Alexander's Inc.: Numerous Signs Of Distress

Core Viewpoint - Office REITs have shown modest gains in 2023, with an average return of 5.23%, significantly lower than the S&P 500's 18.55% and Nasdaq 100's 21.20% [2][3] Performance Summary - Year-to-date performance of various REIT sectors shows Cannabis at 13.33%, Healthcare at 11.68%, and Office at 5.23%, while the Equity REIT Index averages only 1.07% [3] - The WFH trend has led to a permanent decrease in demand for commercial office space, contributing to increased defaults in commercial real estate loans, particularly office-related loans [4] Company Overview - Alexanders, Inc. (ALX) is a small-cap REIT with a market cap of $1.14 billion, primarily focused on office and retail properties in New York City [4] - ALX has a portfolio of 2.455 million square feet with a 92.5% occupancy rate for office and retail spaces and 96.8% for residential properties as of March 31 [4] Financial Performance - ALX reported Q1 2024 rental revenue of $61.4 million, a 16.1% increase from Q1 2023, while net income rose by 43.8% to $16.1 million [10] - The company experienced a significant drop in cash from financing, down 99.6% year-over-year, due to unusual treasury sales in the previous year [10] Growth Metrics - ALX's FFO (Funds From Operations) has shown a declining trend over the past four years, with a CAGR of -5.03% [12] - The stock price has decreased by 41.27% over the past decade, indicating a bearish long-term trend despite short-term gains [9] Balance Sheet Metrics - ALX has a liquidity ratio of 1.20 and a debt ratio of 50%, with total debts of $1.093 billion against cash and cash equivalents of $536 million [14] - The company has a high Debt/EBITDA ratio of 10.0, indicating significant leverage [14] Dividend Metrics - ALX maintains a quarterly dividend of $4.50, with a payout ratio of 114%, which is considered unsustainable [16] - The company has not cut its dividend during the pandemic, but the current payout ratio raises concerns about future sustainability [16] Valuation Metrics - ALX is currently priced 9.6% above its estimated NAV, with a dividend score of 8.01 and a price/FFO ratio of 17.5 [17] Investor Sentiment - Analysts have mixed ratings on ALX, with one analyst maintaining a Sell rating and a price target of $145, implying a potential downside of 34.5% [19]