<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
/XX/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 1995
-------------------------------------------------
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- -----------------------
Commission File Number: 1-6064
ALEXANDER'S, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 51-0100517
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201)587-8541
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
/X/ Yes / / No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
/ / Yes / / No
As of November 2, 1995 there were 5,000,850 common shares outstanding.
Page 1 of 14
<PAGE> 2
THIS FORM 10-QA AMENDS THE FOLLOWING ITEMS OF THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q PREVIOUSLY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON NOVEMBER 14, 1995.
ALEXANDER'S, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION:
----------------------
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the Three and Nine Months
Ended September 30, 1995 and September 30, 1994 . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1995 and September 30, 1994 . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
Page 2 of 14
<PAGE> 3
PART I. FINANCIAL INFORMATION
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS:
Real estate, at cost:
Land $ 46,082 $ 26,460
Buildings leaseholds, and leasehold
improvements (including $16,356 of
construction in progress at September 30, 1995) 82,823 59,851
Capitalized expenses and predevelopment
costs 35,615 27,213
-------- --------
Total 164,520 113,524
Less accumulated depreciation and
amortization (37,437) (36,365)
-------- --------
127,083 77,159
Investment in unconsolidated joint
venture 10,594 7,499
-------- --------
Real estate, net 137,677 84,658
Cash and cash equivalents 11,760 2,363
Restricted cash 20,782 -
Accounts receivable, net of allowance for
doubtful accounts of $147 in 1995 409 43
Receivable arising from the straight-lining
of rents 4,035 2,888
Deferred lease and other expenses 10,103 11,561
Deferred debt expense 5,126 2,642
Other assets 2,510 714
Note receivable - 4,550
-------- --------
TOTAL ASSETS $192,402 $109,419
======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
LIABILITIES AND DEFICIENCY IN NET ASSETS:
Continuing Operations:
- ----------------------
Secured debt $173,613 $ 51,654
Amounts due to Vornado Realty Trust and
its affiliate 9,129 12,342
Liability for postretirement
healthcare benefits 15,756 15,882
Taxes payable and accrued liabilities 10,647 9,067
Minority interest 600 1,574
Unsecured debt - 1,188
-------- --------
Total continuing operations 209,745 91,707
-------- --------
Discontinued Retail Operations:
- -------------------------------
Taxes payable and accrued liabilities 2,325 2,613
Liabilities subject to settlement under
reorganization proceedings 8,535 36,672
-------- --------
Total discontinued retail operations 10,860 39,285
-------- --------
TOTAL LIABILITIES 220,605 130,992
-------- --------
Commitments and contingencies
Deficiency in Net Assets:
- -------------------------
Common stock; $1.00 par value per share;
authorized, 10,000,000 shares;
issued 5,173,450 5,174 5,174
Additional capital 24,843 24,843
Deficit (57,260) (50,630)
-------- --------
(27,243) (20,613)
Less treasury shares, 172,600 shares at
cost (960) (960)
-------- --------
Total deficiency in net assets (28,203) (21,573)
-------- --------
TOTAL LIABILITIES AND DEFICIENCY
IN NET ASSETS $192,402 $109,419
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 3 of 14
<PAGE> 4
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except share amounts)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------------- --------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Property rentals $ 2,179 $ 2,179 $ 6,557 $ 6,557
Expense reimbursements 169 254 764 825
Equity in income of unconsolidated
joint venture 1,270 641 2,131 1,164
Parking lot income 256 242 664 756
---------- ---------- ---------- ----------
Total Revenues 3,874 3,316 10,116 9,302
---------- ---------- ---------- ----------
Expenses:
Operating, general and administrative
(including management fee of $750 and
$1,750 to Vornado in 1995) 1,640 1,222 5,683 3,492
Depreciation and amortization 460 453 1,393 1,367
Reorganization costs - 232 1,938 1,375
---------- ---------- ---------- ----------
Total expenses 2,100 1,907 9,014 6,234
---------- ---------- ---------- ----------
Operating income 1,774 1,409 1,102 3,068
Interest and debt expense (including interest
on loan from Vornado in 1995) (3,986) (673) (10,208) (1,893)
Interest and other income, net 286 21 1,070 157
Gain on sale of real estate - - - 161
---------- ---------- ---------- ----------
(Loss)/income before reversal of deferred taxes (1,926) 757 (8,036) 1,493
Reversal of deferred taxes - - 1,406 -
---------- ---------- ---------- ----------
NET (LOSS)/INCOME $ (1,926) $ 757 $ (6,630) $ 1,493
========== ========== ========== ==========
Net (Loss)/Income Per Share $ (.39) $ .15 $ (1.33) $ .30
========== ========== ========== ==========
Weighted average number of common
shares outstanding during period 5,000,850 5,000,850 5,000,850 5,000,850
</TABLE>
See notes to consolidated financial statements.
Page 4 of 14
<PAGE> 5
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income $ (6,630) $ 1,493
Adjustments to reconcile net (loss)/income to net
cash (used in) provided by operations:
Depreciation and amortization
(including debt issuance costs) 3,591 1,656
Straight-lining of rental income (1,147) (1,227)
Gain on sale of real estate - (161)
Equity in real estate operations (net of
contributions of $951 and $839
in 1995 and 1994) (3,082) (1,196)
Change in assets and liabilities:
Accounts receivable (366) (2)
Note receivable 4,550 -
Amounts due to Vornado Realty Trust and its affiliate (1,355) 268
Liability for postretirement healthcare benefits (126) -
Taxes payable and accrued liabilities 2 (241)
Other (1,459) 2,088
-------- -------
Net cash (used in)/provided by operating activities of
continuing operations (6,022) 2,678
Payment of liabilities of discontinued operations (28,425) (5,206)
-------- -------
Net cash used in operating activities (34,447) (2,528)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (28,480) (6,946)
Cash restricted for construction financing (6,098) -
Cash restricted for operating liabilities (14,684) 775
Proceeds from sale of real estate - 200
-------- -------
Net cash used in investing activities (49,262) (5,971)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of secured debt 138,425 10,000
Debt repayments (39,766) (775)
Deferred debt expense (5,553) (2,349)
-------- -------
Net cash provided by financing activities 93,106 6,876
-------- -------
Net increase (decrease) in cash and cash equivalents 9,397 (1,623)
Cash and cash equivalents at beginning of period 2,363 7,043
-------- -------
Cash and cash equivalents at end of period $ 11,760 $ 5,420
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest (including capitalized
interest of $4,569 and $1,329) $ 11,499 $ 4,931
======== =======
</TABLE>
Excludes an increase in real estate of $20,838 and secured debt of $21,812
and a reduction in minority interest of $974 as a result of the Company
acquiring a partnership interest (see Note 4).
See notes to consolidated financial statements.
Page 5 of 14
<PAGE> 6
ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets as of September 30, 1995, the
consolidated statements of operations for the three and nine months ended
September 30, 1995 and September 30, 1994, and the consolidated statements
of cash flows for the nine months ended September 30, 1995 and September
30, 1994 are unaudited. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and changes in cash
flows at September 30, 1995 and September 30, 1994 have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These Consolidated
Financial Statements should be read in conjunction with the financial
statements and notes thereto included in the Company's 1994 Annual Report
to Shareholders. The results of operations for the period ended September
30, 1995 are not necessarily indicative of the operating results for the
full year.
Effective in the first quarter of 1995, to be consistent with the
prevalent real estate industry practice, the Company changed the
presentation of its consolidated statements of operations to show tenant
reimbursements of expenses, previously offset against operating expenses,
as part of revenues. Prior period's amounts have been reclassified to
conform with the current year's presentation.
2. EMERGENCE FROM CHAPTER 11
In March 1995, the Company paid holders of allowed general unsecured
claims in full, together with accrued interest in respect of their claims.
Such payments aggregated $24,005,000. The Official Committee of Unsecured
Creditors has been dissolved and all secured and unsecured creditors having
allowed claims in the Bankruptcy Court cases have received the cash
payments or debt instruments contemplated to be delivered to them under the
Plan. A number of claims are being disputed by the Company and therefore
are not allowed claims. An escrow account has been established for the
resolution of these claims (see Note 4). The Bankruptcy Court has retained
jurisdiction to resolve these disputed claims and for other limited
purposes.
Because the Company is in the development stage, its current operating
properties (four of its eight properties) do not generate sufficient cash
flow to pay all of its expenses. The Company's four non-operating
properties (Rego Park, Lexington Avenue, Paramus and the Kings Plaza Store)
are in various stages of development. Rents under the Rego Park project
are scheduled to commence in March 1996 -- see Note 6 "Caldor Corporation".
As rents commence from a portion of the remaining development properties,
the Company expects that cash flow will become positive.
The Company estimates that the fair market values of its assets are
substantially in excess of their historical cost, and that there is
additional borrowing capacity. Therefore, Alexander's may raise capital
through (a) property specific or corporate borrowing, (b) the sale of
securities and (c) asset sales. In addition, the Company may receive the
proceeds from certain tax certiorari or condemnation proceedings -- see
Note 6 "Paramus Property" and "Tax Certiorari Proceedings". Although there
can be no assurance, the Company believes that these cash sources will be
adequate to fund cash requirements until its operations generate adequate
cash flow.
Page 6 of 14
<PAGE> 7
ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. RELATED PARTY TRANSACTIONS
Steven Roth is Chief Executive Officer and a Director of the Company, the
Managing General Partner of Interstate Properties ("Interstate") and
Chairman of the Board and Chief Executive Officer of Vornado Realty Trust
("Vornado"). Interstate owns 27.1% of the outstanding common stock of the
Company and owns 27.4% of the outstanding common shares of beneficial
interest of Vornado. In addition, Mr. Roth owns 3.5% of the outstanding
common shares of beneficial interest of Vornado. Mr. Roth, Interstate and
the other two general partners of Interstate own, in the aggregate, 32.1%
of the outstanding common shares of beneficial interest of Vornado. Vornado
owns 29.3% of the outstanding common stock of the Company, including 27.1%
purchased in March 1995.
In March 1995, the Company and Vornado entered into a three-year
management and development agreement (the "Management Agreement"). The
annual management fee payable by the Company to Vornado is $3,000,000, plus
6% of development costs with a minimum guaranteed fee for the development
portion of $1,650,000 in the first year and $750,000 in each of the second
and third years. On July 6, 1995, Vornado assigned its Management
Agreement to Vornado Management Corp., an affiliate of Vornado.
The fee pursuant to the Management Agreement is in addition to the
leasing fee the Company pays to Vornado under the leasing agreement (the
"Leasing Agreement") which has been in effect since 1992. Subject to the
payment of rents by tenants, Vornado is due $8,552,000, after the reversal
of $2,424,000 of fees payable and the corresponding deferred leasing
expense applicable to the B.J. Wholesale Club and Home Depot leases in
Paramus, which are no longer in effect. Such amount is payable annually in
an amount not to exceed $2,500,000, until the present value of such
installments (calculated at a discount rate of 9% per annum) equals the
amount that would have been paid had it been paid on September 21, 1993, or
at the time the transactions which gave rise to the commissions occurred,
if later. The term of the Leasing Agreement has been extended to be
coterminous with the term of the Management Agreement.
In March 1995, the Company borrowed $45,000,000 from Vornado, the
subordinated tranche of a $75,000,000 secured financing (see Note 4(2)).
The Company incurred interest on the loan of $1,910,000 and $4,087,000 in
the three and nine months ended September 30, 1995, of which $279,000 and
$900,000 was capitalized.
Effective March 2, 1995, for a three-year period, Vornado and Interstate
agreed not to own in excess of two-thirds of the Company's common stock or
to enter into certain other transactions with the Company, other than the
transactions described above, without the consent of the Company's
independent directors.
4. DEBT AND RESTRICTED CASH
The Company borrowed $138,425,000 during the nine months ended September
30, 1995, of which $11,814,000 was borrowed in the third quarter. The
proceeds of these borrowings were used primarily to (i) pay construction
costs associated with the Rego Park property of $16,400,000, (ii) pay
$39,552,000 of outstanding funded debt, and $24,005,000 of allowed general
unsecured claims and (iii) fund (a) interest-bearing escrow accounts for
unpaid real estate taxes ($7,000,000) and the remaining disputed claims in
the Bankruptcy Court cases as they become allowed ($8,000,000), and (b)
collateral accounts for the Rego Park construction ($6,000,000).
Substantially all of the assets of the Company and its subsidiaries have
been pledged and/or mortgaged to secure such indebtedness. The borrowings
consist of:
Page 7 of 14
<PAGE> 8
ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) A $25,000,000 five year loan maturing February 24, 2000, secured
principally by, a mortgage on the Company's Fordham Road property and
guaranteed by the parent. The loan bears annual interest at 30 day LIBOR
plus 4.25% (10.13% at September 30, 1995), capped at LIBOR 9.75% (all-in
rate, 14%) and requires amortization based on a 20 year term with an
assumed interest rate of 9 1/2%. Beginning in year four, all cash flow of
the property, after debt service, will further amortize the loan. The loan
is not prepayable for the first six months of its term and is only
prepayable with yield maintenance during the next twelve months in the
event of certain types of refinancings. For the remainder of the term, it
is prepayable without penalty. The loan contains customary mortgage
covenants, including, among others, a default by the existing tenant.
Further, in the event debt service coverage falls below certain levels or
the existing tenant's financial condition, as defined, deteriorates, then
during the first three years of the loan term, all cash flow of the
property, after debt service, will be escrowed with the lender (see Note 6
"Caldor Corporation").
(2) A $75,000,000 three-year loan secured by mortgages on all of the
Company's assets and/or pledges of the stock of subsidiaries owning the
assets and/or guarantees of such subsidiaries and the parent. The loan
bears interest at a blended rate of 13.8% per annum for the first two years
and is comprised of two separate notes of $45,000,000 to Vornado and
$30,000,000 to a bank. Each note is separately secured by the collateral
described above. The Vornado loan is subordinate to that of the bank and
bears interest at 16.43% per annum (effective rate 17.54%) for the first
two years and at a fixed rate for the third year of 992 basis points over
the one-year Treasury bill rate. The bank's loan bears interest at 9.86%
for the first two years and at a fixed rate for the third year of 325 basis
points over the one-year Treasury bill rate. The Company paid a loan
origination fee to Vornado and the bank of $1,500,000 and $375,000,
respectively. The loans are prepayable at the end of the second year of
their term without penalty. The loans contain customary covenants
including, among others, lease approval rights, limitations on additional
debt, dividends, acquisitions, mergers, property sales and restrict the
Company from developing property without signed leases for more than 50% of
such property's leasable space. No dividends can be paid unless required to
maintain Real Estate Investment Trust ("REIT") status.
(3) A two year $60,000,000 construction loan and a two year $25,000,000
bridge loan from a group of banks, each secured by a mortgage on the Rego
Park property. As of September 30, 1995, approximately $38,425,000 was
funded under such loans. The loans mature on April 1, 1997 (but may be
extended at the Company's option, subject to certain conditions, for an
additional year) and bear annual interest at (i) LIBOR plus 1.625% or (ii)
the greater of (a) Federal Funds Rate plus 1.125% or (b) prime plus 0.625%,
at the option of the Company (7.53% at September 30, 1995). The ability of
the Company to borrow the $25,000,000 under the bridge loan is based on
conditions that cannot be met today and may not be met during the term of
this loan. The Company has not relied on this amount in its determination
of its ability to fund its current cash needs but believes that it will be
able to refinance the Rego Park property at a level exceeding $60,000,000
upon the completion of construction and commencement of tenants paying
rent.
In addition to the above, in January 1995, the Seven Thirty One Limited
Partnership ("the Partnership"), redeemed the first portion of the outside
731 Limited Partners' interest by giving such limited partners a promissory
note due in August 1998 in the amount of $21,812,000 (the "Note"). The Note
bears annual interest at Prime plus 1% and is secured by a third mortgage
on the Lexington Avenue property. The outside 731 Limited Partners have the
right to put their remaining 7.64% interest to the Partnership until
October 1998, in exchange for a five year secured note in the principal
amount of $15,000,000, bearing annual interest at Prime plus 1%.
Page 8 of 14
<PAGE> 9
ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
After giving effect to the additional borrowings and debt repayments
noted above, a summary of maturities of long-term debt is as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
<S> <C>
1995 $ 111
1996 473
1997 500
1998 135,680
1999 14,204
Thereafter 22,645
--------
$173,613
========
</TABLE>
5. INCOME TAXES
The Company intends to file, with its Federal income tax return for 1995,
an election to be treated as a REIT for Federal income tax purposes. As a
result of the Company's intention to elect to be taxed as a REIT, the
deferred tax balance of $1,406,000 at December 31, 1994 was reversed,
resulting in an income tax benefit in the first quarter of 1995. At
September 30, 1995, net operating loss carryovers of approximately
$133,000,000 are available to offset both future taxable income and the
amount of the Company's REIT taxable income that otherwise would be
required to be distributed to stockholders.
6. CONTINGENCIES
Paramus Property
The State of New Jersey has notified the Company of its intention to
condemn a portion of the Paramus property. The New Jersey Department of
Transportation ("DOT") has recently made an offer to purchase the land
which is the subject of the condemnation proceeding for $15,400,000 based
on an appraisal performed on their behalf. The Company expects to negotiate
with the DOT to attempt to reach agreement on the value. In the event that
the Company and the DOT do not reach agreement on the value, a formal
process will be initiated by the DOT, pursuant to which, among other
things, a group of independent commissioners will be appointed by a court
to determine fair market value. If the condemnation occurs, the Company
would be required to change its development plans, and the time and cost to
develop the property may materially increase. The leases which the Company
had signed with Home Depot and B.J.'s Wholesale Club at this property are
no longer in effect.
Lexington Avenue Property
The Company believes that, along with a number of other locations, a
portion of the Lexington Avenue property is being considered by the Port
Authority of New York and New Jersey (the "Port Authority") for the site of
the terminus for a rail link from midtown Manhattan to LaGuardia and
Kennedy Airports. Approvals of numerous Federal, New York State and New
York City agencies are required before construction could begin. If the
project proceeds and the Port Authority selects a portion of the Lexington
Avenue property for such use and can establish that it is needed to serve a
public use, benefit or purpose, the Port Authority, after conducting the
requisite public hearings, may acquire such portion of the Lexington Avenue
property pursuant to its powers of eminent domain. The Company has
expressed its opposition to the possible condemnation of a portion of the
property and has the right to appeal any
Page 9 of 14
<PAGE> 10
ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
such action by the Port Authority. If the Port Authority prevails, the Company
would be entitled to compensation for its loss. Since the nature and scope of
any plans being considered by the Port Authority, and whether any such plans
would ultimately affect the Lexington Avenue property, cannot be fully assessed
by the Company at this time, it is impossible to determine the ultimate effect
that a taking, or any uncertainty with respect thereto, would have on the
Company's use or development of the Lexington Avenue property.
Tax Certiorari Proceedings
Alexander's Department Stores of Valley Stream, Inc. ("ADS of Valley
Stream") is a party to a tax certiorari proceeding against The Board of
Assessors and The Board of Assessment Review of the County of Nassau (the
"Board") for overpayment of taxes on its former Valley Stream store property
during the assessment rolls from 1986 to 1992. In January 1995, the Supreme
Court of Nassau County, New York ruled that ADS of Valley Stream is entitled to
an assessment reduction which would result in a refund of approximately
$6,600,000, plus interest (currently, $9,900,000). Both the Board and the
Company have appealed the Court's decision.
The Company is currently negotiating certiorari proceedings with the City
of New York on several of its properties. As to one of these properties, the
Company and its joint venture partner have agreed with the Law Department of
the City of New York to a reduction in the assessed values covering the tax
years 1988/1989 through 1995/1996, generating a refund of approximately
$28,300,000. The cash arising from the Company's allocable share of such
refund, net of expenses, is approximately $9,000,000. This settlement is
subject to approval by various agencies of the City of New York.
Environmental Matters
The results of a 1993 Phase I environmental assessment at the Kings Plaza
Shopping Center's ("Center") property show that certain adjacent properties
owned by third parties have experienced petroleum hydrocarbon contamination.
Based on this assessment and preliminary investigation of the Center's property
and its history there is potential for contamination on the property. If
contamination is found on the property, the Center may be required to engage in
remediation activities; management is unable to estimate the financial impact
of potential contamination if any is discovered in the future. If further
investigations reveal that there is contamination on its site, since the Center
believes such contamination would have resulted from activities of third
parties, the Center intends to pursue all available remedies against any of
these third parties.
Caldor Corporation ("Caldor")
On September 18, 1995, Caldor, which leases the Fordham Road and Flushing
Properties from the Company, filed for relief under Chapter 11 of the United
States Bankruptcy Code. Property rentals from these two leases represent
approximately 63% of the Company's consolidated revenues for the year ended
December 31, 1994 and approximately 54% of the Company's consolidated revenues
for the nine months ended September 30, 1995. Caldor has reported to the
Company store sales of $48,658,000 and $42,047,000 for the Fordham Road
Property and the Flushing property, respectively, for the lease years ending
March 31, 1995. Caldor leased these properties "as is", expended the entire
cost of refurbishing these stores and continues to pay rent on both of these
locations. Caldor is also the lessee of a portion of the Rego Park Property
under a lease scheduled to commence after the completion of the redevelopment
of this property. Caldor, which is responsible for the construction of its
store, ceased such construction in September 1995. The loss of property rental
payments under any of these leases could have a material adverse effect on the
financial condition and results of operations of the Company.
In addition, the failure of Caldor to meet certain financial tests may
result in the Company being required to escrow net cash flow of approximately
$500,000 per annum from the Fordham Road Property into an account of the lender
as a reserve against future payments under the loans (see Note 4(1)).
Page 10 of 14
<PAGE> 11
ALEXANDER'S, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $3,874,000 in the quarter ended September
30, 1995, compared to $3,316,000 in the prior year's quarter, an increase of
$558,000 or 16.8%. Revenues were $10,116,000 for the nine months ended
September 30, 1995, compared to $9,302,000 for the prior year's nine months, an
increase of $814,000 or 8.8%. These increases resulted primarily from an
increase in the income derived from the operation of the Kings Plaza Shopping
Center and Marina during the three and nine months ended September 30, 1995.
Operating, general and administrative expenses were $1,640,000 in the
quarter ended September 30, 1995, compared to $1,222,000 in the prior year's
quarter, an increase of $418,000. Operating, general and administrative
expenses were $5,683,000 in the nine months ended September 30, 1995 compared
to $3,492,000 for the prior year's nine months, an increase of $2,191,000.
These increases resulted primarily from fees under the Management Agreement,
higher professional fees and the commencement of salary to the Chairman of the
Board of Directors.
Depreciation and amortization expense for the three and nine months ended
September 30, 1995, did not change significantly from such expense for the
prior year's periods.
Reorganization costs were $1,938,000 in the nine months ended September 30,
1995, compared to $1,375,000 in the prior year's period, an increase of
$563,000. These expenses were primarily due to professional fees incurred in
connection with investigating financing alternatives, becoming a REIT and
bankruptcy expenses. As stated in the Company's second quarter Form 10-Q, the
Company expects no further significant reorganization costs, and in the third
quarter of this year incurred no such costs.
Interest and debt expense was $3,986,000 in the quarter ended September 30,
1995, as compared to $673,000 in the prior year's quarter, an increase of
$3,313,000. Of this increase, approximately (i) $2,000,000 was attributable to
higher levels of debt, (ii) $100,000 was attributable to higher interest rates,
(iii) $400,000 was attributable to the amortization of debt issuance costs, and
(iv) $800,000 resulted from interest and debt expense for 1994 being charged
against the accrual for losses from discontinued operations. Interest and debt
expense was $10,208,000 for the nine months ended September 30, 1995, as
compared to $1,893,000 for the prior year's period, an increase of $8,315,000.
Of this increase, approximately (i) $4,400,000 was attributable to higher
levels of debt, (ii) $200,000 was attributable to higher interest rates, (iii)
$1,900,000 was attributable to the amortization of debt issuance costs
including a $600,000 write-off, and (iv) $1,800,000 resulted from interest and
debt expense for 1994 being charged against the accrual for losses from
discontinued operations.
Interest and other income, net was $286,000 in the quarter ended September
30, 1995 as compared to $21,000 in the prior year's quarter, an increase of
$265,000. Interest and other income, net was $1,070,000 in the nine months
ended September 30, 1995 as compared to $157,000 for the prior year's period,
an increase of $913,000. These increases resulted primarily from (i) interest
income earned on higher average cash invested due to increased borrowings and
(ii) refunds of taxes, partially offset by (i) a settlement fee paid in
connection with a financing arrangement not consummated, and (ii) a loss on the
conveyance of residential property to the Borough of Paramus.
As a result of the Company's intention to elect to be taxed as a REIT for
the year ended December 31, 1995, the deferred tax balance of $1,406,000 at
December 31, 1994 was reversed, resulting in an income tax benefit in the
quarter ended March 1995.
Page 11 of 14
<PAGE> 12
ALEXANDER'S, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities of $34,447,000 for the nine months ended
September 30, 1995 was comprised of: (i) a net loss of $6,630,000, (ii)
adjustments for non-cash items of $638,000, and (iii) the payment of
liabilities of discontinued operations of $28,425,000, offset by (iv) a net
change in operating assets and liabilities of $1,246,000.
Cash used in operating activities of $2,528,000 for the nine months ended
September 30, 1994, was comprised of: (i) the payment of liabilities of
discontinued operations of $5,206,000, offset by (ii) net income of $1,493,000,
less adjustments for non-cash items of $928,000, and (iii) a net change in
operating assets and liabilities of $2,113,000.
Net cash used in investing activities of $49,262,000 for the nine months
ended September 30, 1995, was comprised of capital expenditures of $28,480,000,
cash restricted for construction financing of $6,098,000 and cash restricted
for operating liabilities of $14,684,000. Net cash used in investing
activities of $5,971,000 for the nine months ended September 30, 1994, was
comprised primarily of capital expenditures.
Net cash provided by financing activities of $93,106,000 for the nine
months ended September 30, 1995, was comprised of proceeds from the issuance of
secured debt of $132,872,000 (net of deferred debt expense), offset by
repayments of debt of $39,766,000. Net cash provided by financing activities
of $6,876,000 for the nine months ended September 30, 1994, was comprised
primarily of proceeds from the issuance of secured debt (net of deferred debt
expense).
In connection with the redevelopment of its Rego Park property (new parking
structure and other improvements), the Company has expended approximately
$16,400,000 during the nine months ended September 30, 1995, and expects to
expend, through the first quarter of 1996, up to an additional $20,000,000 to
complete the project. At September 30, 1995, there was $21,600,000 available
under a $60,000,000 construction loan to fund these expenditures. The Company
estimates that its capital expenditure requirements for other projects will
include: (i) the redevelopment of the Paramus property estimated to cost
between $55,000,000 and $60,000,000 (ii) the subdivision of the existing space
and other improvements at the Kings Plaza Store property estimated to cost
between $10,000,000 and $15,000,000, and (iii) the renovation of the existing
Lexington Avenue building estimated to cost between $20,000,000 and
$25,000,000. While the Company anticipates that financing will be available
after tenants have been obtained for these redevelopment projects, there can be
no assurance that such financing will be obtained or if obtained, that such
financings will be on terms that are acceptable to the Company. In addition,
it is uncertain as to when these projects will commence.
On September 18, 1995, Caldor, which leases the Fordham Road and Flushing
Properties from the Company, filed for relief under Chapter 11 of the United
States Bankruptcy Code. Property rentals from these two leases represent
approximately 63% of the Company's consolidated revenues for the year ended
December 31, 1994 and approximately 54% of the Company's consolidated revenues
for the nine months ended September 30, 1995. Caldor has reported to the
Company store sales of $48,658,000 and $42,047,000 for the Fordham Road
Property and the Flushing Property, respectively, for the lease years ending
March 31, 1995. Caldor leased these properties "as is", expended the entire
cost of refurbishing these stores and continues to pay rent on both of these
locations. Caldor is also the lessee of a portion of the Rego Park Property
under a lease scheduled to commence after the completion of the redevelopment
of this property. Caldor, which is responsible for the construction of its own
store, ceased such construction in September 1995. The loss of property rental
payments under any of these leases could have a material adverse effect on the
financial condition and results of operations of the Company.
Page 12 of 14
<PAGE> 13
ALEXANDER'S, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Because the Company is in the development stage, its current operating
properties (four of its eight properties) do not generate sufficient cash flow
to pay all of its expenses. The Company's four non-operating properties (Rego
Park, Lexington Avenue, Paramus and the Kings Plaza Store) are in various
stages of development. Rents under the Rego Park project are scheduled to
commence in March 1996 -- see Note 6 "Caldor Corporation". As rents commence
from a portion of the remaining development properties, the Company expects
that cash flow will become positive.
The Company estimates that the fair market values of its assets are
substantially in excess of their historical cost, and that there is additional
borrowing capacity. Therefore, Alexander's may raise capital through (a)
property specific or corporate borrowing, (b) the sale of securities and (c)
asset sales. In addition, the Company may receive the proceeds from certain
tax certiorari or condemnation proceedings -- see Note 6 "Paramus Property"
and "Tax Certiorari Proceedings". Although there can be no assurance, the
Company believes that these cash sources will be adequate to fund cash
requirements until its operations generate adequate cash flow.
Page 13 of 14
<PAGE> 14
ALEXANDER'S, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ALEXANDER'S, INC.
------------------------------------
(Registrant)
Date: December 20, 1995 /s/ Joseph Macnow
------------------------------------
JOSEPH MACNOW
Vice President - Chief Financial
Officer and Chief Accounting Officer
Page 14 of 14
