1 EXHIBIT INDEX ON PAGE 43 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, 2000 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.) 888 Seventh Avenue, New York, New York. 10019 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 894-7000 210 Route 4 East, Paramus, New Jersey 07652 (Former name, former address and former fiscal year, if changed since last report) 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 9, 2001) was approximately $131,783,000. 5,000,850 shares of the Registrant's common stock, par value $1 per share, were outstanding as of February 9, 2001. Documents Incorporated by Reference Part III: Proxy Statement for Annual Meeting of Shareholders to be held May 30, 2001
2 TABLE OF CONTENTS <TABLE> <CAPTION> Page <S> <C> Item PART I. 1. Business 3 2. Properties 6 3. Legal Proceedings 10 4. Submission of Matters to a Vote of Security Holders 10 Executive Officers of the Company 10 PART II. 5. Market for Registrant's Common Equity and Related Stockholder Matters 11 6. Selected Financial Data 12 7 Management's Discussion and Analysis of Financial 13 Condition and Results of Operations 7A. Quantitative and Qualitative Disclosures about Market 18 Risk 8. Financial Statements and Supplementary Data 18 9. Changes in and Disagreements with Accountants 18 on Accounting and Financial Disclosure PART III. 10. Directors and Executive Officers of the Registrant 37 (1) 11. Executive Compensation 37 (1) 12. Security Ownership of Certain Beneficial Owners and Management 37 (1) 13. Certain Relationships and Related Transactions 37 (1) PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 38 SIGNATURES 39 </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, 2000, which is incorporated by reference. -2-
3 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. Alexander's activities are conducted through its manager, Vornado Realty Trust ("Vornado"). Alexander's has seven 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 351,000 square foot building, which is 100% leased to Sears, Circuit City, Bed Bath & Beyond, Marshalls and Old Navy; (ii) the recently renovated Kings Plaza Regional Shopping Center on Flatbush Avenue in Brooklyn, New York, which contains 1,100,000 square feet is comprised of a two-level mall containing 477,000 square feet (the "Mall), a 289,000 square foot department store leased to Sears and another anchor department store owned and operated as a Macy's by Federated Department Stores, Inc. ("Federated"); (iii) the Flushing property located at Roosevelt Avenue and Main Street in Flushing, New York, which contains a 177,000 square foot building currently unoccupied; and (iv) 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 developed: (v) 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; (vi) the Paramus property which consists of 30.3 acres of land located at the intersection of Routes 4 and 17 in Paramus, New Jersey; and (vii) the Rego Park II property, which comprises one and one-half square blocks of vacant land adjacent to the Rego Park I property. The Company has completed the excavation and laying the foundation for its Lexington Avenue property as part of the proposed development of a large multi-use building. The proposed building is expected to be comprised of a commercial portion, which may include a combination of retail stores, offices, hotel space, extended stay residences, residential rentals and parking; and a residential portion, consisting of condominium units. The capital required for the proposed building will be in excess of $650,000,000. If the residential portion of the property is developed, the air rights representing the residential portion would be transferred to a taxable REIT subsidiary, as a REIT is not permitted to sell condominiums without being subject to a 100% excise tax on the gain from the sale of such condominiums. The Company sold its Fordham road property, located in the Bronx, New York, on January 12, 2001. The vacant property contains 303,000 square feet and was sold for $25,500,000 resulting in a gain of $19,000,000. In addition, the Company paid off the mortgage on this property at a discount, which resulted in an extraordinary gain from the early extinguishment of debt of $3,500,000. Sears accounted for 21%, 22% and 28% of the Company's consolidated revenues for the years ended December 31, 2000, 1999 and 1998, respectively. No other tenant accounted for more than 10% of revenues. -3-
4 The Company has completed a renovation of the Kings Plaza Regional Shopping Center (the "Center") at a total cost of $48,000,000, of which $42,392,000 has been expended as of December 31, 2000. Included in the $48,000,000 is $15,000,000 that the Company agreed to pay Federated to renovate its Macy's store at the Center. This agreement was part of the terms of the acquisition, by the Company, of Federated's 50% interest in the Center in June 1998. The remainder of the Center renovation (the exterior) is expected to be completed in 2001. In the aggregate, Alexander's operating properties do not generate sufficient cash flow to pay all of its expenses. The Company's three non-operating properties (Lexington Avenue, Paramus, and Rego Park II) are in various stages of development. As rents commence from portions of the development property(s) and from the vacant property, the Company expects that cash flow will become positive. The Company estimates that the fair market values of its assets are substantially in excess of their historical cost and that it has 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. 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 888 Seventh Avenue; New York, New York 10019, telephone 212-894-7000. Relationship with Vornado Realty Trust ("Vornado") Vornado owns 33.1% of the Company's Common Stock at December 31, 2000, of which 41,500 share were acquired on March 31, 2000 and 10,400 shares were acquired on April 11, 2000. The Company is managed by, and its properties are redeveloped and leased by Vornado, pursuant to agreements with a one-year term expiring in March of each year which are automatically renewable. The annual management fee payable by the Company to Vornado is equal to the sum of (i) $3,000,000, (ii) 3% of the gross income from the Mall, plus (iii) 6% of development costs with minimum guaranteed fees of $750,000 per annum. The leasing agreement provides for the Company to pay a fee to Vornado equal to (i) 3% of the gross proceeds, as defined, from the sale of an asset and (ii) in the event of a lease or sublease of an asset, 3% of lease rent for the first ten years of a lease term, 2% of lease rent for the eleventh through the twentieth years of a lease term and 1% of lease rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by tenants. 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. At December 31, 2000 the Company does not owe Vornado any leasing fees. Pursuant to the leasing agreement, in the event third party real estate brokers are used, the fees to Vornado increase by 1% and Vornado is responsible for the fees to the third party real estate brokers. At December 31, 2000, the Company is indebted to Vornado in the amount of $115,000,000 comprised of (i) $95,000,000 relating to the subordinated tranche of a $115,000,000 secured financing, and (ii) $20,000,000 under the line of credit discussed below. On August 1, 2000, the Company obtained a $50,000,000 secured line of credit from Vornado under the same terms and conditions as the existing $95,000,000 loan from Vornado, including the interest rate of 15.72%. The maturity date of the existing $95,000,000 loan has been extended to March 15, 2002, which is also the maturity date of the new line of credit. The interest rate on the loan and line of credit will reset on March 15, 2001, using the same spread to treasuries as presently exists. The proceeds of the secured line of credit are being used for general corporate purposes including continuing to fund the real estate development costs at its Lexington Avenue property. It is expected that a construction loan will be obtained to finance the development of the Lexington Avenue property. These loans are secured by liens 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 liens do not cover the Kings Plaza Regional Shopping Center and Rego Park I and are subordinate to first mortgages and a $20,000,000 bank term loan. Vornado is a fully integrated REIT with significant experience in the ownership, development, leasing, operation and management of retail and office properties. -4-
5 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. At December 31, 2000, 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 Vorndao) own, in the aggregate, 27.5% of the outstanding common stock of the Company, and 17.7% of the outstanding common shares of beneficial interest of Vornado. ENVIRONMENTAL MATTERS In June 1997, the Kings Plaza Regional Shopping Center (the "Center"), commissioned an Environmental Study and Contamination Assessment Site Investigation (the Phase II "Study") to evaluate and delineate environmental conditions disclosed in a Phase I study. The results of the Study indicate the presence of petroleum and bis (2-ethylhexyl) phthalate contamination in the soil and groundwater. The Company has delineated the contamination and has developed a remediation approach. The New York State Department of Environmental Conservation ("NYDEC") has not yet approved the remediation approach. The Company accrued $2,000,000 in previous years ($1,678,000 has been paid as of December 31, 2000) for its estimated obligation with respect to the clean up of the site, which includes costs of (i) remedial investigation, (ii) feasibility study, (iii) remedial design, (iv) remedial action and (v) professional fees. If the NYDEC insists on a more extensive remediation approach, the Company could incur additional obligations. The majority of the contamination may have resulted from activities of third parties; however, the sources of the contamination have not been fully identified. Although the Company intends to pursue all available remedies against any potentially responsible third parties, there can be no assurance that such parties will be identified, or if identified, whether these potentially responsible third parties will be solvent. In addition, the costs associated with pursuing any potentially responsible parties may be cost prohibitive. The Company has not recorded an asset as of December 31, 2000 for potential recoveries of environmental remediation costs from other parties. 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 financial position, results of operations and cash flows. 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. The Company's success is also subject to its ability to finance its development and to refinance its debts as they come due. EMPLOYEES The Company currently has one corporate employee and 77 property level employees. -5-
6 Item 2. Properties The following table shows the location, approximate size and leasing status as of December 31, 2000 of each of the Company's properties, excluding the Fordham Road property that was sold on January 12, 2001. <TABLE> <CAPTION> Approximate Approximate Land Area in Building Average Significant Lease Square Feet Leaseable Square Annualized Tenants Square Expiration/ ("SF") Feet/Number Base Rent Percent (30,000 square Footage Option Property Ownership or Acreage of Floors Per Sq. Foot Leased feet or more) Leased Expiration - -------- --------- ------------ ---------------- ------------ ------- ------------------ ------- ---------- <S> <C> <C> <C> <C> <C> <C> <C> <C> OPERATING PROPERTIES Rego Park I Owned 4.8 acres 351,000/3 $ 29.02 100% Sears 195,000 2021 Queens Blvd. & (1) Circuit City 50,000 2021 63rd Rd. Bed Bath & Beyond 46,000 2013 Rego Park, New York Marshalls 39,000 2008/2021 Kings Plaza Regional Owned 24.3 acres 766,000/4 30.73 91% Sears 289,000 2023/2033 Shopping Center (1)(2) 114 Mall tenants 433,000 Various Flatbush Avenue Brooklyn, New York Roosevelt Avenue & Leased (3) 44,975 SF 177,000/4 -- -- -- -- Main Street Flushing, New York Third Avenue & Owned 60,451 SF 173,000/4 5.00 100% An affiliate of 173,000 2023 152nd Street Conway Bronx, New York ----------- 1,467,000 =========== DEVELOPMENT PROPERTIES Square block at East Owned 84,420 SF -- 59th Street & (4) Lexington Avenue New York, New York Routes 4 & 17 Owned 30.3 acres -- Paramus, New Jersey (5) Rego Park II Owned 6.6 acres -- Queens, New York </TABLE> -6-
7 (1) Excludes parking garages operated for the benefit of the Company. (2) Excludes the 339,000 square foot Macy's store, owned and operated by Federated. (3) Leased to the Company through January 2027. The Company is obligated to pay rent to the landlord as follows: $331,000 per year from February 1997 through January 2007, $220,000 per year from February 2007 through January 2017, and $147,000 per year from February 2017 through January 2027. (4) The Company has completed the excavation and laying the foundation of the site as part of the proposed development of a large multi-use building. The proposed building is expected to be comprised of a commercial portion, which may include a combination of retail stores, offices, hotel space, extended stay residences, residential rentals and parking; and a residential portion, consisting of condominium units. The capital required for the proposed building will be in excess of $650,000,000. (5) Governmental approvals have been obtained to develop a shopping center at this site containing approximately 550,000 square feet (see Item 2 "Paramus Property"). 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. The existing 351,000 square foot building was redeveloped in 1996 and is fully leased to Sears, Circuit City, Bed Bath & Beyond, Marshalls and Old Navy. In addition, in conjunction with the redevelopment, a multi-level parking structure was constructed which provides paid parking spaces for approximately 1,200 vehicles. Kings Plaza Regional Shopping Center The Kings Plaza Regional Shopping Center (the "Center") contains approximately 1.1 million square feet and is comprised of a two-level mall (the "Mall") containing 477,000 square feet and two four-level anchor stores. One of the anchor stores is owned by the Company and leased to Sears, while the other anchor store is owned and operated as a Macy's store by Federated. The Center occupies a 24.3-acre site at the intersection of Flatbush Avenue and Avenue U located in Brooklyn, New York. Among the Center's features are a marina, a five-level parking structure and an energy plant that generates all of the Center's electrical power. The Company has completed a renovation of the Mall in connection with the overall renovation of the Center at an estimated cost of $33,000,000 of which $27,891,000 has been expended as of December 31, 2000. The remainder of the Center renovation (the exterior) is expected to be completed in 2001. -7-
8 The following table shows lease expirations for the Mall tenants in the Center for the next ten years, assuming none of the tenants exercise renewal options: <TABLE> <CAPTION> Percent of Percent of Total Lease 2000 Gross Approximate Annualized Annualized Square Annual Base Leased Area in Fixed Rent Fixed Rent Footage Rental Number of Square Feet Under Under Expiring Represented Represented Leases Under Expiring Expiring Leases per by Expiring by Expiring Year Expiring Leases Leases Square Foot Leases Leases - ---- --------- -------------- ----------- -------------- ----------- ----------- <S> <C> <C> <C> <C> <C> <C> 2001 9 28,576 $ 1,874,925 $ 65.61 6.59% 10.37% 2002 10 32,764 1,339,902 40.90 7.56 7.41 2003 8 16,611 860,071 51.78 3.83 4.76 2004 4 23,006 908,255 39.48 5.31 5.03 2005 10 17,479 852,097 48.75 4.03 4.71 2006 14 81,324 2,344,373 28.83 18.76 12.97 2007 13 52,763 2,389,054 45.28 12.17 13.22 2008 4 5,341 294,836 55.20 1.23 1.63 2009 17 79,056 3,891,948 49.23 18.24 21.53 2010 12 26,469 1,689,201 63.82 6.11 9.35 </TABLE> The following table shows the occupancy rate and the average annual rent per square foot for the Mall stores as of: <TABLE> <CAPTION> Average Annual Base Rent Occupancy Rate Per Square Foot <S> <C> <C> December 31, 2000 91% $ 44.66 December 31, 1999 86 43.12 December 31, 1998 90 40.63 December 31, 1997 86 38.17 December 31, 1996 84 37.29 </TABLE> 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, has been unoccupied since March 1999. The Company is currently in discussions with several tenants to re-lease all or portions of this space. 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. -8-
9 Development Properties: Lexington Avenue The Company owns the Lexington Avenue property which 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 has completed the excavation and laying the foundation for its Lexington Avenue property as part of the proposed development of a large multi-use building. The proposed building is expected to be comprised of a commercial portion, which may include a combination of retail stores, offices, hotel space, extended stay residences, residential rentals and parking; and a residential portion, consisting of condominium units. The capital required for the proposed building will be in excess of $650,000,000. If the residential portion of the property is developed, the air rights representing the residential portion would be transferred to a taxable REIT subsidiary, as a REIT is not permitted to sell condominiums without being subject to a 100% excise tax on the gain from the sale of such condominiums. Paramus The Company owns 30.3 acres of land 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. The Company may develop a shopping center of approximately 550,000 square feet on this site. The estimated cost of such development is approximately $100,000,000. The Company has received municipal approvals on tentative plans to redevelop the site. No development plans have been finalized. Rego Park II The Company owns two 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. Both parcels are currently zoned for residential use. Both parcels are being used for public paid parking. The Company intends to continue to use these properties for paid parking while it evaluates development options. 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, 2000. -9-
10 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 Occupations, Position and Office (current and during the past Name Age five years with the Company unless otherwise stated) - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Stephen Mann 63 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 59 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, an owner of shopping centers and an investor in securities and partnerships. Michael D. Fascitelli 44 President of the Company since August 1, 2000; Director of the Company and President and Trustee of Vornado Realty Trust since December 2, 1996; Director of Vornado Operating Company since 1998; Partner at Goldman, Sachs & Co. in charge of its real estate practice from December 1992 to December 1996; and Vice President at Goldman, Sachs & Co., prior to December 1992. Joseph Macnow 55 Executive Vice President - Finance and Administration since March 1, 2001; Vice President and Chief Financial Officer of the Company from August 1995 to February, 2001; Executive Vice President - Finance and Administration of Vornado since January 1998 and Vice President and Chief Financial Officer of Vornado from 1985 to January 1998. Patrick T. Hogan 33 Vice President - Chief Financial Officer since March 1, 2001; Chief Financial Officer and Treasurer for Correctional Properties Trust, a Maryland UPREIT, from February 1998 to February 2001; from June 1996 to February 1998, worked for the Wackenhut Corporation and Subsidiaries managing treasury and financial reporting functions while also assisting in the formation of Correctional Properties Trust. Irwin Goldberg 56 Secretary and Treasurer from June 1999 to February 2001; Vice President - Chief Financial Officer of Vornado since January 1998; Partner at Deloitte & Touche LLP from September 1978 to January 1998. </TABLE> -10-
11 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 2000 $ 82 $ 63 1/2 2nd Quarter 2000 73 3/4 63 1/2 3rd Quarter 2000 82 1/8 73 1/5 4th Quarter 2000 82 67 </TABLE> <TABLE> <CAPTION> High Low <S> <C> <C> 1st Quarter 1999 $ 78 1/4 $ 66 15/16 2nd Quarter 1999 75 7/8 68 3rd Quarter 1999 84 1/16 70 1/2 4th Quarter 1999 79 1/2 70 </TABLE> As of December 31, 2000, there were approximately 1,700 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 2000 and 1999. 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, 2000, the Company had net operating loss carryovers ("NOL's") of approximately $146,000,000. 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. -11-
12 Item 6. Selected Financial Data Summary of Selected Financial Data (Amounts in thousands, except per share data) <TABLE> <CAPTION> Year Ended December 31, ---------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> Operating data: Total revenues $ 63,965 $ 64,390 $ 51,663 (2) $ 25,369 $ 21,833 ========== ========== ========== ========= ========== Income (loss) from continuing operations 5,197 5,524(1) (6,055) (3) 7,466 (4) 13,097(5) Income from discontinued operations -- -- -- -- 11,602 ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 5,197 $ 5,524 $ (6,055) $ 7,466 $ 24,699 ========== ========== ========== ========== ========== Income (loss) per common share: (6) Continuing operations $ 1.04 $ 1.10 $ (1.21) $ 1.49 $ 2.62 Discontinued operations -- -- -- -- 2.32 ---------- ---------- ---------- ---------- ---------- Net income (loss) per share $ 1.04 $ 1.10 $ (1.21) $ 1.49 $ 4.94 ========== ========== ========== ========== ========== Balance sheet data: Total assets $ 403,305 $ 366,496 $ 317,043 $ 235,074 $ 211,585 Real estate 341,492 267,203 239,157 191,733 181,005 Debt 367,788 329,161 277,113 208,087 192,347 Stockholders' equity 17,695 12,498 6,974 13,029 5,563 </TABLE> 1. Net of $4,877 resulting from the write-off of the asset arising from the straight-lining of rents primarily due to Caldor's rejection of its Flushing lease in 1999. 2. In June 1998, the Company increased its interest in the Kings Plaza Mall to 100% by acquiring Federated's 50% interest. 3. Income (loss) from continuing operations includes the write-off of $15,096 resulting from the razing of the building formerly located at the Company's Lexington Avenue site. 4. Includes a gain of $8,914 from the condemnation of a portion of the Paramus property net of the write-off of the carrying value of the building of $5,786. 5. Includes income from the gain on reversal of the Company's postretirement healthcare liability of $14,372. 6. Income (loss) per share is the same for all years' presented with and without dilution. For further discussion of income (loss) per share see notes to the consolidated financial statements. -12-
13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The Company had net income of $5,197,000 for the year ended December 31, 2000 as compared to net income of $5,524,000 in the prior year. Net income for 1999 is after a charge of $4,877,000 resulting from the write-off of the asset arising from the straight-lining of rents primarily due to Caldor's rejection of its Flushing lease. Details of the changes in the components of net income are discussed in the comparison of the years ended December 31, 2000 and December 31, 1999 below. RESULTS OF OPERATIONS Years Ended December 31, 2000 and December 31, 1999 The Company's revenues, which consist of property rentals and tenant expense reimbursements were $63,965,000 in 2000, compared to $64,390,000 in 1999, a decrease of $425,000. Property rentals were $43,173,000 in 2000, compared to $44,232,000 in 1999, a decrease of $1,059,000. This decrease resulted primarily from Caldor's rejection of its Flushing lease effected March 29, 1999. Tenant expense reimbursements were $20,792,000 in 2000, compared to $20,158,000 in 1999, an increase of $634,000. This increase resulted primarily from higher reimbursements for a portion of the increased fuel costs of the utility plant at the Company's Kings Plaza Regional Shopping Center; partially offset from a change made in the first quarter of 2000, in the method of allocating an anchor tenant's share of parking lot expenses at the Rego Park I property (which covered a number of years). Operating expenses were $29,040,000 in 2000, compared to $33,081,000 in 1999, a decrease of $4,041,000. This decrease resulted primarily from: (i) $4,877,000 representing the write-off of the asset arising from the straight-lining of rents due to Caldor's rejection of its Flushing lease in 1999, (ii) a decrease in repairs and maintenance of $1,243,000 in 2000, partially offset by an increase in expenses of the utility plant at the Company's Kings Plaza Regional Shopping Center in the current year resulting from higher fuel costs. General and administrative expenses were $3,885,000 in 2000, compared to $3,692,000 in 1999, an increase of $193,000 primarily as a result of higher professional fees. Interest and debt expense was $21,424,000 in 2000, compared to $17,647,000 in 1999, an increase of $3,777,000. This increase resulted from (i) an increase in average debt outstanding of $61,268,000, and (ii) an increase in average interest rates from 8.50% to 10.07%, substantially offset by (iii) an increase in capitalized interest relating to the Company's development properties. Years Ended December 31, 1999 and December 31, 1998 The Company's revenues, which consist of property rentals, tenant expense reimbursements and equity in income of unconsolidated joint venture (prior to 1999) were $64,390,000 in 1999, compared to $51,663,000 in 1998, an increase of $12,727,000. -13-
14 Property rentals were $44,232,000 in 1999, compared to $35,151,000 in 1998, an increase of $9,081,000. This increase resulted from: <TABLE> <CAPTION> Effective Date --------- <S> <C> <C> Acquisition of the remaining 50% interest in the Kings Plaza Mall June 1998 $ 11,130,000 Rent from new tenants Various 1,116,000 Caldor's rejection of its Flushing lease April 1999 (2,532,000) Closure of parking operations at the Lexington Avenue property (633,000) ------------- $ 9,081,000 ============= </TABLE> Tenant expense reimbursements were $20,158,000 in 1999, compared to $13,993,000 in 1998, an increase of $6,165,000. This increase resulted primarily from the acquisition of the remaining 50% interest in the Kings Plaza Mall and the resulting consolidation of its operations after June 18, 1998. The decrease in equity in income of unconsolidated joint venture resulted from the consolidation of the Mall's operations in 1998 as noted above. Operating expenses were $33,081,000 in 1999, compared to $20,132,000 in 1998, an increase of $12,949,000. Of this increase (i) $9,254,000 primarily resulted from the acquisition of the remaining 50% interest in the Kings Plaza Mall and the resulting consolidation of the Mall's operations after June 18, 1998 and (ii) $4,877,000 resulted from the write-off of the asset arising from the straight-lining of rents primarily due to Caldor's rejection of its Flushing lease in 1999, partially offset by a decrease in real estate tax, repairs and maintenance and parking garage expenses. General and administrative expenses were $3,692,000 in 1999, compared to $4,079,000 in 1998, a decrease of $387,000 primarily as a result of lower professional fees. Depreciation and amortization expense was $5,441,000 in 1999 compared to $4,289,000 in 1998, an increase of $1,152,000 primarily as a result of the acquisition of the remaining 50% interest in the Kings Plaza Mall and the resulting consolidation of its operations after June 18, 1998. In September 1998, the Company wrote-off $15,096,000 resulting from the razing of the building formerly located at the Lexington Avenue site. Interest and debt expense was $17,647,000 in 1999, compared to $15,115,000 in 1998, an increase of $2,532,000. This increase resulted primarily from (i) higher average debt, partially offset by (ii) a decrease in the average interest rate and (iii) an increase in capitalized interest relating to the Company's development properties. LIQUIDITY AND CAPITAL RESOURCES In the aggregate, Alexander's operating properties do not generate sufficient cash flow to pay all of its expenses. The Company's three non-operating properties (Lexington Avenue, Paramus, and Rego Park II) are in various stages of development. As rents commence from portions of the development property(s) and from the vacant property, the Company expects that cash flow will become positive. The Company may develop a shopping center of approximately 550,000 square feet on the Paramus Property. The estimated cost of such development is approximately $100,000,000. The Company has received municipal approvals on tentative plans to redevelop the site. No development plans have been finalized. The Company has completed the excavation and laying the foundation for its Lexington Avenue property as part of the proposed development of a large multi-use building. The proposed building is expected to be comprised of a commercial portion, which may include a combination of retail stores, offices, hotel space, extended stay residences, residential rentals and parking; and a residential portion, consisting of condominium units. In connection therewith, the Company let contracts for $28,000,000 to undertake the excavation and laying the -14-
15 foundation for the proposed development. $26,839,000 has been paid as of December 31, 2000. The capital required for the proposed building will be in excess of $650,000,000. If the residential portion of the property is developed, the air rights representing the residential portion would be transferred to a taxable REIT subsidiary, as a REIT is not permitted to sell condominiums without being subject to a 100% excise tax on the gain from the sale of such condominiums. The Company sold its Fordham road property, located in the Bronx, New York, on January 12, 2001. The vacant property contains 303,000 square feet and was sold for $25,500,000 resulting in a gain of $19,100,000. In addition, the Company paid off the $21,263,000 mortgage on this property at a discount, which resulted in an extraordinary gain from the early extinguishment of debt of $3,500,000. At December 31, 2000, the Company is indebted to Vornado in the amount of $115,000,000 comprised of (i) $95,000,000 relating to the subordinated tranche of a $115,000,000 secured financing, and (ii) $20,000,000 under the line of credit discussed below. On August 1, 2000, the Company obtained a $50,000,000 secured line of credit from Vornado under the same terms and conditions as the existing $95,000,000 loan from Vornado, including the interest rate of 15.72%. The maturity date of the existing $95,000,000 loan has been extended to March 15, 2002, which is also the maturity date of the new line of credit. The interest rate on the loan and line of credit will reset on March 15, 2001, using the same spread to treasuries as presently exists. The proceeds of the secured line of credit are being used for general corporate purposes including continuing to fund the real estate development costs at its Lexington Avenue property. It is expected that a construction loan will be obtained to finance the Lexington Avenue property. These loans are secured by liens 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 liens do not cover the Kings Plaza Regional Shopping Center and Rego Park I and are subordinate to first mortgages and a $20,000,000 bank term loan. A summary of maturities of debt at December 31, 2000 is as follows: <TABLE> <CAPTION> Year ending December 31, ------------------------ <S> <C> 2001 $ 134,525,000(1) 2002 115,000,000 2003 36,263,000(2) 2004 339,000 2005 735,000 </TABLE> (1) $114,525,000 of this amount relates to a first mortgage loan secured by the Company's Kings Plaza Regional Shopping Center (the "Center"). The Company is currently negotiating refinancing the Center with various outside lenders. Based on the historical operating performance of the Center, management believes that it has excess borrowing capacity over the existing mortgage loan. The remaining $20,000,000 is a term loan to a bank which was scheduled to mature on March 15, 2001. This loan has been extended to March 15, 2002. (2) $21,263,000 of this amount was repaid on January 12, 2001 in connection with the sale of the Fordham Road Property. The Company estimates that the fair market values of its assets are substantially in excess of their historical cost and that it has 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. 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. -15-
16 CASH FLOWS Year Ended December 31, 2000 Cash provided by operating activities of $10,741,000 was comprised of income after adjustments for non-cash items of $9,737,000, net of the change in operating assets and liabilities of $1,004,000. The adjustments for non-cash items are comprised of depreciation and amortization of $8,049,000 and the effect of straight-lining of rental income of $3,509,000. Net cash used in investing activities of $65,636,000 was comprised of capital expenditures of $77,931,000, offset by the release of restricted cash of $12,295,000. The capital expenditures were primarily comprised of: (i) excavation, foundation and predevelopment costs at Lexington Avenue of $35,300,000, (ii) renovations to the Kings Plaza Regional Shopping Center of $22,700,000, and (iii) capitalized interest and other carrying costs of $18,800,000. Net cash provided by financing activities of $31,114,000 was comprised of (i) proceeds from the issuance of debt of $38,849,000, offset by (ii) payment of acquisition obligation of $6,936,000, (iii) repayments of debt of $222,000 and (iv) debt issuance costs of $577,000. Year Ended December 31, 1999 Cash provided by operating activities of $17,194,000 was comprised of income after adjustments for non-cash items of $14,445,000, net of the change in operating assets and liabilities of $2,749,000. The adjustments for non-cash items are comprised of depreciation and amortization of $7,460,000 and the effect of straight-lining of rental income of $1,461,000. Net cash used in investing activities of $47,601,000 was primarily comprised of (i) the escrowing of cash from the proceeds from the Kings Plaza Regional Shopping Center which is restricted as to its use $13,601,000, net of the release of cash from escrow for the condemnation of a portion of the Paramus property $2,318,000 and (ii) capital expenditures of $36,318,000. Net cash provided by financing activities of $41,097,000 was comprised of (i) proceeds from the issuance of debt of $137,676,000, offset by (ii) repayments of debt of $85,628,000, (iii) debt issuance costs of $3,522,000 and (iv) payment of acquisition obligation of $7,429,000. Year Ended December 31, 1998 Cash provided by operating activities of $5,461,000 was comprised of income after adjustments for non-cash items of $10,327,000, net of the change in operating assets and liabilities of $4,866,000. The adjustments for non-cash items are comprised of (i) the write-off of the carrying value of the Lexington Avenue building and related development costs of $15,096,000 and (ii) depreciation and amortization of $5,715,000, offset by (iii) the effect of straight-lining of rental income of $4,429,000. Net cash used in investing activities of $40,217,000 was primarily comprised of (i) $28,000,000 for the acquisition of the remaining 50% interest in the Kings Plaza Mall, (ii) the escrowing of cash from the condemnation of a portion of the Paramus property $2,318,000 and cash from the proceeds from the Kings Plaza Regional Shopping Center loan $5,212,000 which is restricted as to its use and (iii) capital expenditures of $19,387,000, partially offset by (iv) proceeds from the condemnation of a portion of the Paramus property of $14,700,000. Net cash provided by financing activities of $47,428,000 was comprised of (i) proceeds from the issuance of debt on the Kings Plaza Regional Center of $90,000,000, offset by (ii) repayments of debt of $39,236,000 and (iii) debt issuance costs of $3,336,000. -16-
17 Funds from Operations for the Years Ended December 31, 2000 and 1999 Funds from operations were $5,474,000 in the year ended December 31, 2000, a decrease of $4,422,000 from the prior year. The following table reconciles funds from operations and net income: <TABLE> <CAPTION> 2000 1999 ------------ ----------- <S> <C> <C> Net income $ 5,197,000 $ 5,524,000 Depreciation and amortization of real property 5,543,000 5,441,000 Straight-lining of property rentals for rent escalations (3,509,000) (3,740,000) Write-off of the asset arising from the straight-lining of rents -- 4,877,000 Leasing fees paid in excess of expense recognized (1,757,000) (2,206,000) ------------ ----------- $ 5,474,000 $ 9,896,000 ============ =========== </TABLE> Funds from operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs, which is disclosed in the Consolidated Statements of Cash Flows for the applicable periods. There are no material legal or functional restrictions on the use of funds from operations. Funds from operations should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity. Management considers funds from operations a relevant supplemental measure of operating performance because it provides a basis for comparison among REITs; however, funds from operations may not be comparable to similarly titled measures reported by other REITs since the Company's method of calculating funds from operations is different from that used by NAREIT. Funds from operations, as defined by NAREIT, represents net income before depreciation and amortization, extraordinary items and gains or losses on sales of real estate. Funds from operations as disclosed above has been modified to adjust for the effect of straight-lining of property rentals for rent escalations and leasing fee expenses. Below are the cash flows provided by (used in) operating, investing and financing activities: <TABLE> <CAPTION> 2000 1999 -------------- -------------- <S> <C> <C> Operating activities $ 10,741,000 $ 17,194,000 ============== ============== Investing activities $ (65,636,000) $ (47,601,000) ============== ============== Financing activities $ 31,114,000 $ 41,097,000 ============== ============== </TABLE> Recently Issued Accounting Standards In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133") which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The Company is required to adopt SFAS No. 133, as amended by SFAS No. 138, effective January 1, 2001. Because the Company does not currently utilize derivative instruments or engage in hedging activities, management does not anticipate that implementation of this statement will have a material effect on the Company's financial statements. -17-
18 Item 7A. Quantitative and Qualitative Disclosures About Market Risk At December 31, 2000 and 1999, the Company had $170,788,000 and $132,161,000 of variable rate debt at weighted average interest rates of 8.36% and 8.43%. In addition, the Company had $197,000,000 in both years of fixed rate debt bearing interest at weighted average interest rates of 12.19% and 10.58%. A one percent increase in the base used to determine the interest rate of the variable rate debt would result in a $1,708,000 decrease in the Company's annual net income for the year ended December 31, 2000 ($.34 per basic and diluted share). Item 8. Financial Statements and Supplementary Data Index to Financial Statements Page Number Independent Auditors' Report 19 Consolidated Balance Sheets at December 31, 2000 and 1999 20 Consolidated Statements of Operations for the 22 Years Ended December 31, 2000, 1999 and 1998 Consolidated Statements of Stockholders' Equity for the 23 Years Ended December 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows for the 24 Years Ended December 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. -18-
19 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders of Alexander's, Inc. Paramus, New Jersey We have audited the accompanying consolidated balance sheets of Alexander's, Inc. and Subsidiaries (the "Company") as of December 31, 2000 and 1999 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2000. 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 auditing standards generally accepted in the United States of America. 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, 2000, and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. 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 March 1, 2001 -19-
20 ALEXANDER'S, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (amounts in thousands except share amounts) <TABLE> <CAPTION> December 31, --------------------------- 2000 1999 ----------- --------- <S> <C> <C> ASSETS: Real estate, at cost: Land $ 81,656 $ 81,656 Buildings, leaseholds and leasehold improvements 141,873 140,368 Capitalized expenses, development costs and construction in progress 169,811 93,421 ----------- --------- Total 393,340 315,445 Less accumulated depreciation and amortization (51,848) (48,242) ----------- --------- Real estate, net 341,492 267,203 Asset held for sale (Fordham Road property) 4,559 4,602 Cash and cash equivalents 2,272 26,053 Restricted cash 8,390 20,685 Accounts receivable, net of allowance for doubtful accounts of $722 and $314 in 2000 and 1999 1,723 3,353 Receivable arising from the straight-lining of rents, net 15,084 11,575 Deferred lease and other property costs 24,453 24,788 Deferred debt expense 2,280 4,206 Other assets 3,052 4,031 ----------- --------- TOTAL ASSETS $ 403,305 $ 366,496 =========== ========= </TABLE> See notes to consolidated financial statements -20-
21 ALEXANDER'S, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (continued) (amounts in thousands except share amounts) <TABLE> <CAPTION> December 31, 2000 1999 ----------- ---------- <S> <C> <C> LIABILITIES AND STOCKHOLDERS' EQUITY: Debt (including $115,000 and $95,000 due to Vornado Realty Trust in 2000 and 1999) $ 367,788 $ 329,161 Amounts due to Vornado Realty Trust and its affiliate 1,267 3,821 Accounts payable and accrued expenses 13,821 10,804 Other liabilities 2,734 10,212 ----------- ---------- TOTAL LIABILITIES 385,610 353,998 ----------- ---------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: 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 Deficiency (11,362) (16,559) ---------- ---------- 18,655 13,458 Less treasury shares, 172,600 shares at cost (960) (960) ---------- ---------- Total stockholders' equity 17,695 12,498 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 403,305 $ 366,496 ========== ========== </TABLE> See notes to consolidated financial statements -21-
22 ALEXANDER'S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands except per share amounts) <TABLE> <CAPTION> Year Ended December 31, ------------------------------------- 2000 1999 1998 -------- -------- -------- <S> <C> <C> <C> REVENUES: Property rentals $ 43,173 $ 44,232 $ 35,151 Expense reimbursements 20,792 20,158 13,993 Equity in income of unconsolidated joint venture -- -- 2,519 -------- -------- -------- Total revenues 63,965 64,390 51,663 -------- -------- -------- EXPENSES: Operating (including management fee of $1,337, $1,342 and $1,060 to Vornado) 29,040 33,081 20,132 General and administrative (including management fee of $2,160 to Vornado in each year) 3,885 3,692 4,079 Depreciation and amortization 5,543 5,441 4,289 -------- -------- -------- Total expenses 38,468 42,214 28,500 -------- -------- -------- OPERATING INCOME 25,497 22,176 23,163 Interest and debt expense (including interest on loans from Vornado) (21,424) (17,647) (15,115) Interest and other income, net 1,124 995 993 Write-off resulting from the razing of the building formerly located at the Company's Lexington Avenue site -- -- (15,096) -------- -------- --------- NET INCOME (LOSS) $ 5,197 $ 5,524 $ (6,055) ======== ======== ======== Net income (loss) per share (basic and diluted): $ 1.04 $ 1.10 $ (1.21) ======== ======== ========= </TABLE> See notes to consolidated financial statements. -22-
23 ALEXANDER'S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (amounts in thousands) <TABLE> <CAPTION> Additional Treasury Stockholders' Common Stock Capital Deficiency Stock Equity ------------ ---------- ----------- -------- ------------- <S> <C> <C> <C> <C> <C> Balance, January 1, 1998 $ 5,174 $ 24,843 $ (16,028) $ (960) $ 13,029 Net loss -- -- (6,055) -- (6,055) -------- -------- ----------- -------- ---------- Balance, December 31, 1998 5,174 24,843 (22,083) (960) 6,974 Net income -- -- 5,524 -- 5,524 -------- -------- ---------- -------- --------- Balance, December 31, 1999 5,174 24,843 (16,559) (960) 12,498 Net income -- -- 5,197 -- 5,197 -------- -------- ---------- -------- --------- Balance, December 31, 2000 $ 5,174 $ 24,843 $ (11,362) $ (960) $ 17,695 ======== ======== ========== ======== ========= </TABLE> See notes to consolidated financial statements. -23-
24 ALEXANDER'S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) <TABLE> <CAPTION> Year Ended December 31, ------------------------------------------ 2000 1999 1998 ---------- ---------- ---------- <S> <C> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 5,197 $ 5,524 $ (6,055) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization (including debt issuance costs) 8,049 7,460 5,715 Straight-lining of rental income, net (3,509) (3,416) (4,429) Write-off of the asset arising from the straight-lining of rents -- 4,877 -- Write-off resulting from the razing of the building formerly located at the Company's Lexington Avenue site -- -- 15,096 Change in assets and liabilities: Accounts receivable 1,630 (50) (1,935) Distributions less than equity in income of unconsolidated joint venture -- -- (386) Amounts due to Vornado Realty Trust and its affiliate (2,554) (2,019) (1,048) Accounts payable and accrued expenses 3,017 691 1,313 Other liabilities (546) 638 (293) Other (543) 3,489 (2,517) ---------- ---------- ---------- Net cash provided by operating activities 10,741 17,194 5,461 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to real estate (77,931) (36,318) (19,387) Cash made available (restricted) for construction financing 12,202 (13,601) (5,212) Cash made available (restricted) for operating liabilities 93 2,318 (2,318) Acquisition of Kings Plaza Mall, net of liabilities of $1,905 -- -- (28,000) Collection of condemnation proceeds -- -- 14,700 ---------- ---------- ---------- Net cash used in investing activities (65,636) (47,601) (40,217) ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of debt 38,849 137,676 90,000 Debt repayments (222) (85,628) (39,236) Deferred debt expense (577) (3,522) (3,336) Payment of acquisition obligation (6,936) (7,429) -- ----------- ---------- ---------- Net cash provided by financing activities 31,114 41,097 47,428 ---------- ---------- ---------- Net (decrease) increase in cash and cash equivalents (23,781) 10,690 12,672 Cash and cash equivalents at the beginning of the year 26,053 15,363 2,691 ---------- ---------- ---------- Cash and cash equivalents at the end of the year $ 2,272 $ 26,053 $ 15,363 ========== ========== ========== SUPPLEMENTAL INFORMATION Cash payments for interest (of which $16,731, $9,352 and $7,864 have been capitalized) $ 33,979 $ 23,266 $ 21,749 ========== ========== ========== </TABLE> 1998 amounts exclude an increase in real estate of $14,400 and debt of $15,000 and a reduction in minority interest of $600 as a result of the Company acquiring a partnership interest. See notes to consolidated financial statements. -24-
25 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BUSINESS Alexander's Inc. (the "Company") is a real estate investment trust ("REIT") engaged in leasing, managing, developing and redeveloping properties. Alexander's activities are conducted through its manager, Vornado Realty Trust ("Vornado"). In the aggregate, Alexander's operating properties do not generate sufficient cash flow to pay all of its expenses. The Company's three non-operating properties (Lexington Avenue, Paramus, and Rego Park II) are in various stages of development. As rents commence from portions of the development property(s) and from the vacant property, the Company expects that cash flow will become positive. The Company estimates that the fair market values of its assets are substantially in excess of their historical cost, and that it has 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. 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. All intercompany accounts and transactions have been eliminated. Certain reclassifications to prior year amounts have been made to conform with the current year's presentation. The Company currently operates in one business segment. 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. 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. -25-
26 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair Value of Financial Instruments - All financial instruments of the Company are reflected in the accompanying Consolidated Balance Sheets at historical cost which, in management's estimation, based upon an interpretation of available market information and valuation methodologies (including discounted cash flow analyses with regard to fixed rate debt), reasonably approximates their fair values. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of the Company's financial instruments. 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 ranging from four years to forty years. 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 properties are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. In such an event, a comparison is made of the current and projected operating cash flows of each such property 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 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 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, when due, 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 operates in a manner intended to enable it to continue to qualify as a REIT under sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). 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. The Company has reported NOL carryovers for federal tax purposes of approximately $146,000,000 at December 31, 2000, expiring from 2005 to 2012. The Company also has investment tax and targeted jobs tax credits of approximately $3,000,000 expiring in 2002 through 2005. The net basis in the Company's assets and liabilities for tax purposes is approximately $84,000,000 lower than the amount reported for financial statement purposes. Amounts Per Share - Basic income (loss) per share excludes any dilutive effects of stock options. Stock options outstanding were not dilutive in any period. Stock Options - The Company accounts for stock-based compensation using the intrinsic value method. Under the intrinsic value method compensation cost is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the exercise price of the option granted. Compensation cost for stock -26-
27 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS options, if any, is recognized ratably over the vesting period. The Company's policy is to grant options with an exercise price equal to the quoted market price of the Company's stock on the grant date. Accordingly, no compensation cost has been recognized for the Company's stock option plans. 3. ACQUISITION OF KINGS PLAZA MALL In June 1998, the Company increased its interest in the Kings Plaza Mall (the "Mall") to 100% by acquiring Federated Department Store's ("Federated") 50% interest. The purchase price was approximately $28,000,000, which was paid in cash, plus the Company agreed to pay Federated $15,000,000 to renovate its Macy's store in the Mall ($14,500,000 has been paid as of December 31, 2000) and Federated agreed to certain modifications to the Kings Plaza Operating Agreement. Prior to June 18, 1998, the Company owned a 50% interest in the Mall and had accounted for this investment under the equity method. The acquisition was recorded under the purchase method of accounting. The purchase cost was allocated to the acquired assets and assumed liabilities based on the fair value as of the closing date. Set forth below is the unaudited pro forma condensed consolidated statements of operations data for the Company for the year ended December 31, 1998 as if the acquisition of the Kings Plaza Mall and the related financing transactions had occurred on January 1, 1997. <TABLE> <S> <C> Revenues $ 63,309 =========== Net loss $ (2,859) ============ Net loss per share - basic and diluted $ (.57) =========== </TABLE> Summary financial information for the Kings Plaza Mall prior to the acquisition is as follows: <TABLE> <CAPTION> For The Period From January 1, 1998 to June 17, 1998 ---------------- <S> <C> Operating revenue $ 14,085,000 ------------- Operating costs 8,481,000 Depreciation and amortization 715,000 Interest expense 283,000 ------------- 9,479,000 ------------- Operating income $ 4,606,000 ============= Assets $ 31,000,000 ============= Liabilities $ 12,300,000 ============= </TABLE> The Company has completed a renovation of the Kings Plaza Regional Shopping Center (the "Center") at a total cost of $48,000,000, of which $42,392,000 has been expended as of December 31, 2000. Included in the $48,000,000 is the $15,000,000 discussed above that the Company agreed to pay Federated to renovate its Macy's store at the Center. The remainder of the Center renovation (the exterior) is expected to be completed in 2001. -27-
28 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. DEBT Debt comprises: <TABLE> <CAPTION> December 31, ------------ 2000 1999 ---- ---- <S> <C> <C> Term loan to Vornado (1) $115,000,000 $ 95,000,000 Term loan to bank (1) 20,000,000 20,000,000 First mortgage loan, secured by the Company's Kings Plaza Regional Shopping Center (2) 114,525,000 95,676,000 First mortgage loan secured by the Company's Rego Park I Shopping Center (3) 82,000,000 82,000,000 First mortgage loan, secured by the Company's Fordham Road property (4) 21,263,000 21,485,000 Secured note (5) 15,000,000 15,000,000 ------------ ------------ $367,788,000 $329,161,000 ============ ============ </TABLE> (1) At December 31, 2000, the Company is indebted to Vornado in the amount of $115,000,000 comprised of (i) $95,000,000 relating to the subordinated tranche of a $115,000,000 secured financing and (ii) $20,000,000 under the line of credit discussed below. On August 1, 2000, the Company obtained a $50,000,000 secured line of credit from Vornado under the same terms and conditions as the existing $95,000,000 loan from Vornado, including the interest rate of 15.72%. The maturity date of the existing $95,000,000 loan has been extended to March 15, 2002, which is also the maturity date of the new line of credit. The interest rate on the loan and line of credit will reset on March 15, 2001, using the same spread to treasuries as presently exists. The proceeds of the secured line of credit are being used for general corporate purposes including continuing to fund the real estate development costs at its Lexington Avenue property. The interest rate on the bank loan is LIBOR plus 1.85% (8.56% at December 31, 2000). The term loan to the bank which was scheduled to mature on March 15, 2001, has been extended to March 15, 2002. In addition, the interest rate will reset on March 15, 2001 using the same spread to LIBOR as presently exists. The loans are secured by liens 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 liens do not cover the Kings Plaza Regional Shopping Center and Rego Park I and are subordinate to first mortgages. The Vornado lien is subordinate to the bank's. The Vornado loan is prepayable quarterly without penalty. Under the terms of the loans, no dividends can be paid unless required to maintain REIT status. -28-
29 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) The Company's mortgage loan, which is an obligation of a wholly-owned subsidiary, matures on June 1, 2001 and is secured by a mortgage on the Kings Plaza Regional Shopping Center and guaranteed by the Company. The loan bears interests at LIBOR plus 1.25% (8.06% at December 31, 2000). (3) The Company's mortgage loan, which is an obligation of a wholly-owned subsidiary, matures in May, 2009 and is secured by a mortgage on the Rego Park I property and guaranteed by the Company. The loan bears interests at 7.25%. Amortization of principal begins in July 2004 on a 30-year schedule. (4) The Company's $21,263,000, an obligation of a wholly-owned subsidiary of the Company collateralized by the Fordham Road property, was scheduled to mature on February 24, 2000. The mortgage loan was extended for an additional three-years to April 17, 2003. Under the terms of the extension, interest accrues at LIBOR plus 1.50% in the first two years and LIBOR plus 1.75% in year three which is a reduction of the original terms of LIBOR plus 4.25%. (8.30% at December 31, 2000) interest is payable at LIBOR for the entire term. The spread over LIBOR accrues during the extended term and increases the principal balance. This obligation has been satisfied in connection with the sale of the Fordham Road property on January 12, 2001. See "Subsequent Event." (5) The note is secured by a third mortgage on the Lexington Avenue property. The note bears annual interest at Prime plus 1% (10.50% at December 31, 2000) and is prepayable without penalty. A summary of maturities of debt at December 31, 2000, is as follows: <TABLE> <CAPTION> Year Ending December 31, ------------------------ <S> <C> 2001 $ 134,525,000(A) 2002 115,000,000 2003 36,263,000(B) 2004 339,000 2005 735,000 </TABLE> (A) $114,525,000 of this amount relates to a first mortgage loan secured by the Company's Kings Plaza Regional Shopping Center (the "Center"). The Company is currently negotiating refinancing the Center with various outside lenders. Based on the historical operating performance of the Center, management believes that it has excess borrowing capacity over the existing mortgage loan. The remaining $20,000,000 is a term loan to a bank which was scheduled to mature on March 15, 2001. This loan has been extended to March 15, 2002. (B) $21,263,000 of this amount was repaid on January 12, 2001 in connection with the sale of the Fordham Road property. 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 $346,051,000 at December 31, 2000. -29-
30 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. LEASES As Lessor The Company leases properties to tenants. The rental terms for the properties leased range from 5 years to approximately 30 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. Future base rental revenue under these noncancellable operating leases is as follows: <TABLE> <CAPTION> Year Ending Total December 31, Amounts ------------ ------- <S> <C> 2001 $ 31,238,000 2002 30,528,000 2003 31,053,000 2004 30,999,000 2005 30,565,000 Thereafter 310,975,000 </TABLE> Included in operating expenses for the year ended December 31, 1999 is $4,877,000 resulting from the write-off of the asset arising from the straight-line of rents primarily as a result of Caldor's rejection of its Flushing lease in 1999. Sears accounted for 21%, 22% and 28% of the Company's consolidated revenues for the years ended December 31, 2000, 1999, and 1998, respectively. No other tenant accounted for more than 10% of revenues -30-
31 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As Lessee The Company is a tenant under long-term leases. Future minimum lease payments under the operating leases are as follows: <TABLE> <CAPTION> Year Ending Total December 31, Amounts ------------ ------- <S> <C> 2001 $ 416,000 2002 416,000 2003 416,000 2004 416,000 2005 416,000 Thereafter 5,264,000 </TABLE> Rent expense was $416,000, $416,000 and $376,000 for the years ended December 31, 2000, 1999 and 1998, respectively. 6. 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. At December 31, 2000, 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 Vorndao) own, in the aggregate, 27.5% of the outstanding common stock of the Company, and 17.7% of the outstanding common shares of beneficial interest of Vornado. The Company is managed by and its properties are redeveloped and leased by Vornado, pursuant to agreements with a one-year term expiring in March of each year which are automatically renewable. The annual management fee payable by the Company to Vornado is equal to the sum of (i) $3,000,000, (ii) 3% of the gross income from the Kings Plaza Mall, plus (iii) 6% of development costs with minimum guaranteed fees of $750,000 per annum. The leasing agreement provides for the Company to pay a fee to Vornado equal to (i) 3% of the gross proceeds, as defined, from the sale of an asset, and (ii) in the event of a lease or sublease of an asset, 3% of lease rent for the first ten years of a lease term, 2% of lease rent for the eleventh through the twentieth years of a lease term and 1% of lease rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by tenants. 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. At December 31, 2000 the Company does not owe Vornado any leasing fees. Pursuant to the leasing agreement, in the event third party real estate brokers are used, the fees to Vornado increase by 1% and Vornado is responsible for the fees to the third party real estate brokers. -31-
32 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company owes Vornado $115,000,000. The Company incurred interest on the loan of $15,934,000, $7,857,000 and $6,486,000 for the years ended December 31, 2000, 1999 and 1998. 7. COMMITMENTS AND CONTINGENCIES The Company let contracts for $28,000,000 to undertake the excavation, clearing and preparation of the Lexington Avenue property for the proposed development of a large multi-use building. As of December 31, 2000, $26,839,000 has been paid. In June 1997, the Kings Plaza Regional Shopping Center (the "Center"), commissioned an Environmental Study and Contamination Assessment Site Investigation (the Phase II "Study") to evaluate and delineate environmental conditions disclosed in a Phase I study. The results of the Study indicate the presence of petroleum and bis (2-ethylhexyl) phthalate contamination in the soil and groundwater. The Company has delineated the contamination and has developed a remediation approach. The New York State Department of Environmental Conservation ("NYDEC") has not yet approved the remediation approach. The Company accrued $2,000,000 in previous years ($1,678,000 has been paid as of December 31, 2000) for its estimated obligation with respect to the clean up of the site, which includes costs of (i) remedial investigation, (ii) feasibility study, (iii) remedial design, (iv) remedial action and (v) professional fees. If the NYDEC insists on a more extensive remediation approach, the Company could incur additional obligations. The majority of the contamination may have resulted from activities of third parties; however, the sources of the contamination have not been fully identified. Although the Company intends to pursue all available remedies against any potentially responsible third parties, there can be no assurance that such parties will be identified, or if identified, whether these potentially responsible third parties will be solvent. In addition, the costs associated with pursuing any potentially responsible parties may be cost prohibitive. The Company has not recorded an asset as of December 31, 2000 for potential recoveries of environmental remediation costs from other parties. 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 Letters of Credit Approximately $900,000 in standby letters of credit were issued at December 31, 2000. 8. STOCK OPTION PLAN Under the Omnibus Stock Plan (the "Plan"), approved by the Company's stockholders on May 22, 1996, directors, 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 36 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. -32-
33 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 years ended December 31, 2000, 1999 and 1998: <TABLE> <CAPTION> 2000 1999 1998 ---- ---- ---- <S> <C> <C> <C> Net income (loss): As reported $ 5,197,000 $ 5,524,000 $ (6,055,000) Pro forma $ 3,662,000 $ (1,414,000) $ (8,009,000) Net income (loss) per share applicable to common shareholders: As reported $ 1.04 $ 1.10 $ (1.21) Pro forma $ .73 $ (.28) $ (1.60) </TABLE> The fair value of each option grant is estimated on the date of grant using an option-pricing model with the following weighted-average assumptions used for grants in the period ended December 31, 1999 (no options were granted in the year ended December 31, 2000 or 1998): <TABLE> <CAPTION> 1999 ---- <S> <C> Expected Volatility 38% Expected Life 5 years Risk-free interest rate 6.45% Expected dividend yield 0% </TABLE> A summary of the Plan's status, and changes during the years ended December 31, 2000, 1999 and 1998, are presented below: <TABLE> <CAPTION> December 31, 2000 December 31, 1999 December 31, 1998 Weighted-Average Weighted-Average Weighted-Average Shares Exercise Price Shares Exercise Price Shares Exercise Price ------ -------------- ------ -------------- ------ -------------- <S> <C> <C> <C> <C> <C> <C> Outstanding at January 1 955,000 $ 71.66 350,000 $ 73.88 350,000 $ 73.88 Granted -- -- 605,000 70.38 -- -- Exercised -- -- -- -- -- -- Converted to Stock Appreciation Rights (850,000) 71.82 ---------- -------- -------- Outstanding at December 31 105,000 70.38 955,000 71.66 350,000 $ 73.88 ========== ======== ======== Weighted-average fair value of options granted (per option) $ -- $ 40.81 $ -- ========== ======== ======== </TABLE> The following table summarizes information about options outstanding under the Plan at December 31, 2000: <TABLE> <S> <C> Options outstanding: Number outstanding at December 31, 2000 105,000 Weighted-average remaining contractual life 8.2 Years Weighted-average exercise price $ 70.375 Options exercisable: Number exercisable at December 31, 2000 35,700 Weighted-average exercise price $ 70.375 Shares available for future grant at December 31, 2000 were 895,000. </TABLE> -33-
34 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On June 5, 2000, the Board of Directors approved the conversion of 850,000 stock options of two officers/directors into equivalent stock appreciation rights (SARs). The SARs have the same vesting terms and strike prices as the options. Accounting for SARs is reflected in the statement of operations, whereas the accounting for stock options is not. Since the stock price at December 31, 2000 is less than the strike price, no expense is included in the statement of operations for the year ended December 31, 2000. SARs, unlike options, are not aggregated under the REIT rules. 9. INCOME (LOSS) PER SHARE The following table sets forth the computation of basic and diluted income (loss) per share: <TABLE> <CAPTION> December 31, ------------ 2000 1999 1998 ---- ---- ---- <S> <C> <C> <C> Numerator: Income (loss) from continuing operations $ 5,197,000 $ 5,524,000 $(6,055,000) =========== =========== ============ Denominator: Denominator for basic income (loss) per share - weighted average shares 5,000,850 5,000,850 5,000,850 Effect of dilutive securities: Employee stock options 4,927 22,072 -- ----------- ----------- ----------- Denominator for diluted income (loss) per share - adjusted weighted average shares and assumed conversions 5,005,777 5,022,922 5,000,850 =========== =========== =========== Basic and diluted income (loss) per share $ 1.04 $ 1.10 $(1.21) ======= ======= ====== </TABLE> -34-
35 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) (amounts in thousands except per share amounts) <TABLE> <CAPTION> Year Ended December 31, 2000 ----------------- Quarter Ended ------------- Mar. 31 June 30 Sept. 30 Dec. 31 ------- ------- -------- ------- <S> <C> <C> <C> <C> Total Revenues $ 15,086 $ 16,088 $ 16,382 $ 16,409 ======== ======== ======== ======== Net income (loss) $ 1,427 $ 233(3) $ (5,423)(3) $ 8,960(3) ======== ======== ========= ======== Income (loss) per common share diluted (1) $ .29 $ .05 $ (1.08) $ 1.79 ======== ======== ======== ======== </TABLE> <TABLE> <CAPTION> Year Ended December 31, 1999 ----------------- Quarter Ended ------------- Mar. 31 June 30 Sept. 30 Dec. 31 ------- ------- -------- ------- <S> <C> <C> <C> <C> Total Revenues $ 16,623 $ 16,037 $ 15,947 $ 15,783 ======== ======== ======== ======== Net income (loss) $ 1,475 $ 2,336 $ 1,635 $ 78 (2) ======== ======== ======== ========= Income (loss) per common share diluted (1) $ .29 $ .47 $ .32 $ .02 ======== ======== ======= ======== </TABLE> (1) The total for the year may differ from the sum of the quarters as a result of weighting. (2) Net of $4,877 resulting from the write-off of the asset arising from the straight-lining of rents, primarily due to Caldor's rejection of its Flushing lease in 1999, of which $1,877 was recognized in the fourth quarter of 1999. (3) Net of Stock Appreciation Rights (SARs) expense of $983 and $5,881 in the second and third quarter of 2000, respectively. The fourth quarter of 2000 includes $6,864 representing the reversal of the SARs expense previously recognized during 2000. -35-
36 ALEXANDER'S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. SUBSEQUENT EVENT The Company sold its Fordham Road Property, located in the Bronx, New York, on January 12, 2001. The vacant property contains 303,000 square feet and was sold for $25,500,000 resulting in a gain of $19,100,000. In addition, the Company paid off the mortgage on this property at a discount, which resulted in an extraordinary gain from the early extinguishment of debt of $3,500,000. Included in the expenses relating to the sale, the Company paid a commission of $1,020,000 of which $520,000 was paid to Vornado. These transactions will be recorded in the first quarter of 2001. -36-
37 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, 2000, and such information is incorporated herein by reference. Information relating to Executive Officers of the Registrant appears on page 10 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. -37-
38 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 II - Valuation and Qualifying Accounts - years ended December 31, 2000, 1999 and 1998 40 Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2000 41 </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 43 (b) Reports on Form 8-K During the last quarter of the period covered by this Annual Report on Form 10-K, no reports on Form 8-K were filed. -38-
39 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, Executive Vice President-Finance and Administrartion Date: March 1, 2001 -------------------------------- 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 March 1, 2001 - --------------------------- Steven Roth (Principal Executive Officer) /s/ Michael D. Fascitelli President and Director March 1, 2001 - --------------------------- Michael D. Fascitelli /s/ Thomas R. DiBenedetto Director March 1, 2001 - --------------------------- Thomas R. DiBenedetto /s/ David Mandelbaum Director March 1, 2001 - --------------------------- David Mandelbaum /s/ Stephen Mann Director March 1, 2001 - --------------------------- Stephen Mann /s/ Arthur I. Sonnenblick Director March 1, 2001 - --------------------------- Arthur I. Sonnenblick /s/ Neil Underberg Director March 1, 2001 - --------------------------- Neil Underberg /s/ Richard West Director March 1, 2001 - --------------------------- Richard West /s/ Russell B. Wight, Jr. Director March 1, 2001 - --------------------------- Russell B. Wight, Jr. </TABLE> -39-
40 ALEXANDER'S INC. AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS <TABLE> <CAPTION> COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------- -------- -------- -------- -------- (AMOUNTS IN THOUSANDS) BALANCE ADDITIONS BALANCE AT BEGINNING CHARGED AGAINST DEDUCTIONS AT END ---------- DESCRIPTION OF YEAR OPERATIONS DESCRIPTION AMOUNT OF YEAR - ----------- ------- ---------- ----------- ------ ------- <S> <C> <C> <C> <C> <C> YEAR ENDED DECEMBER 31, 2000: Deducted from accounts receivable, Uncollectible accounts allowance for doubtful accounts..... $ 314 $ 413 written-off $ 5 $ 722 ====== ====== ====== ======== YEAR ENDED DECEMBER 31, 1999: Deducted from accounts receivable Uncollectible accounts allowance for doubtful accounts..... $ 841 $ (68) written-off $ 459 $ 314 ====== ======= ====== ======== YEAR ENDED DECEMBER 31, 1998: Deducted from accounts receivable, Uncollectible accounts allowance for doubtful accounts..... $ 147 $ 703 written-off $ 9 $ 841 ====== ====== ====== ======== </TABLE> -40-
41 ALEXANDER'S, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (amounts in thousands) <TABLE> <CAPTION> -------- -------- -------- -------- -------- -------- Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Gross Amount at which Carried at Initial Close of Cost to Period- Company (2) Cost Buildings, Capitalized Building, Capitalized Leasehold Expenses Leaseholds Subsequent and and Pre- and Leasehold to Leaseholds development Description Encumbrances Land Improvements Acquisition(3) Land Improvements Costs ----------- ------------ ---- ------------ -------------- ---- ------------ ----- <S> <C> <C> <C> <C> <C> <C> <C> Commercial Property: New York City, New York: Fordham Rd.(5) $21,263 $2,301 $ 9,258 $ 36 $2,301 $ 9,294 $ -- Third Avenue -- 1,201 4,437 -- 1,201 4,437 -- Rego Park I 82,000 1,647 8,953 57,641 1,647 66,594 -- Rego Park II -- 3,906 1,467 434 3,906 1,566 335 Flushing -- -- 1,660 473 -- 1,784 349 Lexington Ave. 15,000 14,432 12,355 146,358 48,379 -- 124,766 Flatbush Ave. and Avenue U 114,525 497 9,542 108,023 24,483 65,688 27,891 ------- ------ ------- ------- ------ ------- ------- Total New York 232,788 23,984 47,672 312,965 81,917 149,363 153,341 New Jersey - Paramus -- 1,441 -- 12,096 1,441 -- 12,096 Other Properties -- 599 1,804 4,374 599 1,804 4,374 ------ ------- ------- ------ ------- ------- Other secured debt 135,000(1) ------- TOTAL $367,788 $26,024 $49,476 $329,435 $83,957 $151,167 $169,811 ======== ======= ======= ======== ======== ======== ======== </TABLE> <TABLE> <CAPTION> -------- -------- -------- -------- Column G Column H Column I Column J -------- -------- -------- -------- Life on Which Depreciation Accumulated in Depreciation Date Latest Income and Date of Acquired Statement is Description Total(3) Amortization Construction (2) Computed ----------- -------- ------------ ------------ --- -------- <S> <C> <C> <C> <C> <C> Commercial Property: New York City, New York: Fordham Rd.(5) $11,595 $7,036 1928 1992 4-40 years Third Avenue 5,638 3,198 1928 1992 13 years Rego Park I 68,241 15,682 1959 1992 6-40 years Rego Park II 5,807 1,462 1965 1992 5-39 years Flushing 2,133 1,662 1975(4) 1992 10-22 years Lexington Ave. 173,145 -- -- 1992 -- Flatbush Ave. and Avenue U 118,062 28,038 1970 1992 10-40 years ------- ------ Total New York 384,621 57,078 New Jersey - Paramus 13,537 -- -- 1992 -- Other Properties 6,777 1,806 Various 1992 7-25 years ------ ------ Other secured debt TOTAL $404,935 $58,884 ======== ======= </TABLE> (1) The loans, which were scheduled to mature in March 2001, have been extended to March 2002. The loans are secured by liens 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, except for the Kings Plaza Regional Shopping Center and Rego Park I. These liens are subordinate to first mortgages. (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 J. (3) The net basis in the Company's assets and liabilities for tax purposes is approximately $84,000,000 lower than the amount reported for financial statement purposes. (4) Date represents lease acquisition date. (5) The Fordham Road property was sold on January 12, 2001 and the related encumbrance was satisfied. At December 31, 2000 such property was classified as "asset held for sale." -41-
42 ALEXANDER'S, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (amounts in thousands) <TABLE> <CAPTION> December 31, ------------ 2000 1999 ---- ---- <S> <C> <C> REAL ESTATE: Balance at beginning of period $ 327,004 $ 290,686 Additions during the period: Buildings, leaseholds and 1,541 6,846 leasehold improvements Capitalized expenses and development costs 76,390 29,472 ---------- ---------- Balance at end of period $ 404,935 $ 327,004 ========== ========== ACCUMULATED DEPRECIATION: Balance at beginning of period $ 55,199 $ 51,529 Additions charged to operating expenses 3,685 3,670 ---------- ---------- Balance at end of period $ 58,884 $ 55,199 ========== ========== </TABLE> -42-
43 Index to Exhibits The following is a list of all exhibits filed as part of this Report: <TABLE> <CAPTION> EXHIBIT NO. 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 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2000..... * 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.................................................... * 10(i)(C)(1) -- Modification and Extension of Credit Agreement, dated as of March 13, 2000, between Vornado Lending L.L.C., as Lender, and Alexander's Inc., as Borrower. Incorporated herein by reference from Exhibit 10(i)(C)(1) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000..................................................... * 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...................................... * </TABLE> * Incorporated by reference -43-
44 <TABLE> <CAPTION> EXHIBIT NO. PAGE ------- ---- <S> <C> <C> 10(i)(D)(1) -- Modification and Extension of Credit Agreement, dated as of April 14, 2000, between First Union National Bank, as lender, and Alexander's Inc., as borrower. 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, 2000........................................................ * 10(i)(D)(2) -- Pledge and Security Agreement for Transferable Development Rights, dated as of April 14, 2000, between First Union National Bank, as secured party, 731 Limited Partnership, as assignor, and Alexander's, Inc. as borrower, 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, 2000................................................................................... * 10(i)(E) -- Amended, Restated and Consolidated Mortgage and Security Agreement, dated May 12, 1999, between The Chase Manhattan Bank, as mortgagee, and Alexander's Rego Shopping Center Inc., as mortgagor. Incorporated herein by reference from Exhibit 10(i)(E) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000................... * 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) -- 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(i)(J)(1) -- First Amendment to Mortgage and Security Agreement, dated as of February 24, 2000, between Banc of America Commercial Finance Corporation, as mortgagee, and Alexander's of Fordham Road, Inc., as mortgagor. 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, 2000..... * 10(i)(J)(2) -- Amended and Restated Promissory Note (Secured), dated as of February 24, 2000, between Banc of America Commercial Finance Corporation, as lender, and Alexander's of Fordham Road, Inc., as borrower. 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, 2000.................. * 10(i)(J)(3) -- Trigger Agreement, dated as of February 24, 2000, between Banc of America Commercial Finance Corporation, as lender, and Alexander's, Inc., as guarantor. 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, 2000......................................................... * </TABLE> * Incorporated by reference -44-
45 <TABLE> <CAPTION> EXHIBIT NO. PAGE ------- ---- <S> <C> <C> 10(i)(K) -- Term Loan Agreement dated as of June 18, 1998 among Alexanders' Kings Plaza Center, Inc., Kings Plaza Corp., and Alexander's Department Stores of Brooklyn, Inc., as Borrower, Union Bank of Switzerland, as Lender. Incorporated herein by reference from Exhibit 10 to the Registrant's Form 10-Q for the fiscal quarter ended June 30, 1998........................... * 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)(4)(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 (ii)(E)(7) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992... * 10(ii)(A)(4)(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)(5) -- 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)(6) -- 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)(7) -- Guaranty, dated March 1, 1995, of the Lease described in Exhibit 10(ii)(A)(6)(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......................... * 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.................................................... * 10(iv)(A) -- Registrant's Omnibus Stock Plan, as amended, dated May 28, 1997. Incorporated herein by reference from Exhibit 10 to the Registrant's Form 10-Q for the fiscal quarter ended June 30, 1997.................................................................................. * 12 -- Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividend Requirements................................................................. * 13 -- Not applicable.............................................................................. * 16 -- Not applicable.............................................................................. * 18 -- Not applicable.............................................................................. * 19 -- Not applicable.............................................................................. * 21 -- Subsidiaries of Registrant.................................................................. * 22 -- Not applicable.............................................................................. * 23 -- Consent by Deloitte & Touche LLP............................................................ * 25 -- Not applicable.............................................................................. * 29 -- Not applicable.............................................................................. * </TABLE> * Incorporated by reference -45-