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, which was 99.1% commercially occupied and 94.2% residentially occupied as of the end of 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 financial results. The company closely monitors Bloomberg’s creditworthiness and receives confidential financial information to assess the risk.

Another potential weakness is the company’s exposure to rising interest rates, which have increased its debt service costs. While Alexander’s has taken steps to mitigate 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 to spend approximately $125 million on capital expenditures in 2025 to maintain and improve its properties. The company believes that its current cash flow from operations, combined with its existing liquidity of $393.8 million, will be sufficient to fund its business operations, dividends, debt service, and capital projects over the next 12 months.

However, the company acknowledges that recent increases in interest rates and inflation could adversely affect its cash flow from operations. Alexander’s may need to refinance its maturing debt or pay it down, but there is no assurance that additional financing will be available on favorable terms.

Overall, Alexander’s appears to be a well-managed real estate investment trust with a strong portfolio of properties and a significant anchor tenant in Bloomberg. While the company faces some risks related to its tenant concentration and interest rate exposure, its current financial position and outlook suggest it is well-positioned to navigate the challenges ahead.