ALEXANDERS INC Q4 FY2022 earnings call

• 2022 was a strong year with comparable FFO up 10%, but 2023 is expected to be a down year negatively impacted by higher rates. - New York continues to be crucial, with tenants reaffirming commitment. - Farley Facebook, PENN 1, and PENN 2 projects nearly complete with over $2 billion in cash prefunded. - Declared a rightsized dividend to retain $128 million annually. - Completed a deal with Citadel at 350 Park Avenue, relieving vacancy and potentially leading to a new build. - Leasing markets have challenges (slowed pace, lumpier activity) but opportunities (flight to quality, pickup in traditional Class A buildings). - Retail sees rebound in tourism and retailers seeking new locations. - Capital markets remain highly constrained due to Fed's rate increases.

For 2022, comparable FFO as adjusted was $3.15 per share, up $0.29 or 10.1% from 2021. Fourth quarter comparable FFO as adjusted was $0.72 per share, down $0.09 or 11.1% due to higher interest rates. Company-wide same-store cash NOI for the fourth quarter increased by 7.9% over the prior year's fourth quarter. Overall same-store office business was up 8% compared to the prior year's fourth quarter, while New York same-store office business was up 5.4% primarily due to cash rents at Farley coming online. Retail same-store cash NOI was up a very strong 7.9% primarily due to the rent commencement on several important leases.

• Expect 2023 comparable FFO to be down from 2022 due to additional interest expense from higher rates, prior period property tax accrual reversal, and lower FFO from asset sales, partially offset by a lower result on the PENN 1 ground rent reset.

• Higher interest rates negatively impacting earnings. - Constrained capital markets making financing difficult. - Potential tenant issues where landlords face leverage problems and may limit investments in buildings. - Uncertainty in leasing activity and refinancing of assets.

Q: Steve Sakwa asked about PENN 1 and PENN 2's yield increase.

A: Steven Roth said they took yield up based on 1-2 years of experience, signed leases, and market reaction exceeding initial underwriting.

Q: Steve Sakwa followed up on property taxes.

A: Michael Franco explained it was a prior period accrual benefit in 2022, reversed at start of 2023 causing a ding.

Q: John Kim asked about impairment at 650 Madison.

A: Michael Franco said it's due to joint venture accounting, noncash item, and they'll continue working the asset. Steven Roth added impairment process is rigorous and formulaic.

Q: John Kim asked about theMART occupancy.

A: Glen Weiss said increase in vacancy was due to casual business leaving for Atlanta, converting to office space.

Q: Jing Xian Tan asked about 350 Park Avenue financing strategy.

A: Michael Franco said construction financing is difficult now but markets may improve, and land value will be equity contribution. Steven Roth added land value will be equity, anchor tenant, and development teams will swing into 350 Park.

Q: Michael Griffin asked about leasing and office occupancy.

A: Michael Franco and Steven Roth discussed leasing slowing, but return to office momentum, and occupancy approaching 60% with employees wanting to return.

Q: Alexander Goldfarb asked about Retail JV impairment and mark-to-market.

A: Steven Roth said impairment was due to rigorous process, market is sluggish, but will recover.

Q: Vikram Malhotra asked about dividend and street retail expirations.

A: Steven Roth said dividend is based on taxable income, and they're in negotiations with tenants for lower rents.

Q: Dylan Burzinski asked about tracking stock and ground lease reset.

A: Steven Roth said tracking stock is still on the table, and ground lease reset is a brokerage process considering current land value.

Q: Anthony Paolone asked about core office and retail NOI and 350 Park value.

A: Michael Franco said core performance is neutral, and 350 Park deal was fair to both parties.

Q: Nicholas Yulico asked about St. Regis retail and 650 Madison.

A: Michael Franco said loan is nonrecourse, likely to restructure, and 650 Madison impairment is accounting-driven.

Q: Timmy asked about PENN 1 rents.

A: Glen Weiss said leases are piercing 100 in the tower.

Q: Steve Sakwa asked about swaps and caps.

A: Michael Franco said they wrestle with them, some will roll over as Fed nears end of tightening cycle.

Q: Vikram Malhotra asked about headwinds and dividend.

A: Steven Roth said dividend is a Board decision, not speculating on revisiting it.