ALEXANDERS INC Q2 FY2023 earnings call

• Steven Roth compared the situation of offices to malls, stating work from home is like e-commerce to retail and offices are a better bet. Highlighted conserving cash, protecting balance sheet, raising cash by selling assets, reducing debt, and buying back stock, with the Penn District as the main event.
• Michael Franco discussed FFO details, leasing activity with strong demand from financial services and law firms, Class A buildings seeing rent increases, PENN 1 and PENN 2 leasing progress, capital markets challenges, and asset sales including four small retail assets in Manhattan and the Armory Show.

Second quarter comparable FFO as adjusted was $0.72 per share, down from $0.83 in the prior year's second quarter, a decrease of $0.11 or 13.3%, primarily driven by higher net interest expense from increased rates. New York cash same-store office business was up 3% and overall New York business was up 2.7%. In the second quarter, 19 leases totaling 279,000 square feet were completed, with starting rents at $91.57 per square foot, and for the first six months of the year, one million square feet of leases were signed at $99 per square foot.

• 2023 comparable FFO is down from 2022 due to higher interest rates, with known impact totaling a $0.55 reduction. The additional recurring expense from new share-based awards adds $0.05 for the rest of 2023 and $0.02 to $0.03 in 2024, excluding asset sales impact.
• Leasing pipeline is strong with significant activity in top-tier buildings, and expectations of continued flight to quality.

• Interest rate volatility affecting real estate capital markets.
• Large requirement deal flow lagging and stubbornly high concessions.
• Real estate capital markets remain challenged even for Vornado, with banks cautious and constrained in lending.

Q: Steve Sakwa asked about the leasing pipeline and PENN2 lease-up, and New York leasing spreads.

A: Glen Weiss responded that about 40% of Q2 activity was at PENN1, with a strong pipeline including final LOIs and proposals, and PENN2 having good tours. Michael Franco added on rent trends and mark-to-market.

Q: Camille Bonnel inquired about market rents, TI, and rep free side.

A: Glen Weiss said concessions are stubbornly high, and Michael Franco emphasized separating fact from fiction in the office market narrative.

Q: Alexander Goldfarb asked about the new comp plan.

A: Steven Roth and Michael Franco discussed the comp plan details, including it expiring the old plan, reasons for mid-year implementation, and its benefits for retention and performance.

Q: Julien Blouin asked about leasing activity in San Francisco and Chicago.

A: Glen Weiss and Steven Roth commented on San Francisco's successful 555 Cal building and Chicago's softer market with less tenant demand.

Q: Anthony Paolone asked about portfolio asset sales and NOI for the second half.

A: Steven Roth said there's no target on asset types, and they're not forecasting second half NOI.

Q: Nick Yulico asked about Farley building asset sales and financing.

A: Steven Roth mentioned the Farley building is a strong asset with no mortgage and could be a liquidity source.

Q: Ronald Kamdem asked about FFO components and occupancy outlook.

A: Michael Franco discussed non-recurring FFO items, and Glen Weiss and Michael Franco talked about occupancy stability and backfilling expirations.