Alexander’s(ALX) - 2024 Q2 - Quarterly Report

PART I. Financial Information This section provides a comprehensive overview of the company's financial performance and position for the reporting period Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2024, and 2023, including balance sheets, income statements, and cash flows, along with explanatory notes Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Real estate, net | $640.6 | $650.7 | | Cash and cash equivalents | $410.9 | $531.9 | | Total Assets | $1,480.8 | $1,403.7 | | Mortgages payable, net | $1,082.0 | $1,092.6 | | Total Liabilities | $1,268.2 | $1,166.0 | | Total Equity | $212.5 | $237.7 | Consolidated Statements of Income Highlights (in millions, except per share data) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Rental Revenues | $53.4 | $53.7 | $114.8 | $106.6 | | Net Gain on Sale of Real Estate | $0 | $54.0 | $0 | $54.0 | | Net Income | $8.4 | $64.1 | $24.5 | $75.4 | | Net Income per Share (diluted) | $1.63 | $12.51 | $4.77 | $14.70 | - For the six months ended June 30, 2024, net cash provided by operating activities was $28.3 million, a significant decrease from $65.9 million in the prior-year period, with $46.2 million paid in dividends and a $10.0 million debt repayment[21] - On May 3, 2024, the company extended its lease with its largest tenant, Bloomberg L.P., for approximately 947,000 square feet through February 2040, resulting in a $32 million leasing commission payment and a $113.6 million lease incentive liability[33] - On June 11, 2024, the company extended its mortgage on the 731 Lexington Avenue office condominium for four months to October 11, 2024, paying down the principal by $10 million to $490 million at a Prime Rate of 8.50% as of June 30, 2024[44] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance, highlighting that the year-over-year decline in net income was driven by a one-time gain on a real estate sale in 2023, while Funds from Operations (FFO) for the six-month period increased Overview This subsection provides a high-level summary of the company's business as a New York City-focused REIT managed by Vornado, presenting key financial results for Q2 and the first half of 2024, and highlighting significant operational activities Financial Results Summary (in millions, except per share data) | Period | Net Income | Net Income/Share | FFO (non-GAAP) | FFO/Share (non-GAAP) | | :--- | :--- | :--- | :--- | :--- | | Q2 2024 | $8.4 | $1.63 | $17.0 | $3.31 | | Q2 2023 | $64.1 | $12.51 | $18.2 | $3.55 | | YTD 2024 | $24.5 | $4.77 | $42.5 | $8.29 | | YTD 2023 | $75.4 | $14.70 | $36.8 | $7.18 | - The significant decrease in net income for both the three and six-month periods of 2024 compared to 2023 is primarily due to a $54.0 million gain from the sale of the Rego Park III land parcel in 2023[80][81][82] - As of June 30, 2024, the company's portfolio of five properties, totaling 2,456,000 square feet, had a commercial occupancy rate of 92.1% and a residential occupancy rate of 98.7%[83] - Key tenant Bloomberg L.P. accounted for approximately 53% of rental revenues for the first six months of 2024 and extended its lease for 947,000 square feet to February 2040[84][85] Results of Operations This section provides a detailed comparison of operating results for the three and six-month periods ended June 30, 2024, and 2023, highlighting changes in rental revenues and interest expenses - For Q2 2024 vs Q2 2023, rental revenues decreased slightly by $0.3 million, while interest and debt expense increased by $3.0 million, mainly from higher interest rate cap premium amortization and increased rates[88][93] - For YTD 2024 vs YTD 2023, rental revenues grew by $8.2 million, largely due to $6.6 million from IKEA's lease modification and $1.2 million in higher straight-line rent from Bloomberg's lease extension[97] - YTD interest and debt expense rose by $7.0 million, primarily due to $5.1 million of higher interest rate cap premium amortization and a $1.7 million increase from higher interest rates[102] Liquidity and Capital Resources As of June 30, 2024, the company had $524.4 million in liquidity, including cash and restricted cash, with management believing current liquidity is adequate for the next twelve months - Total liquidity as of June 30, 2024, was $524.4 million, comprised of cash, cash equivalents, and restricted cash[106] - For the first six months of 2024, cash decreased by $28.6 million, driven by $46.2 million in dividend payments and a $10.0 million debt repayment, partially offset by $28.3 million in net cash from operations[107] Funds from Operations (FFO) (non-GAAP) This section reconciles GAAP net income to the non-GAAP measure of Funds from Operations (FFO), showing FFO for Q2 2024 was $17.0 million, a slight decrease, while YTD FFO increased to $42.5 million FFO Reconciliation (in millions, except per share data) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $8.4 | $64.1 | $24.5 | $75.4 | | Depreciation & Amortization | $8.6 | $8.0 | $18.1 | $15.4 | | Net gain on sale of real estate | — | ($54.0) | — | ($54.0) | | FFO (non-GAAP) | $17.0 | $18.2 | $42.5 | $36.8 | | FFO per diluted share | $3.31 | $3.55 | $8.29 | $7.18 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure stems from interest rate fluctuations on its variable-rate debt, which constituted $692.5 million of its total $1.09 billion debt as of June 30, 2024 - As of June 30, 2024, $692.5 million of the company's debt is variable-rate, where a 1% change in rates would affect annual interest expense by $6.9 million, or $1.35 per diluted share[121] - The company employs an interest rate cap for its Rego Park II mortgage and an interest rate swap for its 731 Lexington Avenue retail condominium mortgage to manage interest rate volatility[121] Controls and Procedures Management, with the participation of the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective as of the end of the quarter[123] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[123] PART II. Other Information This section covers various other disclosures, including legal proceedings, risk factors, and exhibits, providing additional context to the company's operations and governance Legal Proceedings The company is involved in various legal actions that arise in the ordinary course of business, which management believes will not have a material effect on the company's financial condition, results of operations, or cash flows - Ongoing legal actions are not expected to have a material impact on the company's financial position or results[125] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to the risk factors disclosed in the 2023 Form 10-K have occurred[125] Other Items (Unregistered Sales, Defaults, Mine Safety, Other Info) This section confirms there were no unregistered sales of equity securities, no defaults upon senior securities, no applicable mine safety disclosures, and no other information to report under Item 5 for the period - The company reports none for Unregistered Sales of Equity Securities and Use of Proceeds, Defaults Upon Senior Securities, and Other Information, and Mine Safety Disclosures are not applicable[125] Exhibits This section lists the exhibits filed with the Form 10-Q, including the ninth amendment to the lease with Bloomberg L.P., a loan extension agreement for the 731 Lexington Avenue property, and required officer certifications - Key exhibits filed include the Ninth Amendment of Lease with Bloomberg L.P. and the Loan Extension and Modification Agreement for the 731 Office One LLC mortgage[127] - Standard certifications from the CEO and CFO under Rule 13a-14(a) and Section 1350 are also included as exhibits[129]