	198,347	$	19,221	$	(368)	$	255,788

See notes to consolidated financial statements (unaudited).

ALEXANDER’S, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Amounts in thousands)


	For the Three Months Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES	2023		2022
Net income	$	11,226	$	14,532
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including amortization of debt issuance costs	7,899		7,762

Straight-lining of rents	2,067		2,139

Other non-cash adjustments	1,741		—
Change in operating assets and liabilities:
Tenant and other receivables	(959)		610
Other assets	2,959		11,445
Amounts due to Vornado	(128)		1,195
Accounts payable and accrued expenses	(4,063)		(5,522)
Other liabilities	(6)		24
Net cash provided by operating activities	20,736		32,185

CASH FLOWS FROM INVESTING ACTIVITIES
Construction in progress and real estate additions	(2,060)		(1,158)
Proceeds from maturities of U.S. Treasury bills	166,832		—




Net cash provided by (used in) investing activities	164,772		(1,158)

CASH FLOWS FROM FINANCING ACTIVITIES


Dividends paid	(23,072)		(23,060)
Debt issuance costs	(38)		—
Net cash used in financing activities	(23,110)		(23,060)


Net increase in cash and cash equivalents and restricted cash	162,398		7,967
Cash and cash equivalents and restricted cash at beginning of period	214,478		483,505
Cash and cash equivalents and restricted cash at end of period	$	376,876	$	491,472


RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents at beginning of period	$	194,933	$	463,539
Restricted cash at beginning of period	19,545		19,966
Cash and cash equivalents and restricted cash at beginning of period	$	214,478	$	483,505


Cash and cash equivalents at end of period	$	356,507	$	472,484
Restricted cash at end of period	20,369		18,988
Cash and cash equivalents and restricted cash at end of period	$	376,876	$	491,472

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for interest, net of amounts capitalized in 2022	$	11,476	$	3,728


NON-CASH TRANSACTIONS
Liability for real estate additions, including $3 for development fees due to Vornado in 2022	$	1,481	$	1,232
Write-off of fully depreciated assets	4,044		—
Reclassification of asset held for sale	13,794		—

See notes to consolidated financial statements (unaudited).

ALEXANDER’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.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 six properties in New York City.

2.Basis of Presentation

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, 2022, 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 months ended March 31, 2023 are not necessarily indicative of the operating results for the full year.

We operate in one reportable segment.

3.Recently Issued Accounting Literature

In March 2020, the Financial Accounting Standards Board (“FASB”) issued an update (“ASU 2020-04”) establishing Accounting Standards Codification (“ASC”) Topic 848 (“ASC 848”), Reference Rate Reform. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 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. In December 2022 the FASB issued accounting standard update 2022-06 that defers the sunset of ASC 848 from December 31, 2022 to December 31, 2024. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

ALEXANDER’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

4.Revenue Recognition

The following is a summary of revenue sources for the three months ended March 31, 2023 and 2022.


	For the Three Months Ended March 31,
(Amounts in thousands)	2023		2022
Lease revenues	$	51,036	$	46,808
Parking revenue	1,096		1,228
Tenant services	809		1,179
Rental revenues	$	52,941	$	49,215

The components of lease revenues for the three months ended March 31, 2023 and 2022 are as follows:


	For the Three Months Ended March 31,
(Amounts in thousands)	2023		2022
Fixed lease revenues	$	34,724	$	32,203
Variable lease revenues	16,312		14,605
Lease revenues	$	51,036	$	46,808

Bloomberg L.P. (“Bloomberg”) accounted for revenue of $29,516,000 and $27,518,000 for the three months ended March 31, 2023 and 2022, respectively, representing approximately 56% of our rental revenues in each period. No other tenant accounted for more than 10% of our rental revenues. If we were to lose Bloomberg as a tenant, or if Bloomberg were to be unable to fulfill its obligations under its lease, it would adversely affect our results of operations and financial condition. In order to assist us in our continuing assessment of Bloomberg’s creditworthiness, we receive certain confidential financial information and metrics from Bloomberg. In addition, we access and evaluate financial information regarding Bloomberg from other private sources, as well as publicly available data.

5.Asset Held For Sale

On March 8, 2023, we entered into an agreement to sell the Rego Park III land parcel in Queens, New York, for $71,060,000 inclusive of consideration for Brownfield tax benefits and reimbursement of costs for plans, specifications and improvements to date. The sale, which is subject to customary closing conditions, is expected to be completed in the second quarter of 2023. The financial statement gain will be approximately $54,000,000.

As of March 31, 2023, the $13,794,000 carrying value of the property was classified as "Asset held for sale" on our consolidated balance sheets.

ALEXANDER’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

6.Related Party Transactions

Vornado

As of March 31, 2023, Vornado owned 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) $2,800,000, (ii) 2% of gross revenue from the Rego Park II shopping center, (iii) $0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue, and (iv) $354,000, escalating at 3% per annum, for managing the common area of 731 Lexington Avenue. Vornado is also entitled to a development fee equal to 6% of development costs, as defined.

Leasing and Other Agreements

Vornado also provides us with leasing services for a fee of 3% of rent for the first ten years of a lease term, 2% of rent for the eleventh through the twentieth year of a lease term, and 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 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 3% of gross proceeds, as defined, for asset sales less than $50,000,000 and 1% of gross proceeds, as defined, for asset sales of $50,000,000 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.

The following is a summary of fees incurred to Vornado under the various agreements discussed above.


	For the Three Months Ended March 31,
(Amounts in thousands)	2023		2022
Company management fees	$	700	$	700
Development fees	—		3
Leasing fees	41		1,318
Property management, cleaning, engineering and security fees	1,409		1,269
	$	2,150	$	3,290

As of March 31, 2023, the amounts due to Vornado were $675,000 for management, property management, cleaning, engineering and security fees. As of December 31, 2022, the amounts due to Vornado were $742,000 for management, property management, cleaning, engineering and security fees and $59,000 for leasing fees.

ALEXANDER’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

7.Mortgages Payable

The following is a summary of our outstanding mortgages payable as of March 31, 2023 and December 31, 2022. We may refinance our maturing debt as it comes due or choose to pay it down.


		Interest Rate at March 31, 2023	Balance at
(Amounts in thousands)	Maturity		March 31, 2023		December 31, 2022
First mortgages secured by:
731 Lexington Avenue, office condominium (1)(2)	Jun. 11, 2024	5.58%	$	500,000	$	500,000
731 Lexington Avenue, retail condominium (1)(3)	Aug. 05, 2025	1.76%	300,000		300,000
Rego Park II shopping center (1)(4)	Dec. 12, 2025	5.60%	202,544		202,544
The Alexander apartment tower	Nov. 01, 2027	2.63%	94,000		94,000
Total			1,096,544		1,096,544
Deferred debt issuance costs, net of accumulated amortization of $16,458 and $16,071, respectively			(5,106)		(5,493)
			$	1,091,438	$	1,091,051

(1)Interest rate listed represents the rate in effect as of March 31, 2023 based on LIBOR or SOFR as of contractual reset date plus contractual spread, adjusted for hedging instruments as applicable.

(2)Interest at LIBOR plus 0.90% (LIBOR capped at a rate of 6.00% through June 2023). Maturity represents the extended maturity based on our one-year as-of right extension option. The interest rate of the loan will be equal to the Prime rate (8.00% as of March 31, 2023) during the one-year extension period beginning June 2023.

(3)Interest at SOFR plus 1.51% which was swapped to a fixed rate of 1.76% through May 2025.

(4)Interest at SOFR plus 1.45% (SOFR is capped at a rate of 4.15% through November 2024).

8.Fair Value Measurements

ASC 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

Financial assets measured at fair value on our consolidated balance sheet as of March 31, 2023 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 March 31, 2023.


	As of March 31, 2023
	Total		Level 1		Level 2		Level 3
(Amounts in thousands)
Investments in U.S. Treasury bills(1)	$	99,780	$	99,780	$	—	$	—
Interest rate derivatives (included in other assets)	24,657		—		24,657		—
	$	124,437	$	99,780	$	24,657	$	—

(1)As of March 31, 2023, our investments in U.S. Treasury bills have an aggregate accreted value of $99,881 prior to being marked to fair value and have remaining maturities of less than one year. During the three months ended March 31, 2023, we realized proceeds of $170,000 from maturing U.S. Treasury bills.

ALEXANDER’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

8.Fair Value Measurements - continued

Financial assets measured at fair value on our consolidated balance sheet as of December 31, 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 December 31, 2022.


		As of December 31, 2022
(Amounts in thousands)		Total		Level 1		Level 2		Level 3
	Investments in U.S. Treasury bills(1)	$	266,963	$	266,963	$	—	$	—
	Interest rate derivatives (included in other assets)	29,351		—		29,351		—
		$	296,314	$	266,963	$	29,351	$	—

(1)During the year ended December 31, 2022, we purchased $364,238 in U.S. Treasury bills with an aggregate par value of $370,000 and realized proceeds of $100,000 from maturing U.S. Treasury bills. As of December 31, 2022 our investments in U.S. Treasury bills had an aggregate accreted value of $267,809 prior to being marked to fair value and had remaining maturities of less than one year.

Interest Rate Derivatives

We recognize the fair value of all interest rate derivatives in “other assets” or “other liabilities” on our consolidated balance sheets and since all of our interest rate derivatives have been designated as cash flow hedges, changes in the fair value are recognized in other comprehensive income. The table below summarizes our interest rate derivatives, all of which hedge the interest rate risk attributable to the variable rate debt noted as of March 31, 2023 and December 31, 2022, respectively.


		Fair Value as of				As of March 31, 2023
(Amounts in thousands)		March 31, 2023		December 31, 2022		Notional Amount		Swapped Rate	Expiration Date
Interest rate swap related to:
	731 Lexington Avenue mortgage loan, retail condominium	$	22,453	$	26,718	$	300,000	1.76%	05/25
Interest rate caps related to:
	Rego Park II shopping center mortgage loan	2,196		2,622		202,544		(1)	11/24
	731 Lexington Avenue mortgage loan, office condominium	8		11		500,000		(2)	06/23
Included in other assets		$	24,657	$	29,351

(1)SOFR cap strike rate of 4.15%

(2)LIBOR cap strike rate of 6.00%

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. The table below summarizes the carrying amount and fair value of these financial instruments as of March 31, 2023 and December 31, 2022.


	As of March 31, 2023				As of December 31, 2022
(Amounts in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Assets:
Cash equivalents	$	208,596	$	208,596	$	47,852	$	47,852
Liabilities:
Mortgages payable (excluding deferred debt issuance costs, net)	$	1,096,544	$	1,071,540	$	1,096,544	$	1,061,221

ALEXANDER’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9.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 $298,000 deductible and 20% of the balance of a covered loss, and the Federal government is responsible for the remaining 80% of a covered loss. We are ultimately responsible for any loss incurred by FNSIC.

We continue to monitor the state of the insurance market and the scope and costs of coverage for acts of terrorism or other events. However, we cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for uninsured losses and for deductibles and losses in excess of our insurance coverage, which could be material.

The principal amounts of our mortgage loans are non-recourse to us and the loans contain customary covenants requiring us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties.

Letters of Credit

Approximately $900,000 of standby letters of credit were issued and outstanding as of March 31, 2023.

Other

There are various legal actions brought against us from time-to-time in the ordinary course of business. In our opinion, the outcome of such pending matters in the aggregate will not have a material effect on our financial position, results of operations or cash flows.

10.Earnings Per Share

The following table sets forth the computation of basic and diluted income per share, including a reconciliation of net income and the number of shares used in computing basic and diluted income per share. Basic income per share is determined using the weighted average shares of common stock (including deferred stock units) outstanding during the period. Diluted income per share is determined using the weighted average shares of common stock (including deferred stock units) outstanding during the period, and assumes all potentially dilutive securities were converted into common shares at the earliest date possible. There were no potentially dilutive securities outstanding during the three months ended March 31, 2023 and 2022.


	For the Three Months Ended March 31,
(Amounts in thousands, except share and per share amounts)	2023		2022
Net income	$	11,226	$	14,532

Weighted average shares outstanding – basic and diluted	5,127,086		5,124,478

Net income per common share – basic and diluted	$	2.19	$	2.84

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 March 31, 2023, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2023 and 2022, 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, 2022, 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 13, 2023, 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, 2022, 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.

/s/ DELOITTE & TOUCHE LLP

New York, New York

May 1, 2023

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 represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition, results of operations and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine these items are beyond our ability to control or predict. For a further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Currently, some of these factors are the increase in interest rates and inflation and the continuing effect of the COVID-19 pandemic on our business, financial condition, results of operations, cash flows, operating performance and the effect that these factors have had and may continue to have on our tenants, the global, national, regional and local economies and financial markets and the real estate market in general.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly, any revisions to our forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Management’s Discussion and Analysis of Financial Condition and Results of Operations include a discussion of our consolidated financial statements for the three months ended March 31, 2023 and 2022. 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 months ended March 31, 2023 are not necessarily indicative of the operating results for the full year.

Critical Accounting Estimates and Significant Accounting Policies

A summary of the critical accounting estimates used in the preparation of our consolidated financial statements is included in our Annual Report on Form 10-K for the year ended December 31, 2022 in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a summary of our significant accounting policies is included in “Note 2 – Summary of Significant Accounting Policies” to the consolidated financial statements included therein. For the three months ended March 31, 2023, there were no material changes to these policies.

Overview

We compete with a large number of property owners and developers. Our success depends upon, among other factors, trends of the global, national and local economies, the financial condition and operating results of current and prospective tenants and customers, the availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation, population and employment trends, zoning laws, and our ability to lease, sublease or sell our properties, at profitable levels. Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due.

While substantially all the limitations and restrictions imposed on our retail tenants during the onset of the COVID-19 pandemic have been lifted, economic conditions, including heightened inflation and interest rates, and other factors continue to adversely affect the financial health of our retail tenants.

Quarter Ended March 31, 2023 Financial Results Summary

Net income for the quarter ended March 31, 2023 was $11,226,000, or $2.19 per diluted share, compared to $14,532,000 or $2.84 per diluted share in the prior year’s quarter.

Funds from operations (“FFO”) (non-GAAP) for the quarter ended March 31, 2023 was $18,633,000, or $3.63 per diluted share, compared to $21,785,000 or $4.25 per diluted share in the prior year’s quarter.

Square Footage, Occupancy and Leasing Activity

Our portfolio was comprised of six properties aggregating 2,454,000 square feet. As of March 31, 2023, the commercial occupancy rate was 86.9% and the residential occupancy rate was 97.4%.

Significant Tenant

Asset Held For Sale

As of March 31, 2023, the $13,794,000 carrying value of the property was classified as “Asset held for sale” on our consolidated balance sheets.

Results of Operations – Three Months Ended March 31, 2023, compared to March 31, 2022

Rental Revenues

Rental revenues were $52,941,000 for the three months ended March 31, 2023, compared to $49,215,000 for the prior year’s three months, an increase of $3,726,000. This was primarily due to $1,744,000 of higher revenue due to leasing activity and $1,535,000 of higher real estate tax reimbursements due to higher real estate tax expense.

Operating Expenses

Operating expenses were $24,944,000 for the three months ended March 31, 2023, compared to $21,542,000 for the prior year’s three months, an increase of $3,402,000. This was primarily due to higher real estate tax expense.

Depreciation and Amortization

Depreciation and amortization was $7,478,000 for the three months ended March 31, 2023, compared to $7,351,000 for the prior year’s three months, an increase of $127,000.

General and Administrative Expenses

General and administrative expenses were $1,359,000 for the three months ended March 31, 2023, compared to $1,469,000 for the prior year’s three months, a decrease of $110,000. This was primarily due to lower professional fees.

Interest and Other Income

Interest and other income was $4,319,000 for the three months ended March 31, 2023, compared to $94,000 for the prior year’s three months, an increase of $4,225,000. This was primarily due to $2,153,000 of higher interest income primarily due to an increase in average interest rates and $2,072,000 of higher interest income from our investments in U.S. Treasury bills.

Interest and Debt Expense

Interest and debt expense was $12,253,000 for the three months ended March 31, 2023, compared to $4,415,000 for the prior year’s three months, an increase of $7,838,000. This was primarily due to increases in LIBOR and SOFR rates.

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 March 31, 2023, we had $476,656,000 of liquidity comprised of $376,876,000 of cash and cash equivalents and restricted cash and $99,780,000 of investments in U.S. Treasury bills. The ongoing challenges posed by the increase in interest rates and inflation and the continuing effect of the COVID-19 pandemic could adversely affect our cash flow from continuing operations but we anticipate that cash flow from continuing operations over the next twelve months, together with existing cash balances, will be adequate to fund our business operations, cash dividends to stockholders, debt service and capital expenditures. We may refinance our maturing debt as it comes due or choose to pay it down. However, there can be no assurance that additional financing or capital will be available to refinance our debt, or that the terms will be acceptable or advantageous to us.

For the Three Months Ended March 31, 2023

Cash and cash equivalents and restricted cash were $376,876,000 as of March 31, 2023, compared to $214,478,000 as of December 31, 2022, an increase of $162,398,000. This increase resulted from (i) $164,772,000 of net cash provided by investing activities and (ii) $20,736,000 of net cash provided by operating activities, partially offset by (iii) $23,110,000 of net cash used in financing activities.

Net cash provided by investing activities of $164,772,000 was comprised of $166,832,000 of proceeds from maturities of U.S. Treasury bills, partially offset by construction in progress and real estate additions of $2,060,000.

Net cash provided by operating activities of $20,736,000 was comprised of (i) net income of $11,226,000, (ii) adjustments for non-cash items of $11,707,000, partially offset by (iii) the net change in operating assets and liabilities of $2,197,000. The adjustments for non-cash items were comprised of (i) depreciation and amortization (including amortization of debt issuance costs) of $7,899,000, (ii) straight-lining of rents of $2,067,000 and (iii) other non-cash adjustments of $1,741,000.

Net cash used in financing activities of $23,110,000 was comprised of dividends paid of $23,072,000 and debt issuance costs of $38,000.

For the Three Months Ended March 31, 2022

Cash and cash equivalents and restricted cash were $491,472,000 as of March 31, 2022, compared to $483,505,000 as of December 31, 2021, an increase of $7,967,000. This increase resulted from (i) $32,185,000 of net cash provided by operating activities, partially offset by (ii) $23,060,000 of net cash used in financing activities and (iii) $1,158,000 of net cash used in investing activities.

Net cash provided by operating activities of $32,185,000 was comprised of (i) net income of $14,532,000, (ii) adjustments for non-cash items of $9,901,000 and (iii) the net change in operating assets and liabilities of $7,752,000. The adjustments for non-cash items were comprised of depreciation and amortization (including amortization of debt issuance costs) of $7,762,000 and straight-lining of rents of $2,139,000.

Net cash used in financing activities was comprised of dividends paid of $23,060,000.

Net cash used in investing activities was comprised of construction in progress and real estate additions of $1,158,000.

Liquidity and Capital Resources - continued

Commitments and Contingencies

Insurance

Letters of Credit

Approximately $900,000 of standby letters of credit were issued and outstanding as of March 31, 2023.

Other

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 quarters ended March 31, 2023 and 2022

FFO (non-GAAP) for the quarter ended March 31, 2023 was $18,633,000, or $3.63 per diluted share, compared to $21,785,000, or $4.25 per diluted share in the prior year’s quarter.

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


	For the Quarter Ended March 31,

(Amounts in thousands, except share and per share amounts)	2023		2022
Net income	$	11,226	$	14,532
Depreciation and amortization of real property	7,407		7,253
FFO (non-GAAP)	$	18,633	$	21,785

FFO per diluted share (non-GAAP)	$	3.63	$	4.25

Weighted average shares used in computing FFO per diluted share	5,127,086		5,124,478

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.


	2023					2022
(Amounts in thousands, except per share amounts)	March 31, Balance		Weighted Average Interest Rate	Effect of 1% Change in Base Rates		December 31, Balance		Weighted Average Interest Rate
Variable Rate	$	702,544	5.59%	$	7,025	$	702,544	5.33%
Fixed Rate	394,000		1.97%	—		394,000		1.97%
	$	1,096,544	4.29%	$	7,025	$	1,096,544	4.12%

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 6.00% through June 2023. The interest rate of the loan will be equal to the Prime rate (8.00% as of March 31, 2023) during the one-year extension period beginning June 2023.

We have an interest rate cap relating to the mortgage loan on Rego Park II shopping center with a notional amount of $202,544,000 that caps SOFR at a rate of 4.15% through November 2024.

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 SOFR plus 1.51% for a fixed rate of 1.76% 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 March 31, 2023 and December 31, 2022, the estimated fair value of our mortgages payable was $1,071,540,000 and $1,061,221,000, 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.

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, 2022.

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.

EXHIBIT INDEX


Exhibit No.
15.1	-	Letter regarding unaudited interim financial information

31.1	-	Rule 13a-14 (a) Certification of the Chief Executive Officer

31.2	-	Rule 13a-14 (a) Certification of the Chief Financial Officer

32.1	-	Section 1350 Certification of the Chief Executive Officer

32.2	-	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 March 31, 2023 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 March 31, 2023 formatted as iXBRL and contained in Exhibit 101

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)

Date: May 1, 2023	By:	/s/ Gary Hansen
		Gary Hansen
		Chief Financial Officer (duly authorized officer and principal financial and accounting officer)

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