ALX

Business Context and Reporting Period

Alexander's, Inc. (NYSE: ALX) is a Real Estate Investment Trust (REIT) incorporated in Delaware, engaged in leasing, managing, developing, and redeveloping properties in the greater New York City metropolitan area. The company is managed by Vornado Realty Trust. This summary covers the quarterly period ended September 30, 2009, as reported in Form 10-Q.

Key Financial Metrics

(Amounts in thousands, except per share data)

Material Changes vs. Prior Period

• Profitability Surge: Net income attributable to common stockholders for the nine months ended September 30, 2009, was $117.1 million, a significant increase from $22.2 million in the same period in 2008. This improvement is largely driven by non-recurring items.
• Revenue Growth: Total revenues increased to $166.4 million for the nine months ended September 30, 2009, compared to $156.2 million in 2008. Property rentals rose primarily due to the Rego Park II anchor tenants being placed into service.
• Expense Reduction: General and administrative expenses turned negative (a benefit) for the nine-month period due to a $34.3 million reversal of previously recognized Stock Appreciation Rights (SARs) expense. In the prior year, SARs expense was $23.3 million.
• Debt Position: Total debt increased to $1.27 billion from $1.22 billion at year-end 2008, reflecting draws on the construction loan for the Rego Park II project.

Guidance, Outlook, and Unusual Items

Unusual Items and One-Time Gains

• Tax Liability Reversal: The company recognized $42.5 million of income due to the expiration of the statute of limitations on a portion of its liability for income taxes. This included a $37.3 million income tax benefit and a $5.2 million reduction in interest expense.
• SARs Reversal: A $34.3 million reversal of previously recognized SARs compensation expense occurred after executives exercised their rights in March 2009. No SARs were outstanding as of September 30, 2009.

Outlook and Projects

• Rego Park II: Construction is expected to be substantially completed by the end of 2009. The project is estimated to cost $410 million, with $344.4 million expended as of September 30, 2009. Anchor tenants include Home Depot (assigned to Costco), Century 21, and Kohl's.
• Liquidity: Management anticipates that cash flow from operations and existing cash balances will be adequate to fund operations and debt amortization for the next twelve months.
• Risks: The filing notes that the economic recession continues to negatively affect the commercial real estate industry, potentially leading to lower occupancy rates and effective rents. There is no assurance that the Rego Park II project will be completed on time or within budget.

Investor Verification Checklist

• Sustainability of Earnings: Verify the extent to which the reported net income is driven by the $42.5 million tax reversal and $34.3 million SARs reversal, as these are non-recurring items.
• Rego Park II Completion: Monitor the completion status and final cost of the Rego Park II development, as delays or cost overruns could impact liquidity.
• Debt Maturities: Review the maturity schedule of the $1.27 billion debt, specifically the $238 million construction loan maturing in December 2010 and the refinancing of the Rego Park I mortgage.
• Tenant Concentration: Note that Bloomberg L.P. accounted for approximately 36% of consolidated revenues for the nine months ended September 30, 2009.
• Restricted Cash: Investigate the $88.6 million in restricted cash, primarily related to the fully cash-collateralized mortgage at Rego Park I.