Alexander’s, Inc. 2021 Form 10-K Summary
Business context and reporting period
Alexander’s, Inc. is a New York metropolitan-area REIT engaged in leasing, managing, developing and redeveloping six properties totaling 2.454 million square feet. Vornado Realty Trust manages, leases and develops the properties and owned 32.4% of Alexander’s common stock at December 31, 2021. The filing covers the fiscal year ended December 31, 2021, including fourth-quarter activity.
- Operating portfolio occupancy at December 31, 2021 was 96% excluding residential space and 95% for residential space.
- 731 Lexington Avenue represented approximately 68% of rental revenues; Bloomberg represented approximately 55%.
- Rego Park III is a 140,000-square-foot development parcel where permits were filed in 2021 for an apartment tower.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Rental revenues | $206.1 million | $199.1 million | +$7.0 million |
| Operating expenses | $91.1 million | $88.4 million | +$2.7 million |
| Net income | $132.9 million | $41.9 million | +$91.0 million |
| Net income per diluted share | $25.94 | $8.19 | +$17.75 |
| FFO, non-GAAP | $89.8 million | $82.5 million | +$7.2 million |
| FFO per diluted share | $17.52 | $16.11 | +$1.41 |
| Net cash from operating activities | $118.5 million | $78.1 million | +$40.4 million |
| Cash, cash equivalents and restricted cash | $483.5 million | $449.9 million | +$33.6 million |
Reported net income included $72.3 million of net gains on real estate sales, including $60.8 million from the Paramus Property and $9.1 million from the Bronx Land Parcel, plus $2.3 million of discontinued-operations income. Accordingly, the substantial increase in GAAP earnings was driven primarily by asset-sale gains rather than recurring property operations.
- Rental revenue increased mainly because of prior-year receivable write-offs and higher revenue from new tenants, partly offset by retail vacancies at 731 Lexington Avenue and Rego Park II.
- Interest and debt expense declined to $19.7 million from $24.2 million, primarily because of lower LIBOR.
- Net cash used in financing activities was $160.3 million, primarily reflecting $92.2 million of dividends and $68.0 million of debt repayment related to the Paramus sale.
- Real estate, net, declined to $698.9 million from $720.9 million.
Debt, liquidity and capital structure
- Total mortgage debt was $1.097 billion, or 56% of total enterprise value; debt, net of deferred issuance costs, was $1.090 billion.
- Debt consisted of $500.0 million secured by 731 Lexington office space, $300.0 million secured by 731 Lexington retail space, $202.5 million secured by Rego Park II and $94.0 million secured by The Alexander apartment tower.
- Scheduled principal maturities are $500.0 million in 2024, $502.5 million in 2025 and $94.0 million thereafter. The filing states that the Company may refinance or repay debt as it matures.
- Management reported adequate liquidity over the next twelve months from operating cash flow and existing cash balances to fund operations, dividends, debt amortization and capital expenditures, but cautioned that refinancing availability and terms are not assured.
- The January 2022 dividend was declared at $4.50 per share, or an indicated annual rate of $18.00 per share, implying approximately $92.2 million of 2022 dividends if maintained.
- Approximately $1.003 billion of debt was indexed to LIBOR at year-end. The Company is transitioning contracts to SOFR or other alternatives as LIBOR is discontinued.
Material changes, outlook and unusual items
- Alexander’s sold the Bronx Land Parcel for $10.0 million and the Paramus Property for $75.0 million. Net proceeds after costs and debt repayment were $9.3 million and $4.6 million, respectively.
- The Company sold its Macerich shares for $9.5 million in December 2021, recognizing a $3.5 million fair-value gain and $2.3 million of previously deferred discontinued-operations income.
- Management identified the continuing COVID-19 pandemic as a material uncertainty affecting tenants, occupancy, rent collections, retail activity, office demand, property values, cash flows and access to capital.
- Work-from-home trends may reduce long-term office-space demand, while e-commerce, reduced tourism and tenant financial stress may pressure retail properties.
- Rego Park I and II had 236,000 square feet out of service for redevelopment, primarily former Sears and Century 21 space.
- The Company paid Vornado $11.3 million in 2021 for management, development, leasing, sales commissions and property-level services. Related-party arrangements and common ownership may create conflicts of interest.
- A Sears lawsuit relating to the former Rego Park I store remains pending. The Company estimates reasonably possible losses, if any, will not exceed approximately $650,000.
- Approximately $960,000 of standby letters of credit were outstanding at year-end.
- Management and Deloitte & Touche reported effective internal control over financial reporting, and Deloitte issued unqualified opinions on the financial statements and internal controls.
Most important facts for investors to verify
- Timing and terms of refinancing the $500.0 million 731 Lexington office mortgage due in 2024 and the $502.5 million of debt due in 2025.
- Bloomberg’s credit quality, lease continuity and ongoing contribution of approximately 55% of rental revenues.
- Occupancy, leasing progress and redevelopment costs for the 236,000 square feet currently out of service.
- Impact of COVID-19, hybrid work, e-commerce and New York City tourism on office and retail demand.
- Funding requirements, projected returns and permitting progress for the Rego Park III apartment development.
- Whether recurring FFO and operating cash flow support the $18.00 annualized dividend after excluding real-estate-sale gains.
- Exposure to LIBOR-to-SOFR transition, interest-rate increases, debt covenants and refinancing costs.
- Potential liabilities from the Sears litigation, insurance deductibles and uninsured property, terrorism, climate and environmental risks.