Alexander's (ALX) Q3 2024 earnings summary

Executive summary

• Office leasing momentum in Manhattan is accelerating, with Class A vacancies dropping and rents rising, especially on Park and Sixth Avenue, signaling a landlord's market.

• Year-to-date, 2.5 million sq ft leased company-wide, with expectations to reach 3.5–3.8 million sq ft in Manhattan for 2024, the second highest in company history.

• 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.

• Major transaction: NYU to master lease 1.1 million sq ft at 770 Broadway, with significant prepaid rent to pay off a $700 million loan and annual net rent over the lease term.

• Bloomberg L.P. accounted for 55% of rental revenues for the nine months ended September 30, 2024.

Financial highlights

• Third quarter comparable FFO as adjusted was $0.52 per share, down from $0.66 per share year-over-year, 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 at 87.5%, down from 89.3% last quarter, but will rise to 90.8% with the 770 Broadway lease.

• San Francisco’s 555 California Street leased 443,000 sq ft at $110 per sq ft, with 98.7% occupancy.

• The Mart in Chicago closed 15 leases totaling 239,000 sq ft, with Medline expanding to 161,000 sq ft.

Outlook and guidance

• 2024 comparable FFO outlook unchanged; most leasing activity at Penn Two will impact earnings in 2026, with 2025 expected to be flat to 2024.

• 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.

• Office occupancy expected to temporarily dip in early 2025 as Penn Two space is placed into service, then stabilize in the 93% range.

• Dividend policy remains a single annual payment, with a return to quarterly dividends likely as market conditions normalize.

• No assurance on availability or terms of future refinancing or capital; recent interest rate and inflation increases could impact cash flow.