Overview of Financial Performance

Alexander’s, Inc. reported its financial results for the year ended December 31, 2024. The company’s net income for the year was $43.4 million, or $8.46 per diluted share, compared to $102.4 million, or $19.97 per diluted share, in the prior year. The decrease in net income was primarily due to a $54 million net gain on the sale of real estate that was recorded in 2023.

Funds from operations (FFO), a non-GAAP measure used to evaluate the performance of real estate companies, was $78 million, or $15.19 per diluted share, in 2024 compared to $81.1 million, or $15.80 per diluted share, in 2023. FFO excludes the effect of real estate depreciation and amortization, as well as gains or losses from property sales.

Revenue and Profit Trends

Rental revenues increased by $1.4 million, or 0.6%, to $226.4 million in 2024. This was primarily due to a $4.6 million increase from Bloomberg’s lease extension, partially offset by decreases from the expiration of leases with IKEA, Bed Bath & Beyond, and Old Navy at the Rego Park I property.

Operating expenses increased by $2 million, or 2%, to $103.2 million, mainly due to higher real estate taxes and non-reimbursable operating costs, partially offset by higher capitalized expenses. Depreciation and amortization expense increased by $1.9 million, or 5.7%, to $34.8 million, reflecting higher depreciation on capital projects.

General and administrative expenses rose by $178,000, or 2.8%, to $6.5 million, primarily due to higher professional fees. Interest and other income increased by $2.2 million, or 9.8%, to $24.4 million, driven by higher average interest rates. Interest and debt expense increased by $4.5 million, or 7.8%, to $62.8 million, reflecting higher interest rates, refinancing costs, and deferred debt issuance cost amortization.

The company recorded a $54 million net gain on the sale of real estate in 2023, which contributed significantly to the higher net income in that year.

Strengths and Weaknesses

A key strength of Alexander’s is its high-quality real estate portfolio, with a commercial occupancy rate of 99.1% and a residential occupancy rate of 94.2% as of December 31, 2024. The company’s largest tenant, Bloomberg, accounted for 55% of rental revenues in 2024 and recently extended its lease at the 731 Lexington Avenue property for an additional 11 years.

However, the company’s reliance on Bloomberg as a major tenant is also a weakness, as the loss of this tenant or its inability to fulfill its lease obligations would have a significant adverse impact on Alexander’s results. To mitigate this risk, the company closely monitors Bloomberg’s creditworthiness and financial information.

Another potential weakness is the company’s exposure to rising interest rates, which have increased its financing costs. While Alexander’s has taken steps to manage this risk, such as entering into an interest rate swap and cap, higher rates could continue to put pressure on its profitability.

Outlook and Future Prospects

Looking ahead, Alexander’s expects that cash flow from operations, along with its existing cash balances, will be sufficient to fund its business operations, dividends, debt service, and capital expenditures over the next 12 months. The company may choose to refinance its maturing debt or pay it down, but there is no assurance that additional financing will be available on favorable terms.

The company plans to spend approximately $125 million on capital expenditures in 2025, including maintenance, tenant improvements, and new development projects. These investments are intended to maintain the high quality of the company’s properties and support its long-term growth.

Overall, Alexander’s financial performance in 2024 was solid, with stable rental revenues and profitability, despite the absence of the significant one-time gain recorded in the prior year. The company’s focus on managing its key tenant relationships, controlling costs, and prudently investing in its properties should position it well to navigate the current economic environment and pursue future opportunities.