ALEXANDERS INC Q3 FY2023 earnings call

• Economic situation: The economy has held up better than expected but will be slowed by Fed's historic interest rate increases. Real estate capital markets remain challenged with scarce and expensive capital.
• Business performance: Core office and retail businesses remain resilient. New York office same-store cash NOI up 3%, New York business at all up 2.1%. Leasing markets in Manhattan lead nationally, with healthy leasing volume and strong pipeline.
• Project progress: Construction phase of PENN 2 nearing completion, Wegmans opened a supermarket at 770 Broadway, Pier 94 leasehold contributed to a joint venture and expected to deliver by Q4 2025.

Third quarter comparable FFO as adjusted was $0.66 per share compared to $0.81 for last year's third quarter, a decrease of $0.15. The decrease was driven by items like a one-time real estate tax accrual adjustment, higher net interest expense from increased rates, additional stock compensation expense, and lower FFO from sold properties. New York office same-store cash NOI for the quarter was up 3% and New York business at all was up 2.1%. During the third quarter, the company completed 17 leases totaling 236,000 square feet at average starting rents of over $93 per square foot. Through the first 3 quarters of the year, 1.3 million square feet of leases were signed at an industry-leading $98 per square foot starting rent, with 65% of these leases having starting rents over $100 per square foot. In Chicago, the company completed 68,000 square feet of leases during the quarter at $55 per square foot average starting rents and has a solid pipeline of 400,000 square feet. In retail, there has been a noticeable pickup in leasing activity over the past 3 months with almost all assets seeing tenant interest, and 8 leases totaling 29,000 square feet were signed during the third quarter at a positive 33.5% cash mark-to-market.

• 2023 comparable FFO outlook unchanged since the beginning of the year except for additional G&A expense.
• Fourth quarter current pipeline remains strong at 1.8 million square feet, including 750,000 square feet and 4 deals expected to close in the fourth quarter, aiming for over 2 million square feet for the year.

• Real estate capital markets are challenged with scarce and expensive financing, making it difficult to finance or sell assets.
• Volatility from Fed rate increases and pressure on banks to reduce office exposure pose risks to debt refinancing and capital allocation.

Q: Could you expound a little bit on the New York City leasing pipeline as it relates to both the existing portfolio and developments?

A: Pipeline is focused on current vacancies, PENN 1, PENN 2, and upcoming integrations. A good majority of leases are pinpointed on expiring space in the next 2 years, mainly in the Penn District with 2.5 million feet leased at starting rents of $94 a foot.

Q: Maybe touch on the dividend and the share repurchase program?

A: Expect FFO this year to be about $2.55, recurring taxable income about $0.68. Expect to pay between $0.10 to $0.20 in cash in the fourth quarter for dividend. Have a $200 million authorization for share buybacks, bought $30 million so far, and will continue depending on stock price.

Q: Just as you think about your expirations on the mortgage side for next year, how far in front of those refinancings can you get with the banks? And is there any sense on where pricing is today for refinancing existing mortgages?

A: Start discussions with counterparties depending on maturity. Banks recognize the sponsor and will work on bespoke solutions. Difficult to refinance most assets currently due to lack of capital for real estate, especially office, and banks are under pressure.