Alexander's, Inc. 10-Q Summary: Quarter Ended September 30, 2000
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2000, and the nine months ended on that date. Alexander's, Inc. is a real estate investment trust (REIT) managed by Vornado Realty Trust, which owns 33.1% of the Company's common stock. The Company's portfolio includes operating properties and three non-operating properties (Lexington Avenue, Paramus, and Rego Park II) currently in various stages of development.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2000 | Nine Months Ended Sep 30, 2000 |
|---|---|---|
| Total Revenues | $16,382,000 | $47,556,000 |
| Net (Loss)/Income | $(5,423,000) | $(3,763,000) |
| Net (Loss)/Income Per Share (Basic) | $(1.08) | $(0.75) |
| Operating Cash Flow | Not reported for quarter | $2,035,000 |
| Total Debt | $361,693,000 | $361,693,000 |
| Cash and Cash Equivalents | $1,006,000 | $1,006,000 |
| Stockholders' Equity | $8,735,000 | $8,735,000 |
Note: Amounts in thousands except per share data. Debt includes $110,000,000 owed to Vornado Realty Trust.
Material Changes vs. Prior Period
- Profitability: The Company reported a net loss of $5.4 million for the quarter, a significant deterioration from a net income of $1.6 million in the same period in 1999. For the nine months, the net loss was $3.8 million compared to net income of $5.4 million in 1999.
- Expenses: General and administrative expenses surged to $6.9 million for the quarter (from $0.9 million in 1999) and $9.7 million for the nine months (from $2.8 million in 1999). This increase is primarily due to a $5.9 million non-cash charge for stock appreciation rights (SARs) compensation expense.
- Interest Expense: Interest and debt expense increased to $5.8 million for the quarter and $16.5 million for the nine months, driven by higher average debt levels and increased interest rates (average rate rose to 10.22% for the quarter).
- Revenue: Property rentals decreased slightly to $10.7 million for the quarter and $31.8 million for the nine months, largely due to the prior rejection of a lease by tenant Caldor.
- Liquidity: Cash and cash equivalents dropped from $26.1 million at year-end 1999 to $1.0 million at September 30, 2000, due to heavy capital expenditures ($63.3 million) for development projects.
Outlook, Risks, and Management Commentary
- Capital Requirements: Management states that operating properties do not currently generate sufficient cash flow to cover all expenses. The Company is heavily invested in development, with $28 million contracted for the Lexington Avenue property (with $22.6 million paid) and an estimated additional $650 million required for completion. Paramus development is estimated to require $100 million.
- Financing: On August 1, 2000, the Company secured a $50 million line of credit from Vornado at 15.72% interest. Total indebtedness to Vornado stands at $110 million. The Company expects to obtain a construction loan for the Lexington Avenue property.
- Environmental Contingency: The Kings Plaza Regional Shopping Center faces environmental remediation costs regarding soil and groundwater contamination. The Company has accrued $2 million ($1.5 million in 1997 plus $0.5 million in 1999) but notes that costs could increase if the NYDEC requires a more extensive approach.
- Market Risk: The Company has $169.7 million in variable-rate debt. A 1% increase in interest rates would increase net loss by approximately $1.7 million.
Key Facts for Investor Verification
- Cash Burn Rate: Verify the sufficiency of the $1.0 million cash balance against the $650 million+ capital requirement for the Lexington Avenue development and ongoing operating losses.
- Debt Service: Confirm the ability to service $361.7 million in debt, particularly the $110 million owed to Vornado at high interest rates (15.72% on the new line of credit).
- Non-Cash Charges: Note that the reported net loss is significantly impacted by a $6.9 million non-cash stock appreciation rights charge; verify Funds From Operations (FFO) trends which showed a use of funds of $4.0 million for the nine months.
- Environmental Liability: Monitor the status of the Kings Plaza remediation plan approval by the NYDEC and potential for cost overruns beyond the $2 million accrual.
- Dependency on Vornado: Assess the risks associated with Vornado Realty Trust owning 33.1% of the stock, managing the properties, and holding the majority of the Company's debt.