<PAGE> 1
EXHIBIT INDEX ON PAGE 53
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
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 (I.R.S. Employer
incorporation or organization) Identification No.)
Park 80 West, Plaza II, Saddle Brook, New Jersey 07663
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 587-8541
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Common Stock, $1 par value New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
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.
YES X NO___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the common stock held by non-affiliates of the
Registrant (based upon the closing price of the stock on the New York Stock
Exchange on February 21, 1997) was approximately $160,521,000.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 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
5,000,850 shares of the Registrant's common stock, par value $1 per share, were
outstanding as of February 21, 1997.
Documents Incorporated by Reference
Part III: Proxy Statement for Annual Meeting of Shareholders to be held May 28,
1997.
Page 1 of 62
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Item
----
<S> <C> <C>
PART I. 1. Business 3
2. Properties 7
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 11
Executive Officers of the Company 12
PART II. 5. Market for Registrant's Common
Equity and Related Stockholder Matters 13
6. Selected Financial Data 14
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
8. Financial Statements and Supplementary Data 20
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 20
PART III. 10. Directors and Executive Officers of the Registrant (1)
11. Executive Compensation (1)
12. Security Ownership of Certain
Beneficial Owners and Management (1)
13. Certain Relationships and Related Transactions (1)
PART IV. 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K 40
SIGNATURES 41
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</TABLE>
(1) These items are omitted because the Registrant will file a definitive
Proxy Statement pursuant to Regulation 14A involving the election of
directors with the Securities and Exchange Commission not later than 120
days after December 31, 1996, which is incorporated by reference.
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PART I
Item 1. Business
GENERAL
Alexander's, Inc. (the "Company") is a real estate investment trust
("REIT") engaged in leasing, managing, developing and redeveloping properties,
focusing primarily on the locations where its department stores (which ceased
operations in 1992) formerly operated. The Company believes that its properties,
which are located in New York City and Bergen County, New Jersey, offer
advantageous retail opportunities, principally because of their size and
location in areas where comparable store sites are not readily available.
Alexander's has nine properties consisting of:
Operating properties:
(i) the Rego Park I property located on Queens Boulevard and 63rd
Road in Rego Park, Queens, New York, which contains a recently
redeveloped 351,000 square foot building, of which 96% is leased
to Sears, Circuit City, Bed Bath & Beyond and Marshalls;
(ii) the Kings Plaza Shopping Center on Flatbush Avenue in Brooklyn,
New York which consists of 427,000 square feet of mall stores
(the "Kings Plaza Mall") in which the Company owns a 50%
interest;
(iii) the Fordham Road property located at Fordham Road and the Grand
Concourse in the Bronx, New York, which contains a 303,000
square foot building leased to Caldor, Inc. ("Caldor");
(iv) the Flushing property located at Roosevelt Avenue and Main
Street in Flushing, New York, which contains a 177,000 square
foot building sub-leased to Caldor and
(v) the Third Avenue property located at Third Avenue and 152nd
Street in the Bronx, New York, which contains a 173,000 square
foot building leased to an affiliate of Conway.
Non-operating properties to be redeveloped:
(vi) the Lexington Avenue property which comprises the entire square
block bounded by Lexington Avenue, East 59th Street, Third
Avenue and East 58th Street in Manhattan, New York in which the
Company is the general partner and has a 92% limited partnership
interest;
(vii) the Paramus property which consists of 39.3 acres of land
located at the intersection of Routes 4 and 17 in Paramus, New
Jersey;
(viii) the Kings Plaza Store, a 339,000 square foot store, which was
one of the two anchor stores at the Kings Plaza Shopping Center.
In January 1997, Sears leased 289,000 square feet at this
location for use as a full-line department store expected to
open in the last quarter of 1997, and
(ix) the Rego Park II property, which comprises one and one-half
square blocks of vacant land adjacent to the Rego Park I
property.
See Item 2 "Properties" for additional information.
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The following tenants accounted for more than 10% of the Company's
consolidated revenues:
<TABLE>
<CAPTION>
Years Ended
December 31,
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Caldor 36% 56% 64%
Sears 23% -- --
Conway 6% 13% 14%
</TABLE>
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 September 1995, Caldor filed for relief under Chapter 11 of the
United States Bankruptcy Code. On February 11, 1997 Caldor announced that,
subject to Bankruptcy Court approval, it expects to close the Fordham Road store
in May 1997. The annual base rental revenue under this lease is $3,537,000.
Alexander's current operating properties (five of its nine properties)
do not generate sufficient cash flow to pay all of its expenses. The Company's
four non-operating properties (Lexington Avenue, Paramus, the Kings Plaza Store
and Rego Park II) are in various stages of redevelopment. As rents commence from
a portion of the redevelopment properties, the Company expects that cash flow
will become positive.
The Company estimates that the fair market value of its assets are
substantially in excess of their historical cost and that there is additional
borrowing capacity. Alexander's continues to evaluate its needs for capital,
which may be raised 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 the condemnation proceeding -- described in Item 2 "Paramus
Property" on page 10. 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.
The Company is a Delaware corporation with its principal executive
office located at Park 80 West, Plaza II, Saddle Brook, New Jersey 07663,
telephone (201) 587-8541.
Relationship with Vornado Realty Trust ("Vornado")
On March 2, 1995, Vornado, which previously owned 2.2% of the Company's
Common Stock, purchased 27.1% of the Company's Common Stock owned by Citibank,
N.A. In addition, Vornado and a bank lent the Company $75,000,000. The loan has
a three-year term and is 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. In addition, Vornado agreed to act as manager of the
Company for a period of three years commencing March 2, 1995 pursuant to a
management and development agreement (the "Management Agreement"). Vornado is a
fully integrated REIT with significant experience in the ownership, development,
redevelopment, leasing, operation and management of retail and industrial
properties. On July 6, 1995, Vornado assigned its Management Agreement to
Vornado Management Corp., an affiliate of Vornado.
The annual management fee payable by the Company to Vornado is
$3,000,000, plus 6% of development costs with minimum guaranteed fees for the
development portion of $1,650,000 in the first year and $750,000 in each of the
second and third years. For the year ended December 31, 1996, the Company paid
development fees of $2,343,000 to Vornado.
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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 $5,565,000. 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.
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. Interstate owns
27.1% of the outstanding common stock of the Company and owns 24.4% of the
outstanding common shares of beneficial interest of Vornado. In addition, Mr.
Roth owns 3.0% of the outstanding common shares of beneficial interest of
Vornado. Mr. Roth, Interstate and the other two general partners of Interstate,
David Mandelbaum and Russell B. Wight, Jr. (who are also directors of the
Company and trustees of Vornado) own, in the aggregate, 29.1% of the outstanding
common shares of beneficial interest of Vornado. On December 2, 1996, Michael D.
Fascitelli was elected a director of the Company and received an option for
350,000 shares of the Company's common stock pursuant to the Company's Omnibus
Stock Plan. Mr. Fascitelli is President of Vornado Realty Trust and a member of
its Board of Trustees.
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.
Emergence From Chapter 11
In May 1992, at a time when the Company's business consisted of retail
store operations, the Company and sixteen of its subsidiaries filed petitions
for relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). In September 1993, the Bankruptcy Court confirmed the Joint Plan of
Reorganization (the "Plan"), pursuant to which the Company and its subsidiaries
reorganized their business as a real estate company.
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 approximately $24,000,000. 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.
ENVIRONMENTAL MATTERS
Compliance with applicable provisions of federal, state and local laws
regulating the discharge of materials into the environment or otherwise relating
to the protection of the environment have not had, and, although there can be no
assurance, are not expected to have, a material effect on the Company's
operations, earnings, competitive position or capital expenditures.
The results of a 1993 Phase I environmental study 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 study and preliminary investigation of the Center's property and
its history, there is potential for contamination on the property. The study
also revealed an underground storage tank which failed an integrity test,
although no contamination has been observed to date. The tank failure has been
reported to the New York State Department of Environmental Conservation ("DEC")
and the tank was repaired in early 1994. In October 1994, independent testing
revealed that all of the Center's underground storage tanks (used for storing
heating oil) and related distribution lines passed a tank and line leak status
test. Such results were furnished to the DEC. If contamination is found on the
property, the Center may be required to engage in remediation activities;
management
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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.
The Company is aware of the presence of asbestos-containing materials at
several of its properties and believes that it manages such asbestos in
accordance with applicable laws. The Company plans to abate or remove such
asbestos as appropriate.
The Company believes that known and potential environmental liabilities
will not have a material adverse effect on the Company's business, assets,
results of operations or cash flow. However, there can be no assurance that the
confirmation of the existence of contamination or the identification of
potential new areas of contamination would not be material to the Company.
COMPETITION
The Company conducts its real estate operations in the New York
metropolitan area, a highly competitive market. The Company's success depends
upon, among other factors, the trends of the national and local economies, the
financial condition and operating results of current and prospective tenants,
the availability and cost of capital, interest rates, construction and
renovation costs, income tax laws, governmental regulations and legislation,
population trends, the market for real estate properties in the New York
metropolitan area, zoning laws and the ability of the Company to lease, sublease
or sell its properties at profitable levels. The Company competes with a large
number of real estate property owners. In addition, although the Company
believes that it will realize significant value from its properties over time,
the Company anticipates that it may take a number of years before all of its
properties generate cash flow at or near anticipated levels. Its success is also
subject to its ability to finance its development and to refinance its debts as
they come due.
EMPLOYEES
The Company currently employs two people.
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Item 2. Properties
The following table shows the location, approximate size and leasing
status as of December 31, 1996 of each of the Company's properties.
<TABLE>
<CAPTION>
Approximate Approximate
Land Building Square Average
Square Footage/ Annualized
Footage ("SF") Number of Base Rent Percent
Property Ownership or Acreage Floors Per Sq. Foot (1) Leased
------------ --------- ----------------- --------------- ---------------- -------
OPERATING PROPERTIES
<S> <C> <C> <C> <C> <C>
Rego Park I Owned 4.8 acres 351,000/3 $27.79 96%
Queens Blvd. & (2)
63rd Rd.
Rego Park, New York
Kings Plaza 50% 24.3 acres 427,000/2 $31.19 84%
Shopping Center Owned (2) (4)
(Kings Plaza Mall)
Flatbush Avenue
Brooklyn, New York
Fordham Road & Owned 92,211 SF 303,000/5 $11.54 100%
Grand Concourse
Bronx, New York
Roosevelt Avenue & Leased (5) 44,975 SF 177,000/4 $16.35 100%
Main Street (2)
Flushing, New York
Third Avenue & Owned 60,451 SF 173,000/4 $ 4.33 100%
152nd Street
Bronx, New York
---------
1,431,000
=========
REDEVELOPMENT PROPERTIES
Square block at East 92% 84,420 SF 591,000/6
59th Street & Owned (6) (7)
Lexington Avenue
New York, New York
Routes 4 & 17 Owned 39.3 acres 340,000/3
Paramus, New Jersey (8) (7)
Kings Plaza Store Owned Included in 339,000/4
Flatbush Avenue Shopping Center
Brooklyn, New York total above
Rego Park II Owned 6.6 acres --
Queens, New York
</TABLE>
<TABLE>
<CAPTION>
Lease
Square Expiration/
Footage Option
Property Tenants Leased Expiration
------------ --------------------- ------ ----------
OPERATING PROPERTIES
<S> <C> <C> <C>
Rego Park I Sears 195,000 2021
Queens Blvd. & Circuit City 50,000 (3)
63rd Rd. Bed Bath & Beyond 46,000 (3)
Rego Park, New York Marshalls 39,000 2008/2021
Kings Plaza 120 Tenants 357,000 (See table
Shopping Center on page 9)
(Kings Plaza Mall)
Flatbush Avenue
Brooklyn, New York
Fordham Road & Caldor (9) 303,000 2013/2028
Grand Concourse
Bronx, New York
Roosevelt Avenue & Caldor 177,000 2027
Main Street
Flushing, New York
Third Avenue & An affiliate of Conway 173,000 2023
152nd Street
Bronx, New York
REDEVELOPMENT PROPERTIES
Square block at East
59th Street &
Lexington Avenue
New York, New York
Routes 4 & 17
Paramus, New Jersey
Kings Plaza Store Sears 289,000 (3)
Flatbush Avenue
Brooklyn, New York
Rego Park II
Queens, New York
</TABLE>
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(1) Average annualized base rent per square foot does not include rent for
leases which had not commenced as of December 31, 1996.
(2) Excludes parking garages operated for the benefit of the Company.
(3) The Circuit City and Bed Bath & Beyond leases are expected to commence
in the first half of 1997. The Sears lease is expected to commence in
the last quarter of 1997.
(4) Excludes approximately 150,000 square feet of enclosed, common area
space.
(5) Leased to the Company through January 2027. The Company is obligated to
pay rent to the landlord as follows: $496,000 per year through January
1997, $331,000 per year from February 1997 through January 2007,
$220,000 per year from February 2007 through January 2017, and $147,000
from February 2017 through January 2027.
(6) The Lexington Avenue property is owned by Seven Thirty One Limited
Partnership, of which 7.64% is owned by non-affiliated limited partners.
(7) The Company is evaluating redevelopment plans for these sites which may
involve razing the existing buildings.
(8) Approximately 9 acres are subject to condemnation described in Item 2
"Paramus Property" on page 10.
(9) On February 11, 1997, Caldor announced that, subject to Bankruptcy Court
approval, it expects to close this store in May 1997.
Operating Properties:
Rego Park I
The Rego Park I property encompasses the entire block fronting on Queens
Boulevard and bounded by 63rd Road, 62nd Drive, 97th Street and Junction
Boulevard, and includes the Company's former three-floor store.
The existing 351,000 square foot building has been redeveloped and 96% of
its square footage has been leased to Sears, Circuit City, Bed Bath & Beyond and
Marshalls. In addition, a multi-level parking structure has been constructed.
The parking structure provides paid parking spaces for approximately 1,200
vehicles. In connection with this redevelopment, the Company has expended
approximately $37,200,000 and expects to expend up to an additional $3,400,000
to complete the project. At December 31, 1996 there was $1,700,000 available
under a $60,000,000 construction loan to fund these expenditures.
Kings Plaza Shopping Center
The Kings Plaza Shopping Center (the "Center") comprises a two-level mall
(the "Kings Plaza Mall"), and two four-level anchor stores. It contains
approximately 1.1 million square feet and occupies a 24.3-acre site at the
intersection of Flatbush Avenue and Avenue U located in Brooklyn, New York.
Among its features are a marina, a five-level parking structure and an energy
plant that generates the shopping center's electrical power. The Company owns
one anchor store in the shopping center of approximately 339,000 square feet
(see "Kings Plaza Store" - Redevelopment Properties), and an undivided one-half
interest in the Kings Plaza Mall. The other anchor store is owned and operated
as a Macy's store by Federated Department Stores, Inc. ("Federated").
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Kings Plaza Mall
The Mall stores contain approximately 427,000 leasable square feet. As of
December 31, 1996, 84% of the leasable area was leased to approximately 120
tenants.
The following table shows lease expirations for the tenants in the Mall
stores for the next ten years, assuming none of the tenants exercise renewal
options:
<TABLE>
<CAPTION>
Percent of Total Percent of
Approximate Annualized Fixed Leased Square 1996 Gross
Number of Leased Area in Annualized Fixed Rent Under Footage Annual Rental
Leases Square Feet Under Rent Under Expiring Leases Represented by Represented by
Year Expiring Expiring Leases Expiring Leases per Square Foot Expiring Leases Expiring Leases
- ---- -------- --------------- --------------- --------------- --------------- ---------------
<C> <C> <C> <C> <C> <C> <C>
1997 7 25,549 $ 498,303 $ 19.50 5.99% 3.73%
1998 5 11,471 281,610 24.55 2.69% 2.11%
1999 4 7,720 446,569 57.85 1.81% 3.35%
2000 13 29,091 1,369,727 47.08 6.82% 10.28%
2001 15 81,018 2,487,507 30.70 18.98% 18.67%
2002 13 42,207 1,591,188 37.70 9.89% 11.94%
2003 12 26,510 1,210,055 45.65 6.21% 9.08%
2004 3 25,819 1,236,055 47.87 6.05% 9.28%
2005 4 27,253 622,400 22.84 6.38% 4.67%
2006 14 53,549 1,819,118 33.97 12.53% 13.65%
</TABLE>
The following table shows the occupancy rate and the annual rent per square foot
as of:
<TABLE>
<CAPTION>
Annual Rent
Occupancy Rate Per Square Foot
-------------- ---------------
<S> <C> <C>
December 31, 1996 84% $31.19
December 31, 1995 88% $27.54
June 30, 1994 88% $24.91
June 30, 1993 90% $24.77
June 30, 1992 86% $21.92
</TABLE>
Centercorp, Inc. manages the Mall. Interstate Properties, through Vornado,
is the leasing agent.
At December 31, 1996, the Company's share of the $7,890,000 mortgage on the
Kings Plaza Mall is $3,945,000. The interest rate is 8.50% and it matures on
December 1, 2001. Since the Kings Plaza Mall is an unconsolidated joint venture,
the mortgage on the Kings Plaza Mall is not reflected on the Company's books and
records.
Fordham Road
The Company owns the Fordham Road property, which is located at the
intersection of Fordham Road and the Grand Concourse in the Bronx, New York. The
property includes a five-floor building containing approximately 303,000 square
feet located in the center of a shopping complex in one of the busiest shopping
areas in the Bronx. This property is leased to Caldor. On February 11, 1997,
Caldor announced that, subject to Bankruptcy Court approval, it expects to close
this store.
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Flushing
The Flushing property is located on Roosevelt Avenue and Main Street in the
downtown, commercial section of Flushing, Queens. Roosevelt Avenue and Main
Street are active shopping districts with many national retailers located in the
area. A subway entrance is located directly in front of the property with bus
service across the street. It comprises a four-floor building containing 177,000
square feet and a parking garage.
This property is subleased to Caldor (other than the portion currently being
used as a parking garage).
Third Avenue
The Company owns the Third Avenue property, a four-floor building and a
small surface parking lot located at the intersection of Third Avenue and 152nd
Street in the Bronx, New York. The store is located in a densely populated
neighborhood. This property is leased to an affiliate of Conway, a New York area
discount retailer.
Redevelopment Properties:
Lexington Avenue
As of December 31, 1996, the Company owns an approximately 92% interest in
the Seven Thirty One Limited Partnership (the "Partnership"), a limited
partnership which owns the Lexington Avenue property. This property comprises
the entire square block bounded by Lexington Avenue, East 59th Street, Third
Avenue and East 58th Street and is situated in the heart of one of Manhattan's
busiest business and shopping districts with convenient access to several subway
and bus lines. The property is located directly across the street from
Bloomingdale's flagship store and only a few blocks away from both Fifth Avenue
and 57th Street. The Company is evaluating redevelopment plans for this
property, which may involve razing the existing buildings and developing a large
multi-use building requiring capital in excess of $300,000,000 to be expended.
No redevelopment decisions have been finalized.
Paramus
The Company owns 39.3 acres of land, including its former store building,
located at the intersection of Routes 4 and 17 in Paramus, New Jersey. The
Company's property is located directly across from the Garden State Plaza
regional shopping mall, within two miles of three other regional shopping malls
and within 10 miles of New York City.
Approximately 9 acres located on the property's periphery are subject to
condemnation by the State of New Jersey. Alexander's and the New Jersey
Department of Transportation ("DOT") are negotiating an agreement, pursuant to
which the DOT will pay approximately $14,700,000 for the property subject to
condemnation and grant the Company the right to develop up to 550,000 square
feet on the remaining acreage. The agreement with the DOT is subject to
negotiation of final documentation and to certain municipal approvals. The
Company is considering razing the existing building and developing a two or
three level shopping center on the site. The estimated cost of such
redevelopment is between $60,000,000 and $70,000,000. No redevelopment decisions
have been finalized.
Kings Plaza Store
The Company's anchor store in the Kings Plaza Shopping Center is a
four-floor building containing approximately 339,000 square feet. Access to the
store is available from entrances on Flatbush Avenue and the parking lot and
from entrances on both levels of the Mall.
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In January 1997, Sears leased 289,000 square feet at this location for use
as a full-line department store expected to open in the last quarter of 1997.
The lease has a 25 year term with a ten-year renewal option. Sears has the right
to cancel the lease if Alexander's does not commit to make certain improvements
to the Kings Plaza Shopping Center estimated to cost approximately $15,000,000.
The remaining 50,000 square feet will be leased to other retailers. The Company
plans to demise the store space for use by Sears and the other retailers at a
cost of approximately $5,000,000 to $10,000,000.
Rego Park II
The Company owns two additional land parcels adjacent to the Rego Park I
property. They are the entire square block bounded by the Long Island
Expressway, 97th Street, 62nd Drive and Junction Boulevard and a smaller parcel
of approximately one-half square block at the intersection of 97th Street and
the Long Island Expressway (the "Z Parcel"). Both parcels are currently zoned
for residential use with the Z parcel having a commercial zoning overlay. Both
parcels are being used for public paid parking. The Company intends to continue
to use these properties for paid parking while it evaluates the feasibility of
having these properties re-zoned for commercial use.
Insurance
The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance with respect to its properties with policy
specifications and insured limits customarily carried for similar properties.
Management of the Company believes that the Company's insurance coverage
conforms to industry norms.
Item 3. Legal Proceedings
Neither the Company nor any of its subsidiaries is a party to, nor is their
property the subject of, any material pending legal proceeding other than
routine litigation incidental to their businesses. The Company believes that
these legal actions will not be material to the Company's financial condition or
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1996.
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Executive Officers of the Company
The following is a list of the names, ages, principal occupations and
positions with the Company of the executive officers of the Company and the
positions held by such officers during the past five years.
<TABLE>
<CAPTION>
Principal Occupation, Position and Office (current and during the past
Name Age five years with the Company unless otherwise stated)
---- --- ----------------------------------------------------
<S> <C> <C>
Stephen Mann 59 Chairman of the Board of Directors since March 2, 1995; Interim
Chairman of the Board of Directors from August, 1994 to March 1,
1995; Chairman of the Clifford Companies since 1990; and, prior
thereto, counsel to Mudge Rose Guthrie Alexander & Ferdon, attorneys.
Steven Roth 55 Chief Executive Officer of the Company since March 2, 1995;
Chairman of the Board and Chief Executive Officer of Vornado since
May 1989; Chairman of Vornado's Executive Committee of the Board
since April 1988; and the Managing General Partner of Interstate, a
developer and operator of shopping centers and an investor in securities
and partnerships.
Joseph Macnow 51 Vice President and Chief Financial Officer of the Company since
August 1995 and Vice President and Chief Financial Officer of Vornado
since 1985.
Brian M. Kurtz 48 Executive Vice President and Chief Administrative Officer from July,
1994 to the present; Senior Vice President and Chief Administrative
Officer from March 1993 to July 1994; Senior Vice President and
Controller from January 1989 to March, 1993; and Vice President-
Controller from December 1985 to January 1989.
</TABLE>
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Equity and Related Stockholder Matters
The common stock, par value $1.00 per share, of the Company is traded on
the New York Stock Exchange under the symbol "ALX". Set forth below are the high
and low sales prices for the Company's common stock for each full quarterly
period within the two most recent years:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1st Quarter 1996 $ 69 5/8 $ 65 1/4
2nd Quarter 1996 74 66 1/4
3rd Quarter 1996 73 1/4 67 1/2
4th Quarter 1996 80 69 1/4
</TABLE>
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1st Quarter 1995 $ 54 $ 49 3/4
2nd Quarter 1995 58 5/8 51 3/8
3rd Quarter 1995 61 3/8 55 1/4
4th Quarter 1995 69 3/4 60
</TABLE>
As of December 31, 1996, there were approximately 2,000 holders of
record of the Company's common stock. The Company pays dividends only if, as and
when declared by its Board of Directors. No dividends were paid in 1996 and
1995. In order to qualify as a REIT, the Company generally is required to
distribute as a dividend 95% of its taxable income. At December 31, 1996, the
Company had net operating loss carryovers ("NOL's") of approximately
$138,000,000. Under the Internal Revenue Code of 1986, as amended, the Company's
NOL's generally would be available to offset the amount of the Company's REIT
taxable income that otherwise would be required to be distributed as a dividend
to stockholders.
-13-
<PAGE> 14
Item 6. Selected Financial Data
Summary of Selected Financial Data
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------------------------------------
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993(1)
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Operating data:
Total revenues $ 21,833 $ 14,761 $ 13,206 $ 10,150
Gains on sales of real estate
leases -- -- $ 161 $ 7,686
Income/(loss) from continuing
operations $ 13,097(3) $ (7,696) $ 4,033 $ 9,644
Income/(loss) from discontinued
operations 11,602 10,133 -- (280)
Cumulative effect of change in
accounting -- -- -- --
-------- --------- --------- --------
Net income/(loss) $ 24,699 $ 2,437 $ 4,033 $ 9,364
======== ========= ========= ========
Income/(loss) per common share:
Continuing operations $ 2.62 $ (1.54) $ .81 $ 1.93
Discontinued operations 2.32 2.03 -- (.05)
Cumulative effect of change in
accounting -- -- -- --
-------- --------- --------- --------
Net income/(loss) per share $ 4.94 $ .49 $ .81 $ 1.88
======== ========= ========= ========
Balance sheet data:
Total assets $211,585 $ 198,541 $ 109,419 $ 92,917
Real estate 181,005 150,435 84,658 70,882
Debt 192,347 182,883 52,842 43,520
Stockholders' equity/(deficit) 5,563 (19,136) (21,573) (25,606)
</TABLE>
<TABLE>
<CAPTION>
Five Months
Ended (1) Fiscal Year Ended
------------ ------------------------------
Dec. 31, 1993 July 31, 1993(2) July 25, 1992
------------ ------------- -------------
<S> <C> <C> <C>
Operating data:
Total revenues $ 5,596 $ 5,948 $ 2,207
Gains on sales of real estate
leases -- $ 28,779 --
Income/(loss) from continuing
operations $ 946 $ 27,151 $ (14,630)
Income/(loss) from discontinued
operations -- (477) (118,198)
Cumulative effect of change in
accounting -- (21,449) --
-------- --------- ---------
Net income/(loss) $ 946 $ 5,225 $(132,828)
======== ========= =========
Income/(loss) per common share:
Continuing operations $ .19 $ 5.45 $ (2.94)
Discontinued operations -- (.09) (23.75)
Cumulative effect of change in
accounting -- (4.31) --
-------- --------- ---------
Net income/(loss) per share $ .19 $ 1.05 $ (26.69)
======== ========= =========
Balance sheet data:
Total assets $ 92,917 $ 113,572 $ 113,384
Real estate 70,882 71,325 84,906
Debt 43,520 44,359 53,187
Stockholders' equity/(deficit) (25,606) (26,552) (32,980)
</TABLE>
1. In November 1993, the Company changed to a calendar year from a fiscal year
ending on the last Saturday in July. The amounts for the year ended December
31, 1993 are included for comparative purposes only.
2. Includes 53 weeks.
3. Includes income from the gain on reversal of the Company's postretirement
healthcare liability of $14,372,000.
-14-
<PAGE> 15
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Continuing Operations - Years Ended December 31, 1996
and December 31, 1995
The Company's revenues, which consist of property rentals, tenant
expense reimbursements and equity in income of unconsolidated joint venture were
$21,833,000 in 1996, compared to $14,761,000 in 1995, an increase of $7,072,000
or 47.9%.
Property rentals were $15,952,000 in 1996, compared to $10,239,000 in
1995, an increase of $5,713,000 or 55.8%. This increase resulted primarily from
the commencement of rents and paid parking at the Rego Park I property in March
1996.
Tenant expense reimbursements were $1,872,000 in 1996, compared to
$1,188,000 in 1995, an increase of $684,000 or 57.6%. This increase reflects a
corresponding increase in operating expenses passed through to tenants and was
largely the result of the commencement of rents and paid parking at the Rego
Park I property in March 1996.
Equity in income of unconsolidated joint venture (the Kings Plaza
Shopping Center) was $4,009,000 in 1996, compared to $3,334,000 in 1995, an
increase of $675,000 or 20.2%. This increase resulted primarily from an increase
in rent from mall tenants.
Operating expenses were $5,562,000 in 1996, compared to $3,807,000 in
1995, an increase of $1,755,000. This increase resulted primarily from the
commencement of operations at the Rego Park I property as noted above.
General and administrative expenses were $4,402,000 in 1996, compared to
$4,820,000 in 1995, a decrease of $418,000. This decrease resulted primarily
from lower professional fees.
Depreciation and amortization expense was $2,128,000 in 1996 compared to
$1,858,000 in 1995, an increase of $270,000. This increase resulted primarily
from the commencement of operations at the Rego Park I property as noted above.
Interest and debt expense was $13,934,000 in 1996, compared to
$13,156,000 in 1995, an increase of $778,000. This increase resulted primarily
from interest on the Rego Park I debt being charged to income this year (as a
result of the property becoming operational), whereas in the prior year such
interest was capitalized. The increase in interest expense was partially offset
by additional interest capitalized in 1996 on other redevelopment projects.
Interest and other income, net was $2,918,000 in 1996 compared to
$1,716,000 in 1995, an increase of $1,202,000. This increase resulted primarily
from (i) the amortization of deferred gains of $794,000 in connection with the
Company's postretirement healthcare benefits, (ii) workmen's compensation
insurance and real estate tax refunds aggregating $351,000 and (iii) a
reimbursement of expenses of $764,000 received in 1996 from the Company's
partner in the unconsolidated joint venture, partially offset by (iii) a
decrease in interest income of $745,000 as a result of a lower average cash
invested this year than in the prior year.
Effective October 1, 1996, the Company made significant changes in the
manner in which it provides healthcare benefits to its retirees. As a result,
the Company has reversed its liability for postretirement healthcare costs
resulting in the recognition of a $14,372,000 gain.
-15-
<PAGE> 16
Continuing Operations
Years Ended December 31, 1995 and December 31, 1994
The Company's revenues, which consist of property rentals, tenant
expense reimbursements, and equity in income of unconsolidated joint venture
were $14,761,000 in 1995, compared to $13,206,000 in 1994, an increase of
$1,555,000 or 11.8%.
Property rentals and tenant expense reimbursements in 1995 did not
change significantly from the prior year.
Equity in income from the Kings Plaza Shopping Center was $3,334,000 in
1995, compared to $1,821,000 in 1994, or increase of $1,153,000. This increase
resulted primarily from an increase in rent and tenant expense reimbursements
from mall tenants.
Operating expenses were $3,807,000 in 1995, compared to $2,246,000 in
1994, an increase of $1,561,000. Of this increase (i) $714,000 was higher real
estate taxes, maintenance and utility expenses, which were primarily passed
through to tenants, (ii) $700,000 was fees under the Management Agreement and
(iii) $147,000 was bad debt expense.
General and administrative expenses were $4,820,000 in 1995, compared to
$2,983,000 in 1994, an increase of $1,837,000. This increase resulted from (i)
professional fees of $1,134,000, primarily related to the Company's REIT
formation, (ii) non-recurring payroll and other costs of $355,000 related to the
Company's closing of its New York City office and (iii) fees under the
Management Agreement ($1,800,000) exceeding 1994 expense levels by $348,000.
Depreciation and amortization expense in 1995 did not change
significantly from 1994.
Reorganization costs were $1,938,000 in 1995, compared to $3,721,000 in
1994, a decrease of $1,783,000. These expenses were primarily due to
professional fees incurred in connection with investigating financing
alternatives, becoming a REIT and bankruptcy expenses.
Interest and debt expense was $13,156,000 in 1995, compared to
$3,331,000 in 1994, an increase of $9,825,000. Of this increase approximately
(i) $6,000,000 was attributable to higher levels of debt, (ii) $200,000 was
attributable to higher interest rates, (iii) $1,800,000 was attributable to the
amortization of debt issuance costs, and (iv) $2,200,000 resulted primarily from
interest and debt expense for 1994 being charged against the accrual for losses
from discontinued operations. This increase was partially offset by a $400,000
increase in interest capitalized during development.
Interest and other income, net was $1,716,000 in 1995 compared to
$4,929,000 in 1994, a decrease of $3,213,000. This decrease resulted from other
income of $4,550,000 recorded in 1994 from the settlement of a zoning-related
matter, partially offset by higher interest income earned in 1995 on increased
average cash invested due to additional borrowings.
As a result of the Company's election 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.
Discontinued Operations - Years Ended December 31, 1996 and December 31, 1995
The Company recorded income from discontinued operations of $11,602,000
in 1996 comprised of (i) $9,602,000 from the settlement of a tax certiorari
proceeding against the County of Nassau for overpayment of taxes on its former
Valley Stream Store property and (ii) $2,000,000 from the reduction of other
liabilities of discontinued operations to amounts estimated to be needed to
resolve these liabilities at December 31, 1996.
In 1995, the Company recorded income from discontinued operations of
$10,133,000 comprised of (i) $6,133,000 from the settlement of a tax certiorari
proceeding with the City of New York regarding the Kings Plaza Shopping Center
and (ii) $4,000,000 resulting from the reduction of other liabilities of
discontinued operations to amounts considered necessary to cover the remaining
estimates of these liabilities at December 31, 1995.
-16-
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
Alexander's current operating properties (five of its nine properties)
do not generate sufficient cash flow to pay all of its expenses. The Company's
four non-operating properties (Lexington Avenue, Paramus, the Kings Plaza Store
and Rego Park II) are in various stages of redevelopment. As rents commence from
a portion of the redevelopment properties, the Company expects that cash flow
will become positive.
In connection with the redevelopment of the existing building and the
construction of a multi-level parking structure on its Rego Park I property,
the Company has expended approximately $37,200,000 and expects to expend up to
an additional $3,400,000 to complete the project. At December 31, 1996, there
was $1,700,000 available under a $60,000,000 construction loan to fund these
expenditures. The Company estimates that its capital expenditure requirements
for other redevelopment projects will include: (i) the redevelopment of the
Paramus property, which may include razing the existing building (in which
case, the carrying cost of approximately $5,400,000 would be written off), at a
cost of approximately $60,000,000 to $70,000,000, (ii) the redevelopment of the
Kings Plaza Store property at a cost of approximately $5,000,000 to $10,000,000
and (iii) improvements to the Kings Plaza Shopping Center at a cost of
approximately $15,000,000. Further, the Company is evaluating redevelopment
plans for the Lexington Avenue site, which may involve razing the existing
buildings (in which case, the carrying cost of approximately $15,000,000 would
be written off) and developing a large multi-use building requiring capital in
excess of $300,000,000 to be expended. 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. Caldor accounted for approximately 36% and 56% of
the Company's consolidated revenues for the years ended December 31, 1996 and
1995. The loss of property rental payments under either of these leases could
have a material adverse effect on the financial condition and results of
operations of the Company. Caldor failed to meet certain financial tests
required under the Company's Fordham Road mortgage. As a result, commencing
January 1, 1996 the Company was required to remit the net cash flow from the
Fordham Road Property into an account of the lender as additional payments under
the loan. The amount remitted to the lender for 1996 was $590,000. On February
11, 1997 Caldor announced, that subject to Bankruptcy Court approval, it expects
to close the Fordham Road store in May 1997. The annual base rental revenue
under this lease is $3,537,000.
The $60,000,000 construction loan from a group of banks secured by a
mortgage on the Rego Park I property matures on April 1, 1997 (extendable at the
Company's option for an additional year). On February 27, 1997, the Company
obtained a commitment from one of the existing bank lenders to make a one-year
$75,000,000 loan secured by a mortgage on this property and guaranteed by the
Company. The proceeds of this loan will be used to repay the existing
construction loan and provide the Company with an additional $15,000,000 of
working capital. The new loan will bear interest at LIBOR plus 1.00% or Federal
Funds Rate plus .50% and provides for a one-time facility fee of .125%. The
Company has agreed with the bank to refinance the new loan through the issuance
of rated commercial mortgage backed securities later this year.
As at December 31, 1996, a summary of maturities of debt is as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C> <C>
1997 $ 520
1998 169,307
1999 628
2000 21,892
--------
$192,347
========
</TABLE>
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. Alexander's continues to evaluate its needs for capital
which may be raised through (a) property specific or corporate borrowing, (b)
the sale of securities and (c) asset sales.
-17-
<PAGE> 18
In addition, the Company may receive proceeds from condemnation
proceedings of a portion of its Paramus property.
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.
CASH FLOWS
Year Ended December 31, 1996
Cash provided by operating activities of $8,574,000 was comprised of net
income of $24,699,000 (including income from discontinued operations of
$11,602,000), offset by (i) adjustments for non-cash items of $13,890,000 (ii)
the payment of liabilities of discontinued operations of $1,175,000, and (iii)
the net change in operating assets and liabilities of $1,060,000. The
adjustments for non-cash items are comprised of (i) the reversal of the
Company's postretirement healthcare liability of $14,372,000, (ii) the change in
other liabilities of discontinued operations of $2,000,000, and (iii) the effect
of straight-lining of rental income of $1,756,000, offset by (iv) depreciation
and amortization of $4,105,000, and (v) equity in income of unconsolidated joint
venture of $133,000.
Net cash used in investing activities of $21,029,000 was comprised of
capital expenditures of $32,314,000, offset by the release of cash restricted
for both operating liabilities ($9,228,000) and construction financing
($2,057,000).
Net cash provided by financing activities of $9,464,000 was comprised of
proceeds from the issuance of construction financing of $10,527,000 on the Rego
Park I property, offset by repayments of debt of $1,063,000.
Year Ended December 31, 1995
Cash used in operating activities of $33,210,000 was comprised of: (i)
the payment of liabilities of discontinued operations of $29,488,000, (ii)
adjustments for non-cash items of $5,260,000 and (iii) a net change in operating
assets and liabilities of $899,000, offset by net income of $2,437,000
(including income from discontinued operations of $10,133,000). The adjustments
for non-cash items are comprised of (i) change in other liabilities of
discontinued operations of $4,322,000, (ii) equity in income of unconsolidated
joint venture of $4,285,000 and (iii) the effect of straight-lining of rental
income of $1,340,000, offset by depreciation and amortization of $4,687,000.
Net cash used in investing activities of $62,838,000 was comprised of
(i) capital expenditures of $45,933,000 and (ii) cash restricted for both
operating liabilities ($10,724,000) and construction financing ($6,181,000).
Net cash provided by financing activities of $102,156,000 was comprised
of proceeds from the issuance of debt of $142,034,000 (net of deferred debt
expense), offset by repayments of debt of $39,878,000.
Year Ended December 31, 1994
Cash used in operating activities of $1,631,000 for the year ended
December 31, 1994, was comprised of: (i) the payment of liabilities of
discontinued operations of $5,229,000 and (ii) adjustments for non-cash items of
$590,000, offset by (iii) net income of $4,033,000 and (iv) a net change in
operating assets and liabilities of $155,000. The adjustments for non-cash items
are comprised of (i) equity in income of unconsolidated joint venture of
$1,260,000 and (ii) the effect of straight-lining of rental income of
$1,581,000, offset by depreciation and amortization of $2,251,000.
Net cash used in investing activities of $10,395,000 was comprised of
additions to real estate of $11,170,000, offset by the use of restricted cash of
$775,000.
Net cash provided by financing activities of $7,336,000 was comprised of
proceeds from the issuance of debt (net of deferred debt expense) of $8,111,000,
offset by $775,000 of debt repayments.
-18-
<PAGE> 19
CERTAIN INDEBTEDNESS
As at December 31, 1996, debt consists of:
(1) First mortgage loans are comprised of:
(a) A $23,611,000 five year loan maturing February 24, 2000, secured
principally by a mortgage on the Company's Fordham Road property.
The loan bears annual interest at 30 day LIBOR plus 4.25% (9.69% at
December 31, 1996), 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%. The weighted average interest rate for 1996
was 9.88%. Beginning in year four, all cash flow of the property,
after debt service, will further amortize the loan. The loan is
prepayable without penalty. Caldor, who is the tenant at this
property, failed to meet certain financial tests under the mortgage.
As a result, commencing January 1, 1996 the Company was required to
remit the net cash flow of the property into an account of the
lender as additional payments under the loan. The amount remitted to
the lender for 1996 was $590,000.
(b) A $13,591,000 loan maturing December 31, 1998, secured principally
by a mortgage on the Company's Paramus property. The loan bears
interest at a floating rate (8.22% at December 31, 1996), fixed
annually, equal to 2.5% above the one-year U.S. Treasury bill rate
with a floor of 6.5%. The weighted average interest rate for 1996
was 8.11%. The loan contains customary mortgage covenants and events
of default. The loan is prepayable at any time.
(2)A $75,000,000 three year loan maturing March 15, 1998, 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 I property. The loans mature on April 1, 1997 (extendable at
the Company's option for an additional year). As of December 31, 1996,
approximately $58,300,000 was funded under such construction loan and
there were no borrowings under the $25,000,000 bridge loan. The weighted
average interest rate for 1996 was 7.28%. On February 27, 1997, the
Company obtained a commitment from one of the existing bank lenders to
make a one-year $75,000,000 loan secured by a mortgage on this property
and guaranteed by the Company. The proceeds of this loan will be used to
repay the existing construction loan and provide the Company with an
additional $15,000,000 of working capital. The new loan will bear
interest at LIBOR plus 1.00% of Federal Funds Rate plus .50% and
provides for a one-time facility fee of .125%. The Company has agreed
with the bank to refinance the new loan through the issuance of rated
commercial mortgage backed securities later this year.
(4)In January 1995, the Seven Thirty One Limited Partnership ("the
Partnership"), redeemed the first portion of the non-affiliated 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% (9.25% at December 31, 1996) and is
secured by a third mortgage on the Lexington Avenue property. The
weighted average interest rate for 1996 was 9.25%. The non-affiliated
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%.
-19-
<PAGE> 20
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Independent Auditors' Report 21
Consolidated Balance Sheets at December 31, 1996 and 1995 22
Consolidated Statements of Operations for the
Years Ended December 31, 1996, 1995 and 1994 24
Consolidated Statements of Stockholders' Equity/(Deficit) for the
Years Ended December 31, 1996, 1995 and 1994 25
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1996, 1995 and 1994 26
Notes to Consolidated Financial Statements 27
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
-20-
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
of Alexander's, Inc.
Saddle Brook, New Jersey
We have audited the accompanying consolidated balance sheets of Alexander's,
Inc. and Subsidiaries (the "Company") as of December 31, 1996 and 1995 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years ended December 31, 1996, 1995 and 1994. Our audits
also included the financial statement schedules listed in the index at Item
14(a)(2). These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1996, and
1995, and the results of their operations and their cash flows for the years
ended December 31, 1996, 1995 and 1994 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedules,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 27, 1997
-21-
<PAGE> 22
ALEXANDER'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share amounts)
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
ASSETS:
Real estate, at cost:
Land $ 45,999 $ 46,082
Buildings, leaseholds and leasehold improvements
(including $242 and $34,996 of construction
in progress at December 31, 1996 and 1995) 114,280 96,238
Capitalized expenses and predevelopment costs 47,488 33,165
-------- --------
Total 207,767 175,485
Less accumulated depreciation and amortization (39,375) (37,794)
-------- --------
168,392 137,691
Investment in unconsolidated joint venture 12,613 12,744
-------- --------
Real estate, net 181,005 150,435
Cash and cash equivalents 5,480 8,471
Restricted cash 5,620 16,905
Accounts receivable, net of allowance for doubtful accounts
of $147 in 1996 and 1995 201 180
Receivable arising from the straight-lining of rents, net 5,984 4,228
Deferred lease and other expenses 9,966 10,460
Deferred debt expense 2,364 4,341
Other assets 965 3,521
-------- --------
TOTAL ASSETS $211,585 $198,541
======== ========
</TABLE>
See notes to consolidated financial statements
-22-
<PAGE> 23
ALEXANDER'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(amounts in thousands except share amounts)
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Continuing Operations:
Debt $ 192,347 $ 182,883
Amounts due to Vornado Realty Trust and its affiliate 6,207 8,482
Liability for postretirement healthcare benefits -- 15,526
Accounts payable and accrued liabilities 4,246 4,389
Minority interest 600 600
--------- ---------
Total continuing operations 203,400 211,880
--------- ---------
Discontinued Retail Operations:
Accounts payable and accrued liabilities 976 2,328
Liabilities subject to settlement under reorganization proceedings 1,646 3,469
--------- ---------
Total discontinued retail operations 2,622 5,797
--------- ---------
TOTAL LIABILITIES 206,022 217,677
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock: no par value; authorized, 3,000,000 shares;
issued, none
Common stock: $1.00 par value per share; authorized, 10,000,000 shares;
issued, 5,173,450 shares 5,174 5,174
Additional capital 24,843 24,843
Deficit (23,494) (48,193)
--------- ---------
6,523 (18,176)
Less treasury shares, 172,600 shares at cost (960) (960)
--------- ---------
Total stockholders' equity (deficit) 5,563 (19,136)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 211,585 $ 198,541
========= =========
</TABLE>
See notes to consolidated financial statements
-23-
<PAGE> 24
ALEXANDER'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Property rentals $15,952 $10,239 $10,283
Expense reimbursements 1,872 1,188 1,102
Equity in income of unconsolidated joint venture 4,009 3,334 1,821
-------- -------- --------
Total revenues 21,833 14,761 13,206
-------- -------- --------
Expenses:
Operating (including management fee of $840 and $700
to Vornado in 1996 and 1995) 5,562 3,807 2,246
General and administrative (including management
fee of $2,160 and $1,800 to Vornado in 1996 and 1995) 4,402 4,820 2,983
Depreciation and amortization 2,128 1,858 1,821
Reorganization costs -- 1,938 3,721
-------- -------- --------
Total expenses 12,092 12,423 10,771
-------- -------- --------
Operating income 9,741 2,338 2,435
Interest and debt expense (including interest on loan
from Vornado in 1996 and 1995) (13,934) (13,156) (3,331)
Interest and other income, net 2,918 1,716 4,929
Gain on reversal of liability for post-retirement
healthcare benefits 14,372 -- --
-------- ---------- ----------
Income (loss) before reversal of deferred taxes 13,097 (9,102) 4,033
Reversal of deferred taxes -- 1,406 --
-------- -------- ---------
Income (loss) from continuing operations 13,097 (7,696) 4,033
Income from discontinued operations 11,602 10,133 --
-------- -------- ---------
NET INCOME $24,699 $ 2,437 $ 4,033
======= ======= ========
Net Income (Loss) Per Share:
Continuing operations $ 2.62 $(1.54) $ .81
Discontinued operations 2.32 2.03 --
------ ------ -------
Net income $ 4.94 $ .49 $ .81
====== ======= ======
</TABLE>
See notes to consolidated financial statements.
-24-
<PAGE> 25
ALEXANDER'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(amounts in thousands)
<TABLE>
<CAPTION>
Common Additional Treasury Stockholders'
Stock Capital Deficit Stock Equity (Deficit)
------ ------- -------- ----- ----------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $5,174 $24,843 $(54,663) $(960) $(25,606)
Net income -- -- 4,033 -- 4,033
------ ------- -------- ----- --------
Balance, December 31, 1994 5,174 24,843 (50,630) (960) (21,573)
Net income -- -- 2,437 -- 2,437
------ ------- -------- ----- --------
Balance, December 31, 1995 5,174 24,843 (48,193) (960) (19,136)
Net income -- -- 24,699 -- 24,699
------ ------- -------- ----- --------
Balance, December 31, 1996 $5,174 $24,843 $(23,494) $(960) $ 5,563
====== ======= ======== ====== ========
</TABLE>
See notes to consolidated financial statements.
-25-
<PAGE> 26
ALEXANDER'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations $ 13,097 $ (7,696) $ 4,033
Adjustments to reconcile net income/(loss) to
net cash provided by (used in) continuing
operating activities:
Depreciation and amortization (including debt
issuance costs) 4,105 4,687 2,251
Gain on reversal of postretirement healthcare liability (14,372) -- --
Straight-lining of rental income, net (1,756) (1,340) (1,581)
Equity in income of unconsolidated joint venture
(net of distributions of $(4,142), $(951) and $(583)
for the years ended December 31, 1996, 1995
and 1994, respectively) 133 (4,285) (1,260)
Change in assets and liabilities:
Accounts receivable (21) (137) --
Note receivable -- 4,550 (4,550)
Amounts due to Vornado Realty Trust and its affiliate (2,094) (2,001) 591
Liability for postretirement healthcare benefits (1,154) (356) --
Accounts payable and accrued liabilities (143) (502) 892
Other 2,352 (2,453) 3,222
-------- --------- --------
Net cash provided by (used in) operating activities
of continuing operations 147 (9,533) 3,598
-------- --------- --------
Income from discontinued operations 11,602 10,133 --
Payment of liabilities of discontinued operations (1,175) (29,488) (5,229)
Change in other liabilities of discontinued operations (2,000) (4,322) --
-------- --------- --------
Net cash provided by (used in) discontinued operations 8,427 (23,677) (5,229)
-------- --------- --------
Net cash provided by (used in) operating activities 8,574 (33,210) (1,631)
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (32,314) (45,933) (11,170)
Cash restricted for construction financing 2,057 (6,181) 775
Cash restricted for operating liabilities 9,228 (10,724) --
-------- --------- --------
Net cash used in investing activities (21,029) (62,838) (10,395)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt 10,527 147,806 10,000
Debt repayments (1,063) (39,878) (775)
Deferred debt expense -- (5,772) (1,889)
-------- --------- --------
Net cash provided by financing activities 9,464 102,156 7,336
-------- --------- --------
Net (decrease) increase in cash and cash equivalents (2,991) 6,108 (4,690)
Cash and cash equivalents at the beginning of the
period 8,471 2,363 7,053
-------- --------- --------
Cash and cash equivalents at the end of the period $ 5,480 $ 8,471 $ 2,363
======== ========= ========
SUPPLEMENTAL INFORMATION
Cash payments for interest $ 20,140 $ 16,352 $ 5,133
======== ========= ========
Capitalized interest $ 8,552 $ 6,575 $ 1,718
======== ========= ========
</TABLE>
The 1995 amounts exclude an increase in real estate of $20,838 and debt of
$21,812 and a reduction in minority interest of $974 as a result of the Company
acquiring a partnership interest (see Note 5).
See notes to consolidated financial statements.
-26-
<PAGE> 27
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Alexander's is a real estate investment trust engaged in the business of
leasing, managing, developing and redeveloping real estate properties, focusing
on the properties where its department stores (which ceased operations in 1992)
formerly operated. The Company's properties are located in mature, densely
populated areas in New York City and Paramus, New Jersey.
In May 1992, at a time when the Company's business consisted of retail store
operations, the Company and sixteen of its subsidiaries filed petitions for
relief under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). In September 1993, the Bankruptcy Court confirmed the Joint Plan of
Reorganization (the "Plan"), pursuant to which the Company and its subsidiaries
reorganized their business as a real estate company.
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 approximately $24,000,000. 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.
Alexander's current operating properties (five of its nine properties) do not
generate sufficient cash flow to pay all of its expenses. The Company's four
non-operating properties (Lexington Avenue, Paramus, Kings Plaza Store and Rego
Park II) are in various stages of redevelopment. As rents commence from a
portion of the development properties, the Company expects that cash flow will
become positive. See Note 6 - "Leases" for significant tenants.
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. Alexander's continues to evaluate its needs for capital,
which may be raised 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 a condemnation proceeding -- see Note 10 - "Contingencies
- -Paramus Property". 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, and a partnership in
which the Company held a majority interest at December 31, 1996. Investments in
real estate and other property which are 50% owned joint ventures are accounted
for under the equity method. All material intercompany accounts and transactions
have been eliminated.
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles. Management has made estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
-27-
<PAGE> 28
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective January 1, 1995, to be consistent with prevalent real estate
industry practice, the Company changed the presentation of its consolidated
statements of operations to show tenant reimbursements, previously offset
against operating expenses, as part of revenues. Further, operating expenses and
general and administrative expenses have been shown separately. Prior period's
amounts have been reclassified to conform with the current year's presentation.
Cash and Cash Equivalents -- The Company includes in cash and cash
equivalents both cash and short-term highly liquid investments purchased with
original maturities of three months or less. Cash and cash equivalents does not
include cash restricted for construction financing and operating liabilities
which is disclosed separately.
Real Estate and Other Property -- Real estate and other property is carried
at cost, net of accumulated depreciation. Depreciation is provided on buildings
and improvements on a straight-line basis over their estimated useful lives.
When real estate and other property is undergoing development activities, all
property operating expenses, including interest expense, are capitalized to the
cost of the real property to the extent that management believes such costs are
recoverable through the value of the property.
The Company's policy, pursuant to the Financial Accounting Standards Board
Statement No. 121, "Accounting For the Impairment of Long-Lived Assets and For
Long-Lived Assets to be Disposed Of" (SFAS No. 121), is to annually assess any
impairment in value by making a comparison of the current and projected
operating cash flows of each of its properties over its remaining useful life on
an undiscounted basis, to the carrying amount of such property. Such carrying
amount would be adjusted, if necessary, to reflect an impairment in the value of
the asset.
Deferred Lease Expense -- The Company capitalizes the costs incurred in
connection with obtaining long-term leases. Deferred lease expense is amortized
on the straight-line method over the initial terms of the leases.
Deferred Finance and Debt Expense -- The Company capitalizes the costs
incurred in connection with obtaining short-term or long-term debt or
refinancing existing debt. These costs are amortized on the straight-line method
over the initial terms of the debt, which approximates the interest method.
Leases -- All leases are operating leases whereby rents and reimbursements of
operating expenses are recorded as real estate operating revenue. The
straight-line basis is used to recognize rents under leases entered into which
provide for varying rents over the lease terms.
Income Taxes -- The Company elected, with its federal income tax return for
1995, to be taxed as a real estate investment trust ("REIT") under sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify for taxation as a REIT, the Company must meet various federal income tax
law requirements. In general, a REIT that distributes to its stockholders at
least 95% of its taxable income as a dividend for a taxable year and that meets
certain other conditions will not be taxed on income distributed that year.
The net basis in the Company's assets and liabilities for tax purposes is
approximately $53,000,000 lower than the amount reported for financial statement
purposes.
Reorganization Costs -- Reorganization costs consist of legal, accounting and
other professional fees incurred in connection with consultations on
restructuring alternatives of the Company.
Amounts Per Share -- Amounts per share are computed based upon the weighted
average number of shares outstanding during the period.
-28-
<PAGE> 29
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENT IN UNCONSOLIDATED 50% OWNED JOINT VENTURE (KINGS PLAZA MALL)
The Kings Plaza Shopping Center (the "Center") comprises a two-level mall
(the "Kings Plaza Mall"), and two four-level anchor stores. The Company owns one
anchor store in the center(leased to Sears for use as a full-line department
store expected to open in the last quarter of 1997) and an undivided one-half
interest in the Kings Plaza Mall. The other anchor store is owned and operated
as a Macy's store by Federated Department Stores, Inc. ("Federated").
Summary financial information for the Kings Plaza Mall is as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
Year Ended Six Months Ended -----------------------
Dec. 31, 1996 Dec. 31 1995 1995 1994
------------- ------------ ---- ----
<S> <C> <C> <C> <C>
Operating revenue $26,530 $14,571 $24,828 $24,635
------- ------- ------- -------
Operating costs 16,511 9,035 18,176 17,662
Depreciation and amortization 1,269 593 1,101 1,147
Interest expense 838 465 1,204 1,945
------- ------- ------- -------
18,618 10,093 20,481 20,754
------- ------- ------- -------
Income before taxes $ 7,912 $ 4,478 $ 4,347 $ 3,881
======= ======= ======= =======
Assets $35,400 $40,700 $28,100 $33,800
======= ======= ======= =======
Liabilities $16,300 $20,100 $14,900 $19,500
======= ======= ======= =======
</TABLE>
In December 1995, the Company completed a tax certiorari proceeding with the
City of New York regarding the Kings Plaza Shopping Center property. The Company
and its joint venture partner agreed with the City of New York to a reduction in
the assessed values covering the tax years 1988/1989 through 1995/1996,
generating tax credits of $28,350,000 (of which $6,050,000 was applied to 1995
taxes). The Company's allocated share of these credits, approximately
$8,600,000, net of expenses, was recorded as follows: (i) $6,100,000 as income
from discontinued operations and (ii) $2,500,000 as a reduction of previously
capitalized real estate taxes. As a result of this settlement, $6,700,000 of the
$8,000,000 held in escrow for unpaid real estate taxes was released in 1996 and
the balance is expected to be released in the near future.
4. DISCONTINUED OPERATIONS
The Company recorded income from discontinued operations of $11,602,000 in
1996, and $10,133,000 in 1995 of which $9,602,000 and $6,133,000 resulted from
the settlement of tax certiorari proceedings and $2,000,000 and $4,000,000
resulted from the reduction of other liabilities of discontinued operations to
amounts considered necessary to cover the remaining estimates of these
liabilities. Management periodically evaluates the reserves and adjusts them
accordingly. A reconciliation of the liabilities from the discontinued retail
operations is as follows:
<TABLE>
<CAPTION>
(amounts in thousands)
Year Ended December 31,
-----------------------
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Balance at beginning of period $ 5,797 $ 43,160 $ 60,991
Adjustments during period (2,000) (4,000) --
Liability for postretirement
healthcare benefits reclassified to
continuing operations from a separate
line in discontinued operations -- -- (15,882)
Utilized during period (1,175) (33,363) (1,949)
------- -------- --------
Balance at end of period $ 2,622 $ 5,797 $ 43,160
======= ======== ========
</TABLE>
-29-
<PAGE> 30
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. DEBT
Debt comprises:
<TABLE>
<CAPTION>
(amounts in thousands) December 31, December 31,
1996 1995
-------- --------
<S> <C> <C>
First mortgage loans, payable to 2000, with interest
rates ranging from 8.22% to 9.84% at
December 31, 1996 and 8.08% to 10.28% at
December 31, 1995(1) 37,202 $ 38,265
Term loans payable to 1998, with interest rates
ranging from 9.86% to 16.43% at
December 31, 1996 and 1995, respectively(2) 75,000 75,000
Construction loan, payable to 1998, with average
interest rates of 7.28% and 7.36% at
December 31, 1996 and 1995(3) 58,333 47,806
Secured note, due in 1998, with interest at 9.25%
and 9.50% at December 31, 1996 and 1995(4) 21,812 21,812
-------- --------
$192,347 $182,883
======== ========
</TABLE>
(1) First mortgage loans are comprised of:
(a) A $23,611,000 five year loan maturing February 24, 2000, secured
principally by a mortgage on the Company's Fordham Road property.
The loan bears annual interest at 30 day LIBOR plus 4.25% (9.69% at
December 31, 1996), 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%. The weighted average interest rate for 1996
was 9.88%. Beginning in year four, all cash flow of the property,
after debt service, will further amortize the loan. The loan is
prepayable without penalty. Caldor, Inc. ("Caldor"), who is the
tenant at this property, failed to meet certain financial tests
under the mortgage. As a result, commencing January 1, 1996 the
Company was required to remit the net cash flow of the property into
an account of the lender as additional payments under the loan. The
amount remitted to the lender for 1996 was $590,000.
(b) A $13,591,000 loan maturing December 31, 1998, secured principally
by a mortgage on the Company's Paramus property. The loan bears
interest at a floating rate (8.22% at December 31, 1996), fixed
annually, equal to 2.5% above the one-year U.S. Treasury bill rate
with a floor of 6.5%. The weighted average interest rate for 1996
was 8.11%. The loan contains customary mortgage covenants and events
of default. The loan is prepayable at any time.
-30-
<PAGE> 31
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2)A $75,000,000 three year loan maturing March 15, 1998, 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 I property. The loans mature on April 1, 1997 (extendable at
the Company's option for an additional year). As of December 31, 1996,
approximately $58,300,000 was funded under such construction loan and
there were no borrowings under the $25,000,000 bridge loan. The weighted
average interest rate for 1996 was 7.28%. On February 27, 1997, the
Company obtained a commitment from one of the existing bank lenders to
make a one-year $75,000,000 loan secured by a mortgage on this property
and guaranteed by the Company. The proceeds of this loan will be used to
repay the existing construction loan and provide the Company with an
additional $15,000,000 of working capital. The new loan will bear
interest at LIBOR plus 1.00% or Federal Funds Rate plus .50% and
provides for a one-time facility fee of .125%. The Company has agreed
with the bank to refinance the new loan through the issuance of rated
commercial mortgage backed securities later this year.
(4)In January 1995, the Seven Thirty One Limited Partnership ("the
Partnership"), redeemed the first portion of the non-affiliated 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% (9.25% at December 31, 1996) and is
secured by a third mortgage on the Lexington Avenue property. The
weighted average interest rate for 1996 was 9.25%. The non-affiliated
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%.
As at December 31, 1996, a summary of maturities of debt is as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
<S> <C> <C>
1997 $ 520
1998 169,307
1999 628
2000 21,892
---------
$ 192,347
=========
</TABLE>
All of the Company's debt is secured by mortgages and/or pledges of the
stock of subsidiaries holding the properties. The net carrying value of real
estate collateralizing the debt amounted to $168,392,000 at December 31, 1996.
-31-
<PAGE> 32
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LEASES
As Lessor
The Company leases properties to tenants. The rental terms for the
properties leased range from 20 years to approximately 34 years. The leases
provide for the payment of fixed base rentals payable monthly in advance and for
the payment by the lessees of additional rents based on a percentage of the
tenants' sales as well as reimbursements of real estate taxes, insurance and
maintenance.
As of December 31, 1996, future base rental revenue under these
noncancellable operating leases is as follows:
<TABLE>
<CAPTION>
Year Ending Total
December 31, Amounts
------------ ----------
<S> <C> <C>
1996 $ 13,352,000
1997 13,716,000
1998 13,850,000
1999 13,872,000
2000 14,296,000
Thereafter 289,509,000
</TABLE>
The following tenants accounted for more than 10% of the Company's
consolidated revenues:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Caldor 36% 56% 64%
Sears 23% -- --
Conway 6% 13% 14%
</TABLE>
In addition, the Company has entered into leases, which had not commenced
as of December 31, 1996, with Circuit City (50,000 square feet) and Bed Bath &
Beyond (46,000 square feet) at the Rego Park I location and with Sears (289,000
square feet) at the Kings Plaza location. Sears has the right to cancel the
lease, if Alexander's does not commit to make certain improvements to the Kings
Plaza Shopping Center.
On September 18, 1995, Caldor, which leases the Company's Fordham Road and
Flushing locations, filed for relief under Chapter 11 of the United States
Bankruptcy Code. The loss of property rental payments under either of these
leases could have a material adverse effect on the financial condition and
results of operations of the Company. On February 11, 1997 Caldor announced
that, subject to Bankruptcy Court approval, it expects to close the Fordham Road
store in May 1997. The annual base rental revenue under this lease is
$3,537,000.
-32-
<PAGE> 33
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As Lessee
The Company is a tenant under a long-term lease for the Flushing property
which expires on January 31, 2027. Future minimum lease payments under the
operating lease at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year Ending Total
December 31, Amounts
------------ ----------
<S> <C> <C>
1997 $ 344,000
1998 331,000
1999 331,000
2000 331,000
2001 331,000
Thereafter 5,355,000
</TABLE>
Rent expense was $496,000 for each of the years ended December 31, 1996,
1995 and 1994.
7. INTEREST AND OTHER INCOME, NET
Interest and other income, net is comprised of (amounts in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest income $1,009 $1,601 $ 141
Income from a
zoning-related matter -- -- 4,550
Refund of previously
paid taxes 199 115 77
Gain on sale of real estate -- -- 161
Amortization of deferred
gain on post retirement
benefit 794 -- --
Reimbursement of expenses
from joint venture partner 764 -- --
Workers compensation
insurance refund 152 -- --
------ ------ ------
$2,918 $1,716 $4,929
====== ====== ======
</TABLE>
8. INCOME TAXES
The Company elected to be taxed as a real estate investment trust ("REIT")
under sections 856 through 860 of the Internal Revenue Code of 1986, as amended
(the "Code"), effective for the taxable year ended December 31, 1995. Under the
Code, the Company's net operating loss ("NOL") carryovers generally would be
available to offset the amount of the Company's REIT taxable income that
otherwise would be required to be distributed as a dividend to its stockholders.
In addition, the Company had a deferred tax liability of approximately
$1,406,000 at December 31, 1994, which amount was reversed in 1995 when the
Company elected to be taxed as a REIT.
-33-
<PAGE> 34
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has reported NOL carryovers for federal tax purposes of
approximately $138,000,000 at December 31, 1996, of which $5,000,000,
$52,000,000, $22,000,000, $15,000,000, $16,000,000, $20,000,000 and $8,000,000
expire in 2005, 2006, 2007, 2008, 2009, 2010 and 2011, respectively. The Company
also had investment tax and targeted jobs tax credits of approximately
$3,000,000 expiring in 2002 through 2005.
9. 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
24.4% of the outstanding common shares of beneficial interest of Vornado. In
addition, Mr. Roth owns 3.0% of the outstanding common shares of beneficial
interest of Vornado. Mr. Roth, Interstate and the other two general partners of
Interstate, David Mandelbaum and Russell B. Wight, Jr. (who are also directors
of the Company and trustees of Vornado) own, in the aggregate, 29.1% 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 minimum guaranteed fees for the development portion of $1,650,000 in
the first year of the Management Agreement and $750,000 in each of the second
and third years. For the year ended December 31, 1996, the Company paid
development fees of $2,343,000 to Vornado. 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 $5,565,000. 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 5(2)). The
Company incurred interest on the loan of $7,517,000 and $5,976,000 for the years
ended December 31, 1996 and 1995, of which $3,989,000 and $1,294,000 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.
In September 1994, the Company obtained from Interprop Fordham, Inc., an
affiliate of Interstate, and Citibank, N.A. a short-term secured loan of
$10,000,000 which enabled the Company to make a $2,600,000 payment to the
unsecured creditors and to fund a portion of the Company's working capital and
capital expenditure requirements. This loan was repaid during the first quarter
of 1995.
-34-
<PAGE> 35
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the years ended December 31, 1996, 1995 and 1994, Vornado through
Interstate was paid $1,007,000, $463,000 and $57,000, respectively, by the Kings
Plaza Shopping Center for performing leasing services.
10. COMMITMENTS AND CONTINGENCIES
Lexington Avenue
The Company is evaluating redevelopment plans for this site, which may
involve razing the existing buildings (in which case, the carrying cost of
approximately $15,000,000 would be written off) and developing a large multi-use
building requiring capital in excess of $300,000,000 to be expended. No
development decisions have been finalized.
Paramus Property
The Paramus property consists of 39.3 acres of land, including its former
store building, located in Paramus, New Jersey. Approximately 9 acres located on
the property's periphery are subject to condemnation by the State of New Jersey.
Alexander's and the New Jersey Department of Transportation (the "DOT") are
negotiating an agreement pursuant to which the DOT will pay approximately $14.7
million for the property subject to condemnation and grant Alexander's the right
to develop up to 550,000 square feet on the remaining acreage. The agreement
with the DOT is subject to negotiation of final documentation and to certain
municipal approvals. Alexander's is considering razing the existing building
(in which case, the carrying cost of approximately $5,400,000 would be written
off) and developing a two or three level shopping center on the site. The
estimated total cost of such redevelopment is between $60,000,000 and
$70,000,000. No development decisions have been finalized.
Environmental
The results of a 1993 Phase I environmental study 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 study and preliminary investigation of the Center's property and
its history, there is potential for contamination on the property. The study
also revealed an underground storage tank which failed an integrity test,
although no contamination has been observed to date. The tank failure has been
reported to the New York State Department of Environmental Conservation ("DEC")
and the tank was repaired in early 1994. In October 1994, independent testing
revealed that all of the Center's underground storage tanks (used for storing
heating oil) and related distribution lines passed a tank and line leak status
test. Such results were furnished to the DEC. 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.
The Company is aware of the presence of asbestos-containing materials at
several of its properties and believes that it manages such asbestos in
accordance with applicable laws. The Company plans to abate or remove such
asbestos as appropriate.
The Company believes that known and potential environmental liabilities will
not have a material adverse effect on the Company's business, assets, results of
operations or cash flow. However, there can be no assurance that the
confirmation of the existence of contamination or the identification of
potential new areas of contamination would not be material to the Company.
-35-
<PAGE> 36
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Letters of Credit
Approximately $900,000 in standby letters of credit were issued at December
31, 1996.
11. EMPLOYEE BENEFITS PLAN
The Company has a postretirement healthcare benefit plan (the "Plan").
Beginning on October 1, 1996, coverage for retirees and their covered
dependents is being provided through a medicare health maintenance organization
or other insurance providers. This change reduced the costs to the retirees and
eliminated the Company's liability. Accordingly, the Company has reversed the
liability for postretirement healthcare costs resulting in the recognition of a
$14,372,000 gain.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The disclosure of the estimated fair value of financial instruments is made
in accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial Instruments" which
was adopted by the Company on December 31, 1995. The estimated fair value of
cash and cash equivalents, accounts receivable, accounts payable, and accrued
expenses are reflected in the balance sheet. The fair value of debt has been
estimated by discounting cash flows at the current rate at which similar loans
would be made to borrowers with similar credit ratings for the remaining term.
At December 31, 1996 and 1995, the fair value of debt was estimated to be
$192,481,000 and $184,883,000, compared to a carrying value of $192,347,000 and
$182,883,000, respectively. The fair value estimates presented herein are based
on pertinent information available to management as of December 31, 1996 and
1995.
13. STOCK OPTION PLAN
Under the Omnibus Stock Plan (the "Plan"), approved by the Company's
stockholders on May 22, 1996, officers, key employees, employees of Vornado
Realty Trust and any other person or entity as designated by the Omnibus Stock
Plan Committee are eligible to be granted incentive share options and
non-qualified options to purchase common shares. Options granted are at prices
equal to 100% of the market price of the Company's shares at the date of grant,
vest on a graduated basis, becoming fully vested 60 months after grant and
expire ten years after grant. The Plan also provides for the award of Stock
Appreciation Rights, Performance Shares and Restricted Stock, as defined, none
of which have been awarded as of December 31, 1996.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 requires
expanded disclosure of stock-based compensation arrangements with employees, and
encourages, but does not require compensation cost be measured based on the fair
value of the equity instrument awarded. Companies are permitted, however, to
continue to apply Accounting Principles Board Opinion No. 25 ("APB 25"), which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB 25 to its stock-based
compensation awards.
-36-
<PAGE> 37
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
If compensation cost for Plan awards had been determined based on fair value
at the grant dates, net income and income per share would have been reduced to
the pro forma amounts below, for the year ended December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Net income:
As reported $24,699,000
Pro-forma 24,495,000
Net income per share:
As reported $ 4.94
Pro-forma $ 4.90
</TABLE>
The pro-forma effect of applying SFAS 123 is not necessarily indicative of
the effect on reported net income for future years.
The fair value of each option grant is estimated on the date of grant using
the Binomial option-pricing model with the following weighted-averages
assumptions used for grants in the period ended December 31, 1996.
<TABLE>
<S> <C>
Expected volatility 19%
Expected life 10 years
Risk-free interest rate 5.9%
Expected dividend yield 0%
</TABLE>
A summary of the Plan's status, and changes during the year ended December
31, 1996, is presented below:
<TABLE>
<CAPTION>
December 31, 1996
Weighted-Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Outstanding at January 1 -- --
Granted 350,000 $73.88
Exercised -- --
------- ------
Outstanding at December 31 350,000 $73.88
=======
Options exercised at December 31 --
Weighted-average fair value of options granted
during the year ended December 31 (per option) $35.04
</TABLE>
Shares available for future grant at December 31, 1996 were 350,000.
-37-
<PAGE> 38
ALEXANDER'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
(amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
--------------------------------------------- --------------------------------------------
Quarter Ended Quarter Ended
--------------------------------------------- --------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31
------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $ 4,684 $ 5,686 $ 5,379 $ 6,084 $ 3,554 $ 2,945 $ 4,121 $ 4,141
------- ------- ------- ------- ------- ------- ------- --------
(Loss) income from
continuing operations (462) 53 (630) 14,136(2) (1,444) (3,260) (1,926) (1,066)
Income from discontinued
operations -- 11,602(1) -- -- -- -- -- 10,133(3)
------- ------- ------- ------- ------- ------- ------- --------
Net (loss) income $ (462) $11,655 $ (630) $14,136 $(1,444) $(3,260) $(1,926) $ 9,067
======= ======= ======= ======= ======= ======= ======= ========
(Loss) income per common share:
Continuing operations $ (.09) $ .01 $ (.13) $ 2.83 $ (.29) $ (.65) $ (.39) $ (.21)
Discontinued operations -- 2.32 -- -- -- -- -- 2.03
------- ------- ------- ------- ------- ------- ------- --------
Net (loss) income $ (.09) $ 2.33 $ (.13) $ 2.83 $ (.29) $ (.65) $ (.39) $ 1.82
======= ======= ======= ======= ======= ======= ======= ========
</TABLE>
(1) Comprised of (i) $9,602,000 upon completion of a tax certiorari
proceeding and (ii) $2,000,000 from the reduction of other liabilities
of discontinued operations to amounts considered necessary to cover the
remaining estimates of these liabilities.
(2) Includes gain on reversal of postretirement healthcare liability in the
amount of $14,372,000.
(3) Comprised of (i) $6,133,000 upon completion of a tax certiorari
proceeding and (ii) $4,000,000 from the reduction of other liabilities
of discontinued operations to amounts considered necessary to cover the
remaining estimates of these liabilities.
-38-
<PAGE> 39
PART III
Item 10. Directors and Executive Officers of the Registrant
Information relating to directors and executive officers of the Company
will be contained in a definitive Proxy Statement involving the election of
directors which the Company will file with the Securities and Exchange
Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, not later than 120 days after December 31, 1996, and such
information is incorporated herein by reference. Information relating to
Executive Officers of the Registrant appears on page 12 of this Annual Report on
Form 10-K.
Item 11. Executive Compensation
Information relating to executive compensation will be contained in the
Proxy Statement referred to above in Item 10, "Directors and Executive Officers
of the Registrant", and such information is incorporated herein by reference.
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Information relating to security ownership of certain beneficial owners and
management will be contained in the Proxy Statement referred to in Item 10,
"Directors and Executive Officers of the Registrant", and such information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information relating to certain relationships and related transactions
will be contained in the Proxy Statement referred to in Item 10, "Directors and
Executive Officers of the Registrant", and such information is incorporated
herein by reference.
-39-
<PAGE> 40
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this Report
1.The consolidated financial statements are set forth in Item 8
of this Annual Report on Form 10-K.
2.Financial Statement Schedules.
The following financial statement schedules should be read in
conjunction with the financial statements included in item 8 of this Annual
Report on Form 10-K.
<TABLE>
<CAPTION>
Pages in this
Annual Report
on Form 10-K
------------
<S> <C>
Schedule III - Real Estate and Accumulated Depreciation 42
KINGS PLAZA SHOPPING CENTER AND MARINA (A JOINT VENTURE):
Independent Auditors' Report 44
Balance Sheets at December 31, 1996 and 1995 45
Statements of Earnings for the Year Ended December 31, 1996,
the Six Months Ended December 31, 1995 and the Years Ended
June 30, 1995 and 1994 46
Statements of Equity of the Co-Venturers for the Year Ended
December 31, 1996, the Six Months Ended December 31, 1995
and the Years Ended June 30, 1995 and 1994 47
Statements of Cash Flows for the Year Ended December 31,
1996, the Six Months Ended December 31, 1995 and the Years
Ended June 30, 1995 and 1994 48
Notes to Financial Statements 49
</TABLE>
All other consolidated financial schedules are omitted because they
are inapplicable, not required, or the information is included elsewhere in the
consolidated financial statements or the notes thereto.
3. Exhibits
See Exhibit Index on page 53
(b) Reports on Form 8-K
During the last quarter of the period covered by this Annual Report
on Form 10-K, Alexander's filed the report on Form 8-K described below:
<TABLE>
<CAPTION>
Period Covered:
(Date of Earliest Event
Reported) Items Reported Date of Report
----------------------- -------------- --------------
<S> <C> <C> <C>
December 2, 1996 Other events - December 17, 1996
re: new Director of Company
</TABLE>
-40-
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Joseph Macnow
------------------------------------
Joseph Macnow, Vice President,
Chief Financial Officer
Date: February 27, 1997
--------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven Roth Chief Executive Officer and Director February 27, 1997
- --------------------------- (Principal Executive Officer)
Steven Roth
/s/ Thomas R. DiBenedetto Director February 27, 1997
- -------------------------
Thomas R. DiBenedetto
/s/ Michael D. Fascitelli Director February 27 , 1997
- -------------------------
/s/ David Mandelbaum Director February 27, 1997
- -------------------------
David Mandelbaum
/s/ Stephen Mann Director February 27, 1997
- -------------------------
Stephen Mann
/s/ Arthur I. Sonnenblick Director February 27, 1997
- --------------------------
Arthur I. Sonnenblick
/s/ Neil Underberg Director February 27, 1997
- -------------------------
Neil Underberg
/s/ Richard West Director February 27, 1997
- -------------------------
Richard West
/s/ Russell B. Wight, Jr. Director February 27, 1997
- -------------------------
Russell B. Wight, Jr.
</TABLE>
-41-
<PAGE> 42
ALEXANDER'S, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(amounts in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Gross Amount
Initial at Which
Cost to Carried at
Company (2) Close of Period-
Building, Cost Buildings,
Leaseholds Capitalized Leasehold
and Leasehold Subsequent to and Leasehold
Description Encumbrances Land Improvements Acquisition(3) Land Improvements
- ----------- ------------ ---- ------------ -------------- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Commercial Property:
New York City,
New York:
Fordham Rd $ 23,611 $ 2,301 $ 9,258 -- $ 2,301 $ 9,258
Third Avenue -- 1,201 4,437 -- 1,201 4,437
Rego Park I 58,333 1,647 8,953 53,132 1,647 62,085
Rego Park II -- 3,906 1,467 316 3,906 1,566
Flushing -- -- 1,660 -- -- 1,660
Lexington Ave 21,812 14,432 12,355 52,164 33,979 13,647
Flatbush Ave
and Avenue U 497 9,542 11,302 497 12,638
------- ------- -------- ------- --------
Total New York 23,984 47,672 116,914 43,531 105,291
New Jersey - Paramus 13,591 1,742 7,185 6,440 1,817 7,185
Other Properties 651 1,804 1,375 651 1,804
------- ------- -------- ------- --------
Other secured debt 75,000(1)
--------
TOTAL $192,347 $26,377 $56,661 $124,729 $45,999 $114,280
======== ======= ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
Column F Column G Column H Column I Column J
Capitalized Life on Which
Expenses Accumulated Depreciation in
and Pre- Depreciation Latest Income
development and Date of Date Statement is
Description Costs Total(3) Amortization Construction Acquired (2) Computed
----------- --------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Commercial Property:
New York City,
New York:
Fordham Rd -- $ 11,559 $ 6,630 1933 1992 4-40 years
Third Avenue -- 5,638 3,023 1928 1992 13 years
Rego Park I -- 63,732 8,853 1959 1992 6-40 years
Rego Park II 217 5,689 1,439 1965 1992 5-39 years
Flushing -- 1,660 1,483 1975(4) 1992 10-22 years
Lexington Ave 31,325 78,951 3,754 1965 1992 29 years
Flatbush Ave
and Avenue U 8,206 21,341 6,130 1970 1992 20-40 years
------- -------- ------- ------- ---- -----------
Total New York 39,748 188,570 31,312
New Jersey - Paramus 6,365 15,367 6,260 1962 1992 5-40 years
Other Properties 1,375 3,830 1,803 Various 1992 7-25 years
------ -------- -------
Other secured debt
TOTAL $47,488 $207,767 $39,375
======= ======== =======
</TABLE>
(1) Three-year loan which is 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.
(2) Initial cost is as of May 15, 1992 (the date on which the Company commenced
real estate operations) unless acquired subsequent to that date. See Column
I.
(3) Aggregate cost is approximately the same for federal income tax purposes.
(4) Date represents lease acquisition date.
-42-
<PAGE> 43
ALEXANDER'S, INC. AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(amounts in thousands)
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
REAL ESTATE:
Balance at beginning of period $ 175,485 $ 86,311
Additions during the period:
Land -- 19,622
Buildings, leaseholds and
leasehold improvements (including $242 and
$34,996 of construction in progress
at December 31, 1996 and 1995) 18,136 36,213
Capitalized expenses and predevelopment costs 14,322 33,339
--------- --------
207,943 175,485
Less: Disposition of property (176) --
--------- --------
Balance at end of period $ 207,767 $175,485
========= ========
ACCUMULATED DEPRECIATION:
Balance at beginning of period $ 37,794 $ 36,365
Additions charged to operating
expenses 1,611 1,429
--------- --------
39,405 37,794
Less: Disposition of property (30) --
--------- --------
Balance at end of period $ 39,375 $ 37,794
========= ========
</TABLE>
-43-
<PAGE> 44
INDEPENDENT AUDITORS' REPORT
To the Co-Venturers
Kings Plaza Shopping Center and Marina
Brooklyn, New York
We have audited the accompanying balance sheets of Kings Plaza Shopping
Center and Marina (a joint venture) as of December 31, 1996 and 1995, and the
related statements of earnings, equity of the co-venturers and cash flows for
the year ended December 31, 1996, the six months ended December 31, 1995 and for
each of the two years in the period ended June 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Kings Plaza Shopping Center and Marina at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the year ended December 31, 1996, the six months ended December 31, 1995 and
for each of the two years in the period ended June 30, 1995 in conformity with
generally accepted accounting principles.
February 11, 1997
44
<PAGE> 45
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
ASSETS:
Cash.............................................................. $ 1,398,813 $ 4,005,829
Amounts due from tenants, less allowance for doubtful accounts of
$230,000 and $323,000........................................... 1,243,437 1,791,385
Receivable arising from the straight-lining of rental income,
net............................................................. 815,622 665,130
Notes receivable.................................................. 8,855 8,855
Prepaid expenses and other assets................................. 516,332 689,812
Prepaid real estate tax expense -- tax certiorari proceedings..... 5,633,679 9,172,175
Property and equipment, at cost:
Land............................................................ 4,219,795 4,219,795
Land improvements............................................... 1,503,417 1,503,417
Buildings and building equipment................................ 46,690,716 44,105,947
Fixtures and equipment.......................................... 62,856 140,407
Parking lot toll equipment...................................... 2,555,957 2,555,957
----------- -----------
55,032,741 52,525,523
Less accumulated depreciation................................... 31,773,904 30,549,557
----------- -----------
23,258,837 21,975,966
Deferred charges, less accumulated amortization of $3,395,678 and
$3,148,219...................................................... 2,561,783 2,343,416
----------- -----------
TOTAL ASSETS...................................................... $35,437,358 $40,652,568
=========== ===========
LIABILITIES AND EQUITY:
LIABILITIES:
Accounts payable................................................ $ 506,788 $ 661,546
Accrued expenses................................................ 487,916 1,487,088
Mortgage notes payable.......................................... 7,890,836 9,166,249
Accrued interest payable........................................ 64,179 74,552
Amounts due tenants -- tax certiorari proceedings............... 7,000,180 8,391,954
Liabilities subject to settlement under reorganization
proceeding................................................... 346,669 346,669
----------- -----------
Total liabilities....................................... 16,296,568 20,128,058
COMMITMENTS AND CONTINGENCIES
Equity of the co-venturers........................................ 19,140,790 20,524,510
----------- -----------
TOTAL LIABILITIES AND EQUITY...................................... $35,437,358 $40,652,568
=========== ===========
</TABLE>
See notes to financial statements.
45
<PAGE> 46
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEARS ENDED
DECEMBER DECEMBER JUNE 30,
31, 31, ---------------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rent................................ $12,994,912 $ 7,062,404 $11,995,203 $12,199,017
Expense reimbursements:
Central heating, cooling, air
handling and electricity....... 2,459,496 1,247,501 2,435,660 2,502,758
Real estate taxes................ 1,599,985 904,312 2,968,046 2,934,114
Common area...................... 5,833,560 2,682,261 3,841,110 3,514,019
Parking lot......................... 1,938,748 1,085,073 2,094,210 2,012,380
Miscellaneous income................ 1,703,209 1,589,618 1,493,760 1,472,680
----------- ----------- ----------- -----------
26,529,910 14,571,169 24,827,989 24,634,968
----------- ----------- ----------- -----------
Expenses:
Central heating, cooling, air
handling and electricity......... 4,736,774 2,215,391 4,779,409 4,551,092
Real estate taxes................... 1,845,382 915,749 3,152,717 3,074,016
Common area......................... 4,039,642 2,065,609 3,993,106 4,009,608
Parking lot......................... 3,009,643 1,553,262 3,180,002 2,994,078
Insurance and other expenses........ 1,092,931 1,140,610 1,206,884 1,089,714
Rent................................ 71,156 35,578 71,156 71,156
Management, leasing and publicity... 1,714,950 1,108,901 1,792,368 1,953,771
Depreciation........................ 1,226,630 565,482 1,056,038 1,099,273
Amortization........................ 42,609 27,590 44,727 47,310
----------- ----------- ----------- -----------
17,779,717 9,628,172 19,276,407 18,890,018
----------- ----------- ----------- -----------
Operating income...................... 8,750,193 4,942,997 5,551,582 5,744,950
Interest expense...................... (838,247) (464,607) (1,204,658) (1,944,657)
Gain on settlement of pre-petition
liabilities......................... -- -- -- 80,918
----------- ----------- ----------- -----------
NET EARNINGS.......................... $ 7,911,946 $ 4,478,390 $ 4,346,924 $ 3,881,211
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
46
<PAGE> 47
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)
STATEMENTS OF EQUITY OF THE CO-VENTURERS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER DECEMBER YEARS ENDED JUNE 30,
31, 31, ---------------------------
1996 1995 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, BEGINNING OF
PERIOD.............................. $20,524,510 $13,185,266 $14,297,104 $17,831,957
Payments to the co-venturers........ (9,295,666) (1,442,833) (6,743,226) (9,516,064)
Advances from the co-venturers...... -- 1,442,833 1,284,464 2,100,000
Reversal of previously accrued real
estate taxes..................... -- 2,860,854 -- --
Net earnings........................ 7,911,946 4,478,390 4,346,924 3,881,211
----------- ----------- ----------- -----------
BALANCE, END OF PERIOD................ $19,140,790 $20,524,510 $13,185,266 $14,297,104
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
47
<PAGE> 48
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED
YEAR ENDED ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, --------------------------
1996 1995 1995 1994
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net earnings.................................... $ 7,911,946 $ 4,478,390 $ 4,346,924 $ 3,881,211
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation................................. 1,226,630 565,482 1,056,038 1,099,273
Gain on settlement of pre-petition
liabilities................................ -- -- -- (80,918)
Amortization (including deferred charges).... 247,459 171,749 287,752 278,300
Change in assets and liabilities:
Decrease (increase) in amounts due from
tenants.................................... 547,948 (948,459) (2,226) (58,324)
Increase in straight-lining of rental
income..................................... (150,492) (571,672) (93,458) --
Increase in deferred charges................. (465,826) (515,423) (465,535) (2,885)
(Decrease) increase in accounts payable and
accrued expenses (including accrued real
estate taxes).............................. (1,153,930) (2,458,065) 1,514,948 (1,931,933)
(Decrease) increase in accrued interest
payable.................................... (10,373) (4,923) (2,944,727) 124,996
(Decrease) increase in amounts due to
tenants.................................... (1,391,774) 8,263,888 -- --
Decrease (increase) in prepaid expenses and
other assets............................... 3,711,977 (6,000,925) 290,550 238,126
----------- ----------- ----------- -----------
Net cash provided by operating
activities............................ 10,473,565 2,980,042 3,990,266 3,547,846
----------- ----------- ----------- -----------
Cash flows from investing activities:
Additions to buildings and building equipment... (2,509,501) (1,135,025) (1,078,664) (196,561)
Decrease in note receivable..................... -- 2,132 12,145 11,985
----------- ----------- ----------- -----------
Net cash used in investing activities... (2,509,501) (1,132,893) (1,066,519) (184,576)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Payments to co-venturers........................ (9,295,666) (1,442,833) (6,743,226) (9,516,064)
Advances from co-venturers...................... -- 1,442,833 1,284,464 2,100,000
Repayments of mortgage note..................... (1,275,414) (605,275) (3,105,031) (1,273,711)
----------- ----------- ----------- -----------
Net cash used in financing activities... (10,571,080) (605,275) (8,563,793) (8,689,775)
----------- ----------- ----------- -----------
Net (decrease) increase in cash................... (2,607,016) 1,241,874 (5,640,046) (5,326,505)
Cash, beginning of period......................... 4,005,829 2,763,955 8,404,001 13,730,506
----------- ----------- ----------- -----------
Cash, end of period............................... $ 1,398,813 $ 4,005,829 $ 2,763,955 $ 8,404,001
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Interest paid................................... $ 848,621 $ 469,531 $ 4,111,697 $ 1,819,695
=========== =========== =========== ===========
</TABLE>
Supplemental disclosure of noncash financing activities -- see Note 9.
See notes to financial statements.
48
<PAGE> 49
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS
THE YEAR ENDED DECEMBER 31, 1996,
THE SIX MONTHS ENDED DECEMBER 31,1995 AND
YEARS ENDED JUNE 30, 1995 AND 1994
1. ORGANIZATION AND BUSINESS
Kings Plaza Shopping Center of Avenue U, Inc. (a wholly-owned subsidiary of
Federated Department Stores, Inc. (formerly R.H. Macy & Co. Inc. ("Macy's")) and
Alexander's Department Stores of Brooklyn, Inc. (wholly-owned by Alexander's,
Inc. ("Alexander's")), formed a joint venture for the purpose of owning and
operating the Kings Plaza Shopping Center and Marina ("Center"), including the
energy plant servicing the entire shopping center, but exclusive of the Macy's
and Alexander's stores and land thereunder located in the Center. The
co-venturers each have an undivided 50% interest as tenants in common in the
property and equipment.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation -- The financial statements are prepared in
conformity with generally accepted accounting principles. Management has made
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
Certain amounts have been reclassified for prior years to conform to 1996
presentation.
b. Property and Equipment -- Property and equipment is stated at cost.
Depreciation of property and equipment is provided on a straight-line basis over
the following periods:
<TABLE>
<S> <C>
Land improvements............................................... 10-50 years
Buildings and building equipment................................ 20-50 years
Fixtures and equipment.......................................... 10 years
Parking lot toll equipment...................................... 10 years
</TABLE>
Additions and improvements to property and equipment are capitalized and
depreciated over their estimated remaining lives. Maintenance and repairs are
charged to operations as incurred.
The Center has adopted early the Financial Accounting Standards Board
Statement No. 121 (Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of), which did not have a material impact on
the financial statements. SFAS No. 121 requires management of the Center to
assess any impairment in value by making a comparison of the current and
projected operating cash flow of the Center into the foreseeable future on an
undiscounted basis, to the carrying amount of such property. Such carrying
amount would be adjusted, if necessary, to reflect an impairment in the value of
an asset.
c. Deferred Charges -- Deferred charges include lease commissions and other
costs paid to tenants to acquire the rights to their leased space. Lease
commissions are amortized on a straight-line basis over the life of the
applicable leases. Other lease acquisition costs are amortized over the life of
the respective replacement leases.
d. Revenue Recognition -- Base rents, additional rent based on tenant's
sales volume and reimbursement of the tenant's share of certain operating
expenses are generally recognized when due from tenants. The straight-line basis
is used to recognize base rents on the leases which provide for varying rents
over the lease terms.
49
<PAGE> 50
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. MORTGAGE NOTES PAYABLE
The mortgage notes payable were issued by the co-venturers. The notes are
collateralized by a mortgage on all property and equipment, and by assignment of
leases and charges due thereunder. Mortgage notes payable consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Alexander's note payable in quarterly installments of
$235,507 (including interest at 7%) plus additional
interest at 1.5% on the outstanding balance, due through
December 2001............................................. $3,945,418 $4,583,125
Macy's note payable in quarterly installments of $235,507
(including interest at 7%) plus additional interest at
4.02% on the outstanding balance, due through December
2001...................................................... 3,945,418 4,583,124
---------- ----------
$7,890,836 $9,166,249
========== ==========
</TABLE>
4. COMMITMENTS
a. Joint Venture as Lessor -- The joint venture leases space to tenants in
its shopping center for which the Center charges fixed minimum rents. The terms
of the leases are generally ten years and provide for fixed minimum rents as
follows:
<TABLE>
<CAPTION>
TOTAL
YEAR ENDING DECEMBER 31, AMOUNTS
-------------------------------------------------------- -----------
<S> <C>
1997............................................. $12,584,457
1998............................................. 12,528,434
1999............................................. 12,380,523
2000............................................. 11,479,566
2001............................................. 9,783,587
Subsequent to 2001...................................... 31,601,312
-----------
$90,357,879
===========
</TABLE>
In addition to minimum rents, most of the leases provide for percentage
rents when the tenants' sales volumes exceed stated amounts per lease agreements
and reimbursements for certain of the Center's operating expenses. During the
six months ended December 31, 1995, the Center adjusted its billings to tenants
for certain reimbursable expenses in accordance with the lease agreements. This
adjustment gave rise to an increase of approximately $600,000 in amounts due
from tenants and a corresponding increase in other income attributable to the
portion of the tenants' lease year included in the Center's year ended June 30,
1995.
b. Joint Venture as Lessee -- On January 27, 1970, U & F Realty
Corporation, an affiliate, assigned to the joint venture a lease with the City
of New York for certain real property. The lease, which was amended
50
<PAGE> 51
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
on May 25, 1976 for additional real property, extends for a period of fifty
years from the original lease date at annual rentals (payable quarterly in
advance) in future periods as follows:
<TABLE>
<CAPTION>
RENTAL
YEAR ENDING DECEMBER 31, COMMITMENT
--------------------------------------------------------- ----------
<S> <C>
1997.............................................. $ 71,156
1998.............................................. 78,272
1999.............................................. 85,387
2000.............................................. 85,387
2001.............................................. 85,387
Subsequent to 2001....................................... 1,579,655
----------
$1,985,244
==========
</TABLE>
The lessee may extend the lease for a total of another forty-nine years,
with individual renewal options and annual rentals of $122,957, $147,548,
$177,058, $212,470 and $254,964, for each succeeding ten-year period and the
final nine-year period.
5. FEDERAL INCOME TAX
Under the provisions of Section 701 of the Internal Revenue Code, the
Center is not subject to Federal income tax. The income or loss of the joint
venture is reportable by the co-venturers in proportion to their respective
investment in the joint venture. Similar circumstances apply to state and city
income taxes. Further, any investment credit realized by the joint venture is
passed on to the co-venturers. Accordingly, no provision or liabilities for
Federal, state or city income taxes are required to be reflected on the books of
the Center.
6. RELATED PARTY TRANSACTIONS
Interstate Properties owns 27.1% of the outstanding common stock of
Alexander's, Inc. During the year ended December 31, 1996, for the six months
ended December 31, 1995 and for the years ended June 30, 1995 and 1994
Interstate Properties was paid $846,000, $389,000, $165,000 and $445,000,
respectively, by the Center for performing leasing services for space located in
the Center.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of cash, accounts receivable, notes receivable,
accounts payable, accrued expenses and mortgage notes payable are reflected in
the balance sheet. The fair value estimates are based on information available
as of December 31, 1996. Although management is not aware of any factors that
would significantly affect the estimated fair value amounts, a comprehensive
revaluation has not been performed for purposes of this financial statement
disclosure and current estimates of fair value may differ significantly from
those amounts reflected in the balance sheet.
8. ENVIRONMENTAL INVESTIGATION
In September 1993, the Center had a Phase I environmental study performed
on its property. The results of the study show that certain adjacent properties
not owned by the Center have experienced petroleum hydrocarbon contamination.
Based on this study and preliminary investigation of the Center's property and
its history, there is potential for contamination on the Center's property. The
study also revealed the potential for a release in the vicinity of an
underground storage tank which failed an integrity test, although no
contamination has been observed to date. The tank failure has been reported to
the New York State Department of Environmental Conservation ("DEC"). Such tank
was repaired in early 1994, and in October
51
<PAGE> 52
KINGS PLAZA SHOPPING CENTER AND MARINA
(A JOINT VENTURE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1994, independent testing revealed that all of the Center's underground storage
tanks (used for storing heating oil) and related distribution lines passed a
tank and line leak status test. Such results were furnished to the DEC. 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. No
provision has been made in the financial statements for costs, if any,
associated with any additional investigations and/or clean-up if required
because currently such costs are neither probable nor reasonably estimable.
9. TAX CERTIORARI PROCEEDINGS
In December 1995, the Center completed a tax certiorari proceeding with the
City of New York. Each of the co-venturers has agreed with the City of New York
to a reduction in the assessed values covering the tax years 1988/1989 through
1995/1996, generating tax credits of $28,350,000, of which $18,836,000 relates
to the co-venturer's stores. As a result, real estate taxes previously accrued
for each of the co-venturers were reversed. The estimated amounts due to tenants
resulting from the tax certiorari proceedings was $7,000,180 and $8,391,954 at
December 31, 1996 and 1995, respectively.
* * * * * *
52
<PAGE> 53
INDEX TO EXHIBITS
The following is a list of all exhibits filed as part of this Report:
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT PAGE
- ---------------- --------------------------------------------------------------------- ----
<S> <C> <C>
3(i) Certificate of Incorporation, as amended. Incorporated herein by *
reference from Exhibit 3.0 to the Registrant's Current Report on Form
8-K dated September 21, 1993.........................................
3(ii) By-Laws, as amended. Incorporated herein by reference from Exhibit *
3(B) to the Registrant's Form 10-K for the fiscal year ended July 27,
1991.................................................................
3(iii) By-laws, as amended. Incorporated herein by reference from the *
Registrants Form 10-Q for the quarter ended September 30, 1996.......
10 First Amendment, dated February 21, 1996, to the Registrant's Omnibus 57
Stock Plan...........................................................
10(i)(A)(1) Agreement, dated as of December 4, 1985, among Seven Thirty One *
Limited Partnership ("731 Limited Partnership"), Alexander's
Department Stores of Lexington Avenue, Inc., the Company, Emanuel
Gruss, Riane Gruss and Elizabeth Goldberg (collectively, the
"Partners"). Incorporated herein by reference from Exhibit
10(i)(F)(1) to the Registrant's Form 10-K for the fiscal year ended
July 26, 1986........................................................
10(i)(A)(2) Amended and Restated Agreement of Limited Partnership in the 731 *
Limited Partnership, dated as of August 21, 1986, among the Partners.
Incorporated herein by reference from Exhibit 1 to the Registrant's
Current Report on Form 8-K, dated August 21, 1986....................
10(i)(A)(3) Third Amendment to Amended and Restated Agreement of Limited *
Partnership dated December 30, 1994, among the Partners. Incorporated
herein by reference from Exhibit 10(i)(A)(3) to the Registrant's Form
10-K for the fiscal year ended December 31, 1994.....................
10(i)(B)(1) Promissory Note Modification Agreement, dated October 4, 1993, *
between Alexander's Department Stores of New Jersey, Inc. and New
York Life Insurance Company ("New York Life"). Incorporated herein by
reference from Exhibit 10(i)(3)(a) to the Registrant's Form 10-K for
the Transition Period August 1, 1993 to December 31, 1993............
10(i)(B)(2) Mortgage Modification Agreement, dated October 4, 1993, by *
Alexander's Department Stores of New Jersey, Inc. and New York Life
Incorporated herein by reference from Exhibit 10(i)(E)(3)(a) to the
Registrant's Form 10-K for the Transition Period August 1, 1993 to
December 31, 1993....................................................
10(i)(C) Credit Agreement, dated March 15, 1995, among the Company and Vornado *
Lending Corp. Incorporated herein by reference from Exhibit 10(i)(C)
to the Registrant's Form 10-K for the fiscal year ended December 31,
1994.................................................................
</TABLE>
- ---------------
* Incorporated by reference
53
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT PAGE
- ---------------- --------------------------------------------------------------------- ----
<S> <C> <C>
10(i)(D) Credit Agreement, dated March 15, 1995, among the Company and First *
Union Bank, National Association. Incorporated herein by reference
from Exhibit 10(i)(D) to the Registrant's Form 10-K for the fiscal
year ended December 31, 1994.........................................
10(i)(E) Building Loan Agreement, dated as of March 29, 1995, among the *
Company, Union Bank of Switzerland ("UBS") (New York Branch), as
Lender, and UBS (New York Branch), as Agent. Incorporated by
reference from Exhibit 10(i)(E) to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994..................................
10(i)(F) Project Loan Agreement, dated as of March 29,1995, among the Company, *
UBS (New York Branch), as Lender, and UBS (New York Branch), as
Agent. Incorporated herein by reference from Exhibit 10(i)(F) to the
Registrant's Form 10-K for the fiscal year ended December 31,
1994.................................................................
10(i)(G)(1) Real Estate Retention Agreement dated as of July 20, 1992, between *
Vornado Realty Trust and Keen Realty Consultants, Inc., each as
special real estate consultants, and the Company. Incorporated herein
by reference from Exhibit 10(i)(O) to the Registrant's Form 10-K for
the fiscal year ended July 25, 1992..................................
10(i)(G)(2) Extension Agreement to the Real Estate Retention Agreement, dated as *
of February 6, 1995, between the Company and Vornado Realty Trust.
Incorporated herein by reference from Exhibit 10(i)(G)(2) to the
Registrant's Form 10-K for the fiscal year ended December 31,
1994.................................................................
10(i)(H) Management and Development Agreement, dated as of February 6, 1995, *
between Vornado Realty Trust and the Company, on behalf of itself and
each subsidiary listed therein. Incorporated herein by reference from
Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated
February 6, 1995.....................................................
10(i)(I) Standstill and Corporate Governance Agreement, dated as of February *
6, 1995, by and among Vornado Realty Trust, Interstate Properties and
the Company. Incorporated herein by reference from Exhibit 10.2 to
the Registrant's Current Report on Form 8-K dated February 6,
1995.................................................................
10(i)(J) Commitment letter, dated as of February 6, 1995, between Vornado *
Realty Trust and the Company. Incorporated herein by reference from
Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated
February 6, 1995.....................................................
10(ii)(A)(1) Agreement of Lease, dated April 22, 1966, between S&E Realty Company
and Alexander's Department Stores of Valley Stream, Inc. Incorporated
herein by reference from Exhibit 13N to the Registrant's Registration
Statement on Form S-1 (Registration No. 2-29780).
</TABLE>
- ---------------
* Incorporated by reference
54
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT PAGE
- ---------------- --------------------------------------------------------------------- ----
<S> <C> <C>
10(ii)(A)(2) Guarantee, dated April 22, 1966, of the Lease described as Exhibit *
10(ii)(A)(1) above by Alexander's Department Stores, Inc.
Incorporated herein by reference from Exhibit 13N(1) to the
Registrant's Registration Statement on Form S-1 (Registration No.
2-29780).............................................................
10(ii)(A)(3) Agreement of Lease for Rego Park, Queens, New York, between *
Alexander's, Inc. and Sears Roebuck & Co. Incorporated herein by
reference from Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1994................
10(ii)(A)(7)(a) Lease for Fordham Road, Bronx, New York, dated as of December 1, *
1992, between the Company, as landlord, and Caldor, as tenant.
Incorporated herein by reference from Exhibit 10(ii)(E)(6) to the
Registrant's Form 10-K for the fiscal year ended July 25, 1992.......
10(ii)(A)(7)(b) First Amendment to the Lease for Fordham Road, Bronx, New York, dated *
as of February 22, 1995, between the Company, as landlord, and
Caldor, as tenant. Incorporated herein by reference from Exhibit
10(ii)(A)(7)(b) to the Registrant's Form 10-K for the fiscal year
ended December 31, 1994..............................................
10(ii)(A)(8)(a) Lease for Roosevelt Avenue, Flushing, New York, dated as of December *
1, 1992, between the Company, as landlord, and Caldor, as tenant.
Incorporated herein by reference from Exhibit 10(ii)(E)(7) to the
Registrant's Form 10-K for the fiscal year ended July 25, 1992.......
10(ii)(A)(8)(b) First Amendment to Sublease for Roosevelt Avenue, Flushing, New York, *
dated as of February 22, 1995 between the Company, as sublandlord,
and Caldor, as tenant. Incorporated herein by reference from Exhibit
10(ii)(A)(8)(b) to the Registrant's Form 10-K for the fiscal year
ended December 31, 1994..............................................
10(ii)(A)(9) Lease Agreement, dated March 1, 1993 by and between the Company and *
Alex Third Avenue Acquisition Associates. Incorporated by reference
from Exhibit 10(ii)(F) to the Registrant's Form 10-K for the fiscal
year ended July 31, 1993.............................................
10(ii)(A)(10) Agreement of Lease for Rego Park, Queens, New York, between the *
Company and Marshalls of Richfield, MN., Inc., dated as of March 1,
1995. Incorporated herein by reference from Exhibit 10(ii)(A)(12)(a)
to the Registrant's Form 10-K for the fiscal year ended December 31,
1994.................................................................
10(ii)(A)(11) Guaranty, dated March 1, 1995, of the Lease described in Exhibit *
10(ii)(A)(12)(a) above by the Company. Incorporated herein by
reference from Exhibit 10(ii)(A)(12)(b) to the Registrant's Form 10-K
for the fiscal year ended December 31, 1994..........................
</TABLE>
- ---------------
* Incorporated by reference
55
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT PAGE
- ---------------- --------------------------------------------------------------------- ----
<S> <C> <C>
10(iii)(A)** Employment Agreement, dated March 29, 1995, between Brian M. Kurtz *
and the Company. Incorporated herein by reference from Exhibit
10(iii)(A) to the Registrant's Form 10-K for the fiscal year ended
December 31, 1994....................................................
10(iii)(A)(1)** Amendment to Employment Agreement dated December 11, 1996, between 58
Brian M. Kurtz and the Company.......................................
10(iii)(B)** Employment Agreement, dated February 9, 1995, between the Company and *
Stephen Mann. Incorporated herein by reference from Exhibit
10(iii)(B) to the Registrant's Form 10-K for the fiscal year ended
December 31, 1994....................................................
11 Not applicable.
12 Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed 59
Charges and Preferred Stock Dividend Requirements....................
13 Not applicable.
16 Not applicable.
18 Not applicable.
19 Not applicable.
21 Subsidiaries of Registrant........................................... 60
22 Not applicable.
23 Consent by independent auditors to incorporation by reference........ 61
25 Not applicable.
27 Financial Data Schedule.............................................. 62
29 Not applicable.
</TABLE>
- ---------------
* Incorporated by reference
** Management contract or compensatory plan
56
<PAGE> 1
EXHIBIT 10
AMENDMENT NO. 1
ALEXANDER'S, INC. OMNIBUS STOCK PLAN
Alexander's Inc. Omnibus Share Plan (the "Plan") is hereby amended,
pursuant to Section 15 of the Plan, as set forth below:
1. Section 6 of the Plan is hereby amended by adding the following sentence
to the end of the second paragraph thereof:
"Such reload stock option grants shall not be treated as Shares granted
under the Plan in determining the aggregate number of Shares available for
the grant of awards pursuant to the first sentence of Section 2."
2. Section 12 of the Plan is hereby amended to read in its entirety as
follows:
"Except as may otherwise be determined by the Committee with respect to the
transferability of stock options by a Participant to such Participant's
immediate family members (or trusts, partnerships, or limited liability
companies established for such immediate family members), no award under
the Plan shall be assignable or transferable except by will or the laws of
descent and distribution, and no right or interest of any Participant shall
be subject to any lien, obligation or liability of the Participant. For
this purpose, immediate family member means, except as otherwise defined by
the Committee, the Participant's children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, siblings (including half
brothers and sisters), in-laws and persons related by reason of legal
adoption. Such transferees may transfer a stock option only by will or the
laws of descent or distribution. A stock option transferred pursuant to
this Section 12 shall remain subject to the provisions of the Plan, and
shall be subject to such other other rules as the Committee shall
determine. Upon transfer of a stock option, any related stock appreciation
right shall be cancelled. Except in the case of a holder's incapacity, an
award shall be exercisable only by the holder thereof."
57
<PAGE> 1
EXHIBIT 10(III)(A)(1)
FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT BETWEEN ALEXANDER'S, INC.
AND BRIAN M. KURTZ
Amendment agreement, dated as of this the 11th day of December 1996
("Amendment Date") by and between Alexander's, Inc. and any successor in
interest thereto (the "Company") and Brian M. Kurtz (the "Executive").
WITNESSETH:
Whereas, the Company and the Executive are parties to an Employment
Agreement, dated March 29, 1995 (the "Current Agreement"); and
Whereas, the Company and the Executive now desire to amend the Current
Agreement in accordance with the terms and provisions hereinafter set forth;
Now, therefore, in consideration of these covenants and agreement set forth
herein and in the Current Agreement, and for other good and valuable
consideration, the parties hereto hereby agree as follows:
Effective January 1, 1997.
1. Salary: Your base salary will be at the rate of $120,000 per annum
and shall be paid to you in accordance with the Company's normal payroll
practice.
2. Duties: You shall be required to perform your duties for 104 days
per year, reduced from 156 days per year.
3. Benefits: You will not be entitled to any paid vacation during this
extension period.
4. No other changes: Except for the changes and amendments provided
above, the Current Agreement shall remain in full force and effect.
5. Governing Law: This Amendment Agreement shall be governed by and
construed in accordance with, the laws of the State of New York.
Alexander's, Inc.
By: /s/ JOSEPH MACNOW
--------------------------------------
Title: Vice President, Chief Financial
Officer
--------------------------------------
/s/ BRIAN M. KURTZ
--------------------------------------
Brian M. Kurtz
58
<PAGE> 1
EXHIBIT 12
ALEXANDER'S, INC.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS FISCAL YEAR ENDED
------------------------------------------------------- ENDED ------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JULY 31, JULY 25,
1996 1995 1994 1993(1) 1993(1) 1993(2) 1992
------------ ------------ ------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income/(loss) from continuing
operations before reversal of
deferred taxes................. $ 13,097(4) $ (9,102) $4,033 $ 9,644 $ 946 $27,151(5) $ (14,630)
Fixed charges(3)................. 14,464 13,607 4,228 2,621 633 1,300 1,131
------- -------- ------ ------ ------ ------- --------
Income/(loss) from continuing
operations before income taxes
and fixed charges.............. $ 27,561 $ 4,505 $8,261 $ 12,265 $1,579 $28,451 $ (13,499)
======= ======== ====== ====== ====== ======= ========
Fixed charges:
Interest and debt expense...... $ 14,299 $ 13,442 $4,063 $ 2,456 $ 468 $ 1,135 $ 966
1/3 of rent expense - interest
factor....................... 165 165 165 165 165 165 165
------- -------- ------ ------ ------ ------- --------
14,464 13,607 4,228 2,621 633 1,300 1,131
Capitalized interest........... 8,552 6,575 1,718 753 753 -- --
------- -------- ------ ------ ------ ------- --------
$ 23,106 $ 20,182 $5,946 $ 3,374 $1,386 $ 1,300 $ 1,131
======= ======== ====== ====== ====== ======= ========
Ratio of earnings to fixed
charges........................ 1.20(4) -- 1.39 3.64 1.14 21.89(5) --
Deficiency in earnings available
to cover fixed charges......... -- $(15,677) -- -- -- -- $ (14,630)
======== ========
</TABLE>
- ---------------
(1) In November 1993, the Company changed to a calendar year from a fiscal year
ending on the last Saturday in July. The amounts for the year ended December
31, 1993 are included for comparative purposes only.
(2) Includes 53 weeks.
(3) For purposes of this calculation, earnings before fixed charges consist of
earnings before income taxes plus fixed charges. Fixed charges consist of
interest expense on all indebtedness (including amortization of debt
issuance costs) from continuing operations and the portion of operating
lease rental expense that is representative of the interest factor (deemed
to be one-third of operating lease rentals). Fixed charges does not include
any interest paid to unsecured creditors or charged against the reserve from
discontinued operations. Fixed charges also does not include any interest
expensed or capitalized during the period the Company was in the retail
business (prior to 5/15/92) except for its share of the Kings Plaza Mall
interest expense.
(4) Includes gain of $14,372 from the reversal of the Company's postretirement
healthcare liability without which the Company would have a deficiency in
earnings to cover fixed charges of $9,827.
(5) Includes a gain on sales of leases of $28,779 without which the Company
would have a deficiency in earnings to cover fixed charges of $1,628.
59
<PAGE> 1
EXHIBIT 21
ALEXANDER'S, INC.
SUBSIDIARIES OF REGISTRANT
Alexander's of Brooklyn, Inc.
Alexander's of Fordham Road, Inc.
Alexander's of Rego Park, Inc.
Alexander's of Rego Park II, Inc.
Alexander's of Rego Park III, Inc.
Alexander's of Third Avenue, Inc.
Alexander's of Flushing, Inc.
Alexander's Department Stores of New Jersey, Inc.
Alexander's Department Stores of Lexington Avenue, Inc.
Alexander's Department Stores of Brooklyn, Inc.
U & F Realty Corp.
ADMO Realty Corp.
Ownreal Inc.
Sakraf Wine & Liquor Store, Inc.
Alexander's Department Stores of Valley Stream, Inc.
Alexander's Department Stores of Yonkers, Inc.
Alexander's Department Stores of Bruckner Boulevard, Inc.
A.D.S. Bruckner Operating Corporation
Browning Avenue Realty Corp.
ALS Liquors
Alexander's Department Stores of Roosevelt Field, Inc.
Alexander's Department Stores of Menlo Park, Inc.
SKO Realty Corp.
Narrow Corp.
Queens Plaza Shopping Center, Inc.
Harvey Weston Associates, Inc.
Ideal Hanging Corp.
Alexander's Department Stores Fur Vault, Inc.
ZARCO Trading Corp.
Alexander's Department Stores of Florida, Inc.
60
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation in Amendment No. 3 to Registration
Statement No. 33-62779 on Form S-3 of our report dated February 25, 1997,
appearing in this Annual Report on Form 10-K of Alexander's, Inc. for the year
ended December 31, 1996 and our report dated February 11, 1997 appearing in
this Annual Report on Form 10-K of Kings Plaza Shopping Center and Marina for
the year ended December 31, 1996.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 27, 1997
61
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's audited financial statements for the year ended December 31, 1996 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,480
<SECURITIES> 0
<RECEIVABLES> 348
<ALLOWANCES> 147
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 207,767
<DEPRECIATION> 39,375
<TOTAL-ASSETS> 211,585
<CURRENT-LIABILITIES> 0
<BONDS> 192,347
0
0
<COMMON> 5,174
<OTHER-SE> 389
<TOTAL-LIABILITY-AND-EQUITY> 211,585
<SALES> 0
<TOTAL-REVENUES> 21,833
<CGS> 0
<TOTAL-COSTS> 12,092
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,934
<INCOME-PRETAX> 13,097
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,097
<DISCONTINUED> 11,602
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,699
<EPS-PRIMARY> 4.94
<EPS-DILUTED> 0
</TABLE>
