Alexander's (ALX) Q3 2024 earnings summary

Executive summary

• Leasing momentum accelerated, with 2.5 million sq ft leased YTD and a projected 3.5–3.8 million sq ft for the year, including a major master lease with NYU at 770 Broadway, which will pay off a $700 million loan and provide significant upfront rent.

• Net income for Q3 2024 was $6.7M ($1.30/share), down from $10.8M ($2.10/share) in Q3 2023; nine-month net income was $31.2M ($6.07/share), down from $86.1M ($16.79/share) in 2023, which included a $54M gain from a property sale.

• The Manhattan Class A office market is tightening, with Park Avenue and Sixth Avenue vacancies at 7% and 9%, respectively, and rents rising due to limited new supply.

• The Penn District redevelopment is exceeding expectations, with higher-than-projected rents and strong tenant demand across industries, positioning Penn One and Penn Two as premier assets.

• Retail demand is rebounding, highlighted by a flagship Primark lease in the Penn District and strong occupancy when excluding mall vacancies.

Financial highlights

• Comparable FFO as adjusted was $0.52 per share for Q3 2024, down from $0.66 per share in Q3 2023, mainly due to lower NOI from known move-outs and higher net interest expense.

• Q3 2024 rental revenues were $55.7M, up $0.3M year-over-year; nine-month rental revenues were $170.5M, up $8.4M.

• Office occupancy was 87.5%, down from 89.3% last quarter, but will rise to 90.8% with the NYU lease; further increases expected as Penn Two stabilizes.

• Liquidity stands at $2.6 billion, including $1 billion in cash, to be further boosted by asset sales and lease transactions.

• Over $1 billion of debt will be paid off by year-end, with cash balances increasing by more than $600 million.

Outlook and guidance

• 2024 comparable FFO outlook remains unchanged; most leasing activity will impact earnings in 2026 as new leases commence.

• Management expects cash flow from operations and existing cash to be adequate for business operations, dividends, debt service, and capital expenditures over the next twelve months.

• 2025 earnings expected to be flat to 2024, with material growth anticipated in 2026 as Penn Two and other major leases contribute.

• Dividend policy will remain a single annual payment for 2024 and likely 2025, with a return to quarterly dividends possible as conditions normalize.