Alexander's, Inc. (NYSE: ALX) is a real estate investment trust (REIT) that has established itself as a dominant player in the New York City real estate market. With a diverse portfolio of properties, the company has weathered the challenges of the past few years and is poised for continued growth.

Financials

For the full year 2023, Alexander's reported net income of $102,413,000 and revenue of $224,962,000. The company's annual operating cash flow and free cash flow both stood at $109,111,000. In the latest quarter ended March 31, 2024, the company reported net income of $16,109,000 and revenue of $61,397,000.

Business Overview

Alexander's is a real estate investment trust (REIT) that owns and operates a portfolio of properties in New York City. The company's portfolio includes five properties, totaling 2,455,000 square feet. The properties are primarily located in Manhattan and are used for office, retail, and residential purposes.

The company's portfolio is anchored by its flagship property, 731 Lexington Avenue, which is a mixed-use development that includes office and retail space. The property is home to Bloomberg L.P., which accounted for 49% of the company's rental revenues in the first quarter of 2024.

In addition to its office and retail properties, Alexander's also owns a residential property, The Alexander apartment tower, which is located in the Rego Park neighborhood of Queens.

Navigating Market Challenges

The past few years have presented significant challenges for the real estate industry, with the COVID-19 pandemic and the resulting economic uncertainty impacting demand for office and retail space. However, Alexander's has demonstrated its resilience, with the company's same-store cash NOI increasing by 2.8% in 2023 and 2% in the first quarter of 2024.

One of the key factors contributing to Alexander's success has been its strong tenant base, led by Bloomberg L.P. The company has worked to retain its existing tenants and attract new ones, with the company's leasing team winning the "Gold Medal" in 2023 for its leasing efforts.

Despite the challenges in the office market, Alexander's has been able to maintain high occupancy rates, with the commercial occupancy rate standing at 92.5% as of March 31, 2024. The company has also been proactive in addressing upcoming lease expirations, with the company leasing over 50% of the space expiring in 2024 at its 1290 Avenue of the Americas property.

Outlook

Looking ahead, Alexander's expects its 2024 comparable FFO to continue to be impacted by higher interest rates, with the company projecting a $0.30 impact from higher net interest expense. Additionally, the company expects to see a temporary impact on earnings as it turns over certain spaces, primarily at 1290 Avenue of the Americas, 770 Broadway, and 280 Park Avenue.

However, the company remains optimistic about its long-term prospects, with the PENN District development project expected to be a significant driver of growth. The company has already leased over 2.5 million square feet of office space in the PENN District at an average starting rent of $94 per square foot.

Liquidity

Alexander's maintains a strong balance sheet, with $547,399,000 in liquidity as of March 31, 2024, comprised of cash and cash equivalents and restricted cash. The company has been proactive in managing its debt, with the company's current liquidity including $1.9 billion in undrawn capacity under a $2.5 billion revolving credit facility.

The company's mortgages payable, net of deferred debt issuance costs, stood at $1,092,952,000 as of March 31, 2024. The company's debt is primarily fixed-rate, with a weighted average interest rate of 4.48% as of the end of the first quarter.

Risks and Challenges

While Alexander's has demonstrated its resilience, the company is not without its risks and challenges. The company's reliance on a small number of large tenants, such as Bloomberg L.P., exposes it to tenant concentration risk. If the company were to lose Bloomberg as a tenant, or if Bloomberg were unable to fulfill its lease obligations, it would have a significant impact on the company's financial performance.

Additionally, the company is exposed to the broader trends in the office and retail real estate markets, which have been impacted by the COVID-19 pandemic and the shift towards remote work. While the company has been able to maintain high occupancy rates, there is no guarantee that this trend will continue in the future.

Conclusion

Alexander's, Inc. is a well-positioned real estate investment trust that has navigated the challenges of the past few years with resilience and innovation. With a diverse portfolio of properties, a strong tenant base, and a focus on strategic development projects, the company is poised for continued growth in the years ahead. While the company faces some risks and challenges, its strong balance sheet and experienced management team position it well to capitalize on opportunities in the New York City real estate market.