Alexander’s(ALX) - 2022 Q1 - Quarterly Report

PART I. Financial Information Presents Alexander's, Inc.'s unaudited consolidated financial statements and related notes for Q1 2022 and 2021 Item 1. Financial Statements Presents Alexander's, Inc.'s unaudited consolidated financial statements, including balance sheets, income statements, and cash flows, with notes and auditor's report Consolidated Balance Sheets (Unaudited) Provides a snapshot of Alexander's, Inc.'s financial position, detailing assets, liabilities, and equity as of March 31, 2022, and December 31, 2021 | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :---------------------------- | :------------------------------- | | Assets | | | | Real estate, net | $693,592 | $698,869 | | Cash and cash equivalents | $472,484 | $463,539 | | Total Assets | $1,408,767 | $1,391,965 | | Liabilities | | | | Mortgages payable, net | $1,089,990 | $1,089,613 | | Total Liabilities | $1,152,979 | $1,139,376 | | Equity | | | | Total Equity | $255,788 | $252,589 | Consolidated Statements of Income (Unaudited) Details Alexander's, Inc.'s revenues, expenses, and net income for the three months ended March 31, 2022, and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Rental revenues | $49,215 | $56,153 | | Total expenses | $(30,362) | $(33,885) | | Net income | $14,532 | $17,882 | | Net income per common share - basic and diluted | $2.84 | $3.49 | | Weighted average shares outstanding | 5,124,478 | 5,122,206 | Consolidated Statements of Comprehensive Income (Unaudited) Presents Alexander's, Inc.'s net income and other comprehensive income components, including fair value changes in derivatives, for Q1 2022 and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net income | $14,532 | $17,882 | | Change in fair value of interest rate derivatives | $11,727 | $5,198 | | Comprehensive income | $26,259 | $23,080 | Consolidated Statements of Changes in Equity (Unaudited) Outlines the changes in Alexander's, Inc.'s equity components, including net income, dividends, and other comprehensive income, for the period | Equity Component | Balance, Dec 31, 2021 (in thousands) | Net Income (in thousands) | Dividends Paid (in thousands) | Change in Fair Value of Interest Rate Derivatives (in thousands) | Balance, Mar 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------------- | :------------------------ | :---------------------------- | :--------------------------------------------------------------- | :----------------------------------- | | Common Stock Amount | $5,173 | — | — | — | $5,173 | | Additional Capital | $33,415 | — | — | — | $33,415 | | Retained Earnings | $206,875 | $14,532 | $(23,060) | — | $198,347 | | Other Comprehensive Income (Loss) | $7,494 | — | — | $11,727 | $19,221 | | Treasury Stock | $(368) | — | — | — | $(368) | | Total Equity | $252,589 | $14,532 | $(23,060) | $11,727 | $255,788 | - Dividends paid were $4.50 per common share for both periods[19] Consolidated Statements of Cash Flows (Unaudited) Summarizes Alexander's, Inc.'s cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2022, and 2021 | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash provided by operating activities | $32,185 | $53,966 | | Net cash used in investing activities | $(1,158) | $(242) | | Net cash used in financing activities | $(23,060) | $(23,085) | | Net increase in cash and cash equivalents and restricted cash | $7,967 | $30,639 | | Cash and cash equivalents and restricted cash at end of period | $491,472 | $480,516 | - Cash payments for interest were $3,728,000 in Q1 2022, down from $4,565,000 in Q1 2021[21] Notes to Consolidated Financial Statements (Unaudited) Provides detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies, revenue, and debt 1. Organization Describes Alexander's, Inc. as a Delaware REIT focused on property leasing and development in NYC, managed by Vornado Realty Trust - Alexander's, Inc. (NYSE: ALX) is a Delaware-incorporated REIT engaged in leasing, managing, developing, and redeveloping properties, primarily in the New York City metropolitan area, with Vornado Realty Trust (NYSE: VNO) managing and developing its properties[24] 2. Basis of Presentation Explains the preparation of unaudited consolidated financial statements in accordance with GAAP and SEC Form 10-Q, including estimates and assumptions - The unaudited consolidated financial statements include Alexander's and its subsidiaries, prepared in accordance with GAAP and SEC Form 10-Q instructions, with estimates and assumptions made, and results for the three months ended March 31, 2022, not necessarily indicative of the full year[24][25] - The company operates in one reportable segment[26] 3. Recently Issued Accounting Literature Discusses the company's election to apply hedge accounting expedients under ASU 2020-04 for LIBOR-indexed cash flows - The company elected to apply hedge accounting expedients related to probability and effectiveness assessments for future LIBOR-indexed cash flows under ASU 2020-04 (Reference Rate Reform) to maintain consistent derivative presentation[26] 4. Revenue Recognition Details the breakdown of rental revenues, including lease, parking, and tenant services, and highlights significant tenant concentration | Revenue Source | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Lease revenues | $46,808 | $54,411 | | Parking revenue | $1,228 | $796 | | Tenant services | $1,179 | $946 | | Total Rental revenues | $49,215 | $56,153 | | Lease Revenue Component | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Fixed lease revenues | $32,203 | $33,810 | | Variable lease revenues | $14,605 | $20,601 | | Total Lease revenues | $46,808 | $54,411 | - Bloomberg L.P. accounted for approximately 56% ($27,518,000) of total revenues in Q1 2022, down from 51% ($28,757,000) in Q1 2021, highlighting significant tenant concentration risk[32] 5. Related Party Transactions Outlines transactions and fees incurred with Vornado Realty Trust, a significant shareholder and property manager - Vornado Realty Trust, which owns 32.4% of Alexander's common stock, manages and develops the company's properties and provides leasing services[33] Fees Incurred to Vornado (in thousands) | Fees Incurred to Vornado (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Company management fees | $700 | $700 | | Development fees | $3 | $33 | | Leasing fees | $1,318 | $411 | | Property management, cleaning, engineering and security fees | $1,269 | $1,432 | | Total Fees | $3,290 | $2,576 | - Amounts due to Vornado as of March 31, 2022, totaled $1,328,000 for leasing fees, $606,000 for management/property services, and $144,000 for development fees[37] 6. Mortgages Payable Provides details on the company's mortgage loans, including maturity dates, interest rates, and outstanding balances | Property | Maturity | Interest Rate (Mar 31, 2022) | Balance Mar 31, 2022 (in thousands) | Balance Dec 31, 2021 (in thousands) | | :-------------------------------------- | :--------- | :--------------------------- | :---------------------------------- | :---------------------------------- | | 731 Lexington Avenue, office condominium | Jun. 11, 2024 | 1.30% | $500,000 | $500,000 | | 731 Lexington Avenue, retail condominium | Aug. 05, 2025 | 1.72% | $300,000 | $300,000 | | Rego Park II shopping center | Dec. 12, 2025 | 1.80% | $202,544 | $202,544 | | The Alexander apartment tower | Nov. 01, 2027 | 2.63% | $94,000 | $94,000 | | Total Mortgages Payable | | | $1,096,544 | $1,096,544 | | Less: Deferred debt issuance costs, net | | | $(6,554) | $(6,931) | | Mortgages payable, net | | | $1,089,990 | $1,089,613 | 7. Fair Value Measurements Explains the company's fair value measurement methodologies and presents fair values for financial instruments like interest rate swaps and mortgages - The company uses ASC Topic 820 for fair value measurement, prioritizing Level 1 (quoted prices in active markets) and Level 2 (observable inputs) over Level 3 (unobservable inputs)[41] Financial Instrument Fair Value (in thousands) | Financial Instrument (in thousands) | March 31, 2022 Total Fair Value | December 31, 2021 Total Fair Value | | :---------------------------------- | :------------------------------ | :--------------------------------- | | Interest rate swap | $19,253 | $7,545 | Financial Instrument Carrying Amount and Fair Value (in thousands) | Financial Instrument (in thousands) | March 31, 2022 Carrying Amount | March 31, 2022 Fair Value | December 31, 2021 Carrying Amount | December 31, 2021 Fair Value | | :---------------------------------- | :----------------------------- | :------------------------ | :-------------------------------- | :--------------------------- | | Cash equivalents | $436,616 | $436,616 | $427,601 | $427,601 | | Mortgages payable (excluding deferred debt issuance costs, net) | $1,096,544 | $1,060,157 | $1,096,544 | $1,064,122 | 8. Commitments and Contingencies Details insurance coverage, standby letters of credit, and significant lease extension options impacting future obligations - The company maintains general liability insurance ($300M per occurrence) and all-risk property/rental value insurance ($1.7B per occurrence), including terrorism coverage[47] - Fifty Ninth Street Insurance Company, LLC (FNSIC), a wholly-owned subsidiary, directly insures for NBCR terrorism acts, with FNSIC responsible for a $293,580 deductible and 20% of the balance of a covered loss[48] - Approximately $900,000 of standby letters of credit were outstanding as of March 31, 2022[51] - In January 2022, the sub-tenant at the Flushing property exercised a 10-year extension option, leading to an estimated incremental right-of-use asset and lease liability of approximately $17,000,000[52] 9. Earnings Per Share Presents the calculation of basic and diluted net income per common share for the reporting periods | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (in thousands) | $14,532 | $17,882 | | Weighted average shares outstanding – basic and diluted | 5,124,478 | 5,122,206 | | Net income per common share – basic and diluted | $2.84 | $3.49 | - There were no potentially dilutive securities outstanding during the three months ended March 31, 2022 and 2021[53] Report of Independent Registered Public Accounting Firm States Deloitte & Touche LLP's review found no material modifications needed for the interim financial information to conform with GAAP - Deloitte & Touche LLP reviewed the interim financial information and found no material modifications needed for conformity with GAAP, also confirming the fair statement of the December 31, 2021 consolidated balance sheet[57][58] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition for the three months ended March 31, 2022, compared to the prior year, discussing key financial results, operational highlights, liquidity, capital resources, and non-GAAP measures like FFO Forward-Looking Statements & COVID-19 Impact Highlights the presence of forward-looking statements and the ongoing adverse impact of the COVID-19 pandemic on the company's business and real estate market - The report contains forward-looking statements subject to risks and uncertainties, including the ongoing adverse effects of the COVID-19 pandemic on business, financial condition, and the real estate market[61][62] Critical Accounting Estimates and Significant Accounting Policies Confirms no material changes to critical accounting estimates or significant accounting policies for the quarter ended March 31, 2022 - There were no material changes to critical accounting estimates or significant accounting policies for the three months ended March 31, 2022, as previously disclosed in the Annual Report on Form 10-K for 2021[65] Overview Describes Alexander's, Inc. as a REIT with NYC metropolitan area properties, managed by Vornado, influenced by economic trends and the pandemic - Alexander's, Inc. is a REIT with six properties in the NYC metropolitan area, managed by Vornado Realty Trust, with its success influenced by economic trends, tenant financial health, capital availability, and the ability to lease/sell properties[67][68] - The business continues to be adversely affected by the COVID-19 pandemic, impacting retail tenants' financial health despite lifted restrictions[68] Quarter Ended March 31, 2022 Financial Results Summary Provides a concise summary of key financial metrics, including net income and Funds from Operations (FFO), for Q1 2022 and 2021 | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (in thousands) | $14,532 | $17,882 | | Net income per diluted share | $2.84 | $3.49 | | Funds from operations (FFO) (non-GAAP) (in thousands) | $21,785 | $25,781 | | FFO per diluted share (non-GAAP) | $4.25 | $5.03 | Square Footage, Occupancy and Leasing Activity Details the company's portfolio square footage, occupancy rates for non-residential and residential spaces, and leasing activity - As of March 31, 2022, the portfolio comprised 2,454,000 square feet, with 2,218,000 square feet in service, and in-service non-residential space was 96% occupied, while residential space was 99% occupied[70] Significant Tenant Highlights Bloomberg L.P. as a significant tenant, contributing a substantial portion of total revenues, and notes the associated concentration risk - Bloomberg L.P. generated $27,518,000 in revenue for Q1 2022, representing 56% of total revenues, down from $28,757,000 (51%) in Q1 2021, leading the company to monitor Bloomberg's creditworthiness due to this concentration[71] Results of Operations – Three Months Ended March 31, 2022, compared to March 31, 2021 Analyzes the changes in key operational financial results for the three months ended March 31, 2022, compared to the same period in 2021 Rental Revenues Explains the decrease in rental revenues, attributing it to a prior-year lease termination fee, property sale, and retail vacancies - Rental revenues decreased by $6,938,000 to $49,215,000 in Q1 2022, primarily due to a $2,750,000 lease termination fee in the prior year, $1,761,000 lower revenue from the Paramus property sale, and $1,596,000 from retail tenant vacancies at 731 Lexington Avenue[74] Operating Expenses Discusses the decrease in operating expenses, primarily due to lower expenses subject to recovery like real estate taxes - Operating expenses decreased by $2,258,000 to $21,542,000 in Q1 2022, mainly due to lower expenses subject to recovery, including real estate taxes and common area maintenance[75] Depreciation and Amortization Details the decrease in depreciation and amortization, mainly due to accelerated depreciation in the prior year - Depreciation and amortization decreased by $1,191,000 to $7,351,000 in Q1 2022, primarily due to accelerated depreciation in the prior year related to retail tenant lease expirations[76] General and Administrative Expenses Explains the decrease in general and administrative expenses, primarily driven by lower professional fees - General and administrative expenses decreased by $74,000 to $1,469,000 in Q1 2022, mainly due to lower professional fees[77] Interest and Other Income, net Discusses the decrease in net interest and other income, mainly due to lower dividend income from a prior marketable securities sale - Interest and other income, net, decreased by $78,000 to $94,000 in Q1 2022, primarily due to lower dividend income from the sale of Macerich Company common shares in December 2021[78] Interest and Debt Expense Explains the decrease in interest and debt expense, primarily due to lower interest from a property sale and related debt payoff - Interest and debt expense decreased by $725,000 to $4,415,000 in Q1 2022, mainly due to lower interest expense resulting from the sale of the Paramus property and related debt payoff in October 2021[79] Change in Fair Value of Marketable Securities Notes the absence of income from changes in fair value of marketable securities due to the sale of Macerich common shares - There was no income from change in fair value of marketable securities in Q1 2022, compared to $582,000 in Q1 2021, as the Macerich common shares were sold in December 2021[80] Liquidity and Capital Resources Discusses the company's sources and uses of cash, liquidity position, and expected funding for operations and capital expenditures - Primary cash flow source is rental revenue, dependent on occupancy and rental rates, with other liquidity sources including existing cash, financings, and asset sales[82] - As of March 31, 2022, liquidity was $491,472,000 (cash and cash equivalents + restricted cash), with anticipated cash flows and existing balances expected to fund operations, dividends, debt amortization, and capital expenditures for the next twelve months[83] Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $32,185 | $53,966 | | Net cash used in investing activities | $(1,158) | $(242) | | Net cash used in financing activities | $(23,060) | $(23,085) | | Net increase in cash and cash equivalents and restricted cash | $7,967 | $30,639 | | Cash and cash equivalents and restricted cash at end of period | $491,472 | $480,516 | Commitments and Contingencies (MD&A) Details insurance coverage, standby letters of credit, and significant lease extension options impacting future obligations - The company maintains general liability and all-risk property insurance, including terrorism coverage, with FNSIC acting as a direct insurer for NBCR acts, and mortgage loans are non-recourse and require insurance maintenance[88] - Standby letters of credit totaled approximately $900,000 as of March 31, 2022[89] - A 10-year extension option exercised by a sub-tenant at the Flushing property in January 2022 resulted in an estimated $17,000,000 incremental right-of-use asset and lease liability[89] Funds from Operations ("FFO") (non-GAAP) Defines FFO as a non-GAAP measure used to assess operating performance by excluding real estate depreciation and gains on sales - FFO is a non-GAAP measure, defined by NAREIT, used by management, investors, and analysts to compare operating performance by excluding real estate depreciation/amortization and net gains on sales[91] FFO Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net income | $14,532 | $17,882 | | Depreciation and amortization of real property | $7,253 | $8,481 | | Change in fair value of marketable securities | — | $(582) | | FFO (non-GAAP) | $21,785 | $25,781 | | FFO per diluted share (non-GAAP) | $4.25 | $5.03 | | Weighted average shares used in computing FFO per diluted share | 5,124,478 | 5,122,206 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to interest rate fluctuations and the fair value of its debt instruments, including the impact of variable-rate debt and hedging strategies Debt Exposure to Interest Rate Changes (in thousands) | Debt Type | March 31, 2022 Balance (in thousands) | Weighted Average Interest Rate (Mar 31, 2022) | Effect of 1% Change in Rates (in thousands) | | :---------- | :------------------------------------ | :-------------------------------------------- | :------------------------------------------ | | Variable Rate | $702,544 | 1.44% | $7,025 | | Fixed Rate | $394,000 | 1.94% | — | | Total | $1,096,544 | 1.62% | $7,025 | | Total effect on diluted earnings per share | | | $1.37 | - The company has an interest rate cap on a $500,000,000 mortgage loan (731 Lexington Avenue office condominium) capping LIBOR at 3.0%[96] - An interest rate swap on a $300,000,000 mortgage loan (731 Lexington Avenue retail condominium) converts LIBOR plus 1.40% to a fixed rate of 1.72%[97] Mortgages Payable Fair Value (in thousands) | Metric (in thousands) | March 31, 2022 Fair Value | December 31, 2021 Fair Value | | :-------------------- | :------------------------ | :--------------------------- | | Mortgages payable | $1,060,157 | $1,064,122 | Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of March 31, 2022. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022[99] - No material changes to internal control over financial reporting occurred during the fiscal quarter[99] PART II. Other Information Presents additional required disclosures, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company is involved in various legal actions in the ordinary course of business, but management believes their aggregate outcome will not materially affect its financial position, results of operations, or cash flows - Legal actions in the ordinary course of business are not expected to have a material effect on financial condition, results of operations, or cash flows[101] Item 1A. 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, 2021 - No material changes to risk factors since the Annual Report on Form 10-K for December 31, 2021[102] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - None to report[103] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report during the period - None to report[103] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Not applicable[103] Item 5. Other Information There is no other information to report under this item - None to report[103] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications, financial information in iXBRL format, and the exhibit index - Exhibits include certifications (Rule 13a-14(a) and Section 1350 for CEO/CFO), a letter regarding unaudited interim financial information, and financial information formatted in iXBRL[105][106][107][108] Exhibit Index Provides a detailed list of all exhibits accompanying the report, including various certifications and financial data formats - The exhibit index details specific documents filed, such as certifications (31.1, 31.2, 32.1, 32.2) and iXBRL financial information (101, 104)[105][106][107][108] Signatures Confirms the official signing of the report by the Chief Financial Officer of Alexander's, Inc - The report was signed on May 2, 2022, by Gary Hansen, Chief Financial Officer of Alexander's, Inc[111]