Alexander’s, Inc. 10-Q Summary — Quarter Ended March 31, 2022
Business Context and Reporting Period
Alexander’s, Inc. is a New York metropolitan area REIT engaged in leasing, managing, developing and redeveloping six properties. Vornado Realty Trust manages the company and provides leasing and development services; Vornado owned 32.4% of outstanding common stock as of March 31, 2022. The filing covers the three months ended March 31, 2022. Financial statements are unaudited and were reviewed by Deloitte & Touche LLP without reported material modifications.
- Portfolio: 2.454 million square feet, including 2.218 million square feet in service and 236,000 square feet out of service for redevelopment.
- Occupancy: 96% of in-service nonresidential space and 99% of in-service residential space.
Key Financial Metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Rental revenues | $49.215 million | $56.153 million | Down $6.938 million, approximately 12.4% |
| Net income | $14.532 million | $17.882 million | Down approximately 18.7% |
| Net income per diluted share | $2.84 | $3.49 | Down approximately 18.6% |
| FFO | $21.785 million | $25.781 million | Down approximately 15.5% |
| FFO per diluted share | $4.25 | $5.03 | Down approximately 15.5% |
| Net cash from operating activities | $32.185 million | $53.966 million | Down approximately 40.4% |
| Cash and restricted cash, period-end | $491.472 million | $480.516 million | Up $10.956 million year over year |
- Net margin was approximately 29.5%, compared with 31.9% in the prior-year quarter.
- Dividends paid were $23.060 million, or $4.50 per common share.
- Total liabilities were $1.153 billion and total equity was $255.788 million at March 31, 2022.
- Mortgages payable, net of deferred debt issuance costs, were $1.090 billion. Gross mortgage debt was $1.097 billion, with a reported fair value of $1.060 billion.
- Debt consisted of $702.544 million of variable-rate debt and $394.000 million of fixed-rate debt. The reported weighted-average interest rate was 1.62%.
- Cash flow included $1.158 million of real estate additions and $23.060 million of dividend payments. No significant debt refinancing or asset sale occurred during the quarter.
Material Changes Versus the Prior Comparable Period
- Revenue declined primarily because Q1 2021 included a $2.750 million retail lease termination fee, the October 2021 sale of the Paramus property reduced revenue by $1.761 million, and retail vacancies at 731 Lexington Avenue reduced revenue by $1.596 million.
- Operating expenses decreased $2.258 million to $21.542 million, primarily from lower recoverable real estate taxes and common-area maintenance costs.
- Depreciation and amortization decreased $1.191 million because Q1 2021 included accelerated depreciation related to retail tenant lease expirations at 731 Lexington Avenue.
- Interest and debt expense decreased $725,000 to $4.415 million, primarily following the Paramus property sale and related debt payoff.
- Q1 2021 included a $582,000 gain from marketable securities; no such gain was recorded in Q1 2022 following the December 2021 sale of the company’s Macerich shares.
- Comprehensive income increased to $26.259 million from $23.080 million due to an $11.727 million increase in the fair value of interest-rate derivatives, compared with $5.198 million in Q1 2021.
- Vornado-related fees increased to $3.290 million from $2.576 million, primarily due to higher leasing fees.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide formal earnings or revenue guidance. Management expects cash flows from continuing operations and existing cash balances to fund operations, dividends, debt amortization and capital expenditures over the next twelve months, but notes that refinancing may be required and financing may not be available on acceptable terms.
- Bloomberg L.P. generated $27.518 million, or approximately 56% of total revenue. The company identifies Bloomberg’s potential departure or inability to meet lease obligations as a material concentration risk.
- Mortgage maturities are scheduled for June 2024, August 2025, December 2025 and November 2027. The company may refinance or repay maturing debt.
- COVID-19 continues to affect tenants, retail operations, cash flows, economic conditions and real estate markets. Management states that future effects could be material.
- In January 2022, a Flushing property subtenant exercised a 10-year extension through January 2037. The company recorded approximately $17 million of incremental right-of-use assets and lease liabilities.
- Approximately $900,000 of standby letters of credit were outstanding at quarter-end.
- Insurance exclusions, deductibles, terrorism-related exposures and the availability and cost of future coverage could create material uninsured losses or refinancing constraints.
- The company has interest-rate exposure; management estimates that a 1% increase in base rates would reduce annual diluted earnings by approximately $1.37 per share, based on the disclosed debt profile. A $500 million mortgage has a 3.0% LIBOR cap, and a $300 million mortgage is hedged through an interest-rate swap.
- Ordinary-course legal proceedings are not expected by management to have a material effect. No material changes to previously disclosed risk factors were reported.
Investor Verification Checklist
- Verify Bloomberg’s lease terms, credit metrics, renewal prospects and concentration exposure.
- Review occupancy, vacancies and leasing activity at 731 Lexington Avenue and the redevelopment properties.
- Assess the 2024–2027 mortgage maturities, refinancing assumptions, variable-rate exposure and hedge coverage.
- Reconcile FFO to GAAP net income and consider that FFO is non-GAAP and not a measure of cash available for distribution.
- Evaluate the sustainability of the $4.50 per-share quarterly dividend relative to operating cash flow and recurring capital needs.
- Review Vornado’s management, leasing and development arrangements, related-party fees and Vornado’s 32.4% ownership position.
- Monitor COVID-19 effects, retail tenant financial health, insurance availability and uninsured loss exposure.