Business Context and Reporting Period
Company: Alexander's, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 1999
Business Overview: Alexander's, Inc. is a real estate investment trust (REIT) managed by Vornado Realty Trust. The company owns and operates retail properties, including the Kings Plaza Mall, and is actively engaged in the redevelopment of non-operating properties (Lexington Avenue, Paramus, and Rego Park II). As of September 30, 1999, Vornado Realty Trust owned 29.3% of the company's common stock.
Key Financial Metrics
| Metric (in thousands) | Three Months Ended Sep 30, 1999 |
Nine Months Ended Sep 30, 1999 |
Nine Months Ended Sep 30, 1998 |
|---|---|---|---|
| Total Revenues | $15,947 | $48,607 | $33,681 |
| Net Income (Loss) | $1,635 | $5,446 | $(9,904) |
| Operating Income | $5,863 | $17,172 | $15,701 |
| Funds from Operations (FFO) | $1,406 | $8,231 | $4,108 |
| Net Cash from Operating Activities | N/A | $7,258 | $(2,904) |
| Total Debt | $273,648 (as of Sep 30, 1999) Includes $45,000 due to Vornado |
||
| Cash and Cash Equivalents | |||
| Stockholders' Equity | $12,420 (as of Sep 30, 1999) |
Material Changes vs. Prior Period
- Profitability Turnaround: The company reported a net income of $1.6 million for the quarter and $5.4 million for the nine months ended September 30, 1999. This contrasts sharply with a net loss of $11.9 million for the quarter and $9.9 million for the nine months in 1998. The 1998 losses were significantly impacted by a $15.1 million write-off related to the razing of the Lexington Avenue building.
- Revenue Growth: Total revenues for the nine months increased by $14.9 million (44%) compared to the prior year. This was driven primarily by the full consolidation of the Kings Plaza Mall (acquired 50% interest in June 1998) and increased expense reimbursements.
- Operating Expenses: Operating expenses for the nine months rose by $12.6 million, primarily due to the consolidation of Kings Plaza Mall operations and a $3.0 million write-off of straight-lined rent assets following Caldor's rejection of its Flushing lease.
- Cash Flow: Net cash provided by operating activities improved from a use of $2.9 million in the prior year to a provision of $7.3 million in the current period.
Outlook, Risks, and Management Commentary
- Liquidity and Capital Resources: Current operating properties do not generate sufficient cash flow to cover all expenses. The company relies on redevelopment projects (Lexington Avenue, Paramus, Rego Park II) to generate future cash flow. Capital expenditure requirements are estimated at $100 million for Paramus and over $300 million for Lexington Avenue.
- Recent Financing: On October 20, 1999 (subsequent to the period end), the company borrowed an additional $50 million from Vornado Realty Trust at 14.18% interest, maturing March 15, 2000. Proceeds are intended for development costs.
- Environmental Contingency: The Kings Plaza Mall site has soil and groundwater contamination. The company has accrued $2.0 million for remediation but notes that costs could increase if the NYDEC requires a more extensive approach.
- Tenant Risk: The loss of Caldor as a tenant at the Flushing property resulted in a $3.0 million asset write-off and a loss of $2.96 million in annual base rental.
- Market Risk: The company has $126.6 million in variable-rate debt. A 1% increase in interest rates would decrease annual net income by approximately $1.3 million.
Investor Verification Checklist
- Debt Maturity: Verify the repayment plan for the $45 million Vornado loan and the new $50 million loan, both maturing March 15, 2000, given the high interest rate (14.18%).
- Development Progress: Monitor the status of the Lexington Avenue and Paramus redevelopment projects, as future liquidity depends on their completion and leasing.
- Environmental Costs: Track updates on the Kings Plaza Mall environmental remediation to assess potential for additional accruals beyond the current $2.0 million.
- Leasing Activity: Review leasing progress at the Flushing property to replace the lost Caldor revenue.
- REIT Status: Confirm the company continues to meet requirements to qualify as a REIT, as failure to do so would impact tax status.