UNITEDSTATES

SECURITIESAND EXCHANGE COMMISSION

WASHINGTON,DC 20549

 

**FORM 10-Q**

 

| (Mark one)                     |                                              |   |
|--------------------------------|---------------------------------------------------|--------|
| [X]                            | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  |   |
|                           | OF THE SECURITIES EXCHANGE ACT OF 1934            |   |
|                           |                                              |   |
|                           |                                              |   |
| For the quarterly period ended | **March 31, 2006**                                |   |
|                           |                                              |   |
| OR                             |
|                           |                                              |   |
| [  ]                 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |   |
|                           | OF THE SECURITIES EXCHANGE ACT OF 1934            |   |

 

 

| For the transition period from |         | to |   |   |
|--------------------------------|--------------|----|--------|--------|
|                           |         |
| Commission File Number         | **001-6064** |
|                                |              |    |        |        |  |

 

| **ALEXANDER’S, INC.**                              |
|---------------------------------------------------------|
| (Exact  name of registrant as specified in its charter) |

 

| **Delaware**                                                                        | ** ** | **51-0100517**                       |
|-------------------------------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation or                                    |       | (I.R.S. Employer Identification No.) |
| organization)                                                                       |       |                                 |
|                                                                                |       |                                 |
| **210 Route 4 East, Paramus, New Jersey**                                           | ** ** | **07652**                            |
| (Address of principal executive offices)                                            |       | (Zip Code)                           |
|                                                                                |       |                                 |
| **(201) 587-8541**                                                                  |
| (Registrant’s  telephone number, including area code)                          |
| **N/A**                                                                             |
| (Former  name, former address and former fiscal year, if changed since last report) |

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

[X]Yes    [  ] No

 

Indicate bycheck mark whether the registrant is a large accelerated filer, an acceleratedfiler, or a non-accelerated filer. See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act.

 

[  ] Large Accelerated Filer                 [X]Accelerated Filer           [  ] Non-Accelerated Filer

 

Indicateby checkmark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act)

[  ] Yes   [X] No

 

As of April 14, 2006, there were 5,025,000 shares ofcommon stock, par value $1 per share, outstanding.

 

 

# **ALEXANDER’S, INC.**

# ** **

# **INDEX**

 
|          |                                                                                                    | Page  Number |
|---------------|---------------------------------------------------------------------------------------------------------|--------------|
|          |                                                                                                    |         |
| **PART I.**   | **Financial Information**                                                                               |         |
|          |                                                                                                    |         |
| Item 1.       | Financial Statements:                                                                                   |         |
|          |                                                                                                    |         |
|          | Consolidated Balance Sheets  (unaudited) as of   March 31, 2006 and December 31, 2005                   | 3            |
|          |                                                                                                    |         |
|          | Consolidated Statements of  Operations (unaudited) for the Three   Months Ended March 31, 2006 and 2005 | 4            |
|          |                                                                                                    |         |
|          | Consolidated Statements of  Cash Flows (unaudited) for the  Three Months Ended March 31, 2006 and 2005  | 5            |
|          |                                                                                                    |         |
|          | Notes to Consolidated  Financial Statements (unaudited)                                                 | 6            |
|          |                                                                                                    |         |
|          | Report of Independent Registered  Public Accounting Firm                                                | 12           |
|          |                                                                                                    |         |
| Item 2.       | Management’s  Discussion and Analysis of  Financial Condition and Results of Operations            | 13           |
|          |                                                                                                    |         |
| Item 3.       | Quantitative and Qualitative  Disclosures about Market Risk                                             | 18           |
|          |                                                                                                    |         |
| Item 4.       | Control and Procedures                                                                                  | 18           |
|          |                                                                                                    |         |
| **PART II.**  | **Other  Information**                                                                                  |         |
|          |                                                                                                    |         |
| Item 1.       | Legal Proceedings                                                                                       | 18           |
|          |                                                                                                    |         |
| Item 1A.      | Risk Factors                                                                                            | 18           |
|          |                                                                                                    |         |
| Item 2.       | Unregistered  Sales of Equity Securities and Use of Proceeds                                            | 18           |
|          |                                                                                                    |         |
| Item 3.       | Defaults  Upon Senior Securities                                                                        | 18           |
|          |                                                                                                    |         |
| Item 4.       | Submission  of Matters to a Vote of Security Holders                                                    | 18           |
|          |                                                                                                    |         |
| Item 5.       | Other  Information                                                                                      | 18           |
|          |                                                                                                    |         |
| Item 6.       | Exhibits                                                                                                | 18           |
|          |                                                                                                    |         |
|          |                                                                                                    |         |
| Signatures    | 19                                                                                                      |
|          |                                                                                                    |
| Exhibit Index | 20                                                                                                      |

 

-2-

 

**PART I. FINANCIALINFORMATION**

**Item 1.    *Financial Statements***

 

# **ALEXANDER’S, INC.**

# **CONSOLIDATED BALANCE SHEETS**

# **(UNAUDITED)**

(Amounts in thousands, except shareand per share amounts)

 
| ** **                                                                                                                          | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                          | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Real estate, at  cost:                                                                                                              |       |                     |       |                        |       |
| Land                                                                                                                                |       | $                        | 69,455     |                        | $          | 69,455 |   |
| Buildings,  leaseholds and leasehold improvements                                                                                   |       | 599,886                  |       | 594,574                     |       |
| Construction in  progress                                                                                                           |       | 32,153                   |       | 35,107                      |       |
| Total                                                                                                                               |       | 701,494                  |       | 699,136                     |       |
| Accumulated  depreciation and amortization                                                                                          |       | (92,977                  | )          | (88,976                     | )          |
| Real estate, net                                                                                                                    |       | 608,517                  |       | 610,160                     |       |
|                                                                                                                                |       |                     |       |                        |       |
| Cash and cash  equivalents                                                                                                          |       | 577,733                  |       | 578,406                     |       |
| Restricted cash                                                                                                                     |       | 9,814                    |       | 2,764                       |       |
| Accounts  receivable, net of allowance for doubtful accounts of $462 and $526,  respectively                                        |       | 5,322                    |       | 3,215                       |       |
| Receivable  arising from the straight-lining of rents                                                                               |       | 104,195                  |       | 100,037                     |       |
| Deferred lease  and other property costs, net (including unamortized leasing fees to Vornado  of $44,155 and $44,831, respectively) |       | 71,602                   |       | 72,600                      |       |
| Deferred debt  issuance costs, net                                                                                                  |       | 20,187                   |       | 20,849                      |       |
| Other assets                                                                                                                        |       | 8,444                    |       | 15,286                      |       |
| **TOTAL  ASSETS**                                                                                                                   |       | $                        | 1,405,814  |                        | $          | 1,403,317 |   |
|                                                                                                                                |       |                     |       |                        |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                      |       |                     |       |                        |       |
| Debt                                                                                                                                |       | $                        | 1,078,371  |                        | $          | 1,079,465 |   |
| Accounts payable  and accrued expenses                                                                                              |       | 45,697                   |       | 44,867                      |       |
| Liability for  stock appreciation rights                                                                                            |       | 125,124                  |       | 87,563                      |       |
| Amounts due to  Vornado                                                                                                             |       | 34,139                   |       | 34,324                      |       |
| Other  liabilities (including taxes payable of $31,857 and $37,955)                                                                 |       | 37,696                   |       | 53,524                      |       |
| **TOTAL  LIABILITIES**                                                                                                              |       | 1,321,027                |       | 1,299,743                   |       |
|                                                                                                                                |       |                     |       |                        |       |
| **MINORITY  INTEREST**                                                                                                              |       | 2,250                    |       | 2,250                       |       |
|                                                                                                                                |       |                     |       |                        |       |
| **COMMITMENTS  AND CONTINGENCIES**                                                                                                  |       |                     |       |                        |       |
|                                                                                                                                |       |                     |       |                        |       |
| **STOCKHOLDERS’  EQUITY**                                                                                                      |       |                     |       |                        |       |
| Preferred stock:  $1.00 par value per share; authorized, 3,000,000 shares; issued, none                                             |       | --                       |       | --                          |       |
| Common stock:  $1.00 par value per share; authorized, 10,000,000 shares; issued, and  outstanding, 5,173,450 shares                 |       | 5,173                    |       | 5,173                       |       |
| Additional  capital                                                                                                                 |       | 26,408                   |       | 26,343                      |       |
| Retained  earnings                                                                                                                  |       | 51,782                   |       | 70,639                      |       |
|                                                                                                                                |       | 83,363                   |       | 102,155                     |       |
| Treasury shares:  148,450 and 149,450 shares, at cost                                                                               |       | (826                     | )          | (831                        | )          |
| **TOTAL  STOCKHOLDERS’ EQUITY**                                                                                                |       | 82,537                   |       | 101,324                     |       |
|                                                                                                                                |       |                     |       |                        |       |
| **TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                |       | $                        | 1,405,814  |                        | $          | 1,403,317 |   |

 

See notes to consolidated financial statements.

 

-3-

 

# **ALEXANDER’S, INC.**

# **CONSOLIDATED STATEMENTS OF OPERATIONS**

# **(UNAUDITED)**

(Amounts in thousands, except pershare amounts)

 

 
| ** **                                                                                                                                                                           | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                                                                                           | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| **REVENUES**                                                                                                                                                                         |       |                                             |       |   |   |
| Property rentals                                                                                                                                                                     |       | $                                                | 33,832     |   | $ | 31,673 |   |
| Expense  reimbursements                                                                                                                                                              |       | 14,544                                           |       | 12,003 |   |
| Total revenues                                                                                                                                                                       |       | 48,376                                           |       | 43,676 |   |
|                                                                                                                                                                                 |       |                                             |       |   |   |
| **EXPENSES**                                                                                                                                                                         |       |                                             |       |   |   |
| Operating  (including fees to Vornado of $566 and $468, respectively)                                                                                                                |       | 17,233                                           |       | 13,834 |   |
| General and  administrative (including stock appreciation rights compensation expense of  $37,561 and $22,525, respectively, and management fees to Vornado of $540 in  each period) |       | 38,841                                           |       | 23,628 |   |
| Depreciation and  amortization                                                                                                                                                       |       | 5,293                                            |       | 4,649 |   |
| Total expenses                                                                                                                                                                       |       | 61,367                                           |       | 42,111 |   |
|                                                                                                                                                                                 |       |                                             |       |   |   |
| **OPERATING  (LOSS) INCOME**                                                                                                                                                         |       | (12,991                                          | )          | 1,565 |   |
|                                                                                                                                                                                 |       |                                             |       |   |   |
| Interest and  other income, net                                                                                                                                                      |       | 6,178                                            |       | 981 |   |
| Interest and  debt expense (including interest to Vornado of $3,467 in 2005)                                                                                                         |       | (17,052                                          | )          | (11,303 | ) |
| Loss from  continuing operations                                                                                                                                                     |       | (23,865                                          | )          | (8,757 | ) |
| Net gain on sale  of condominiums                                                                                                                                                    |       | 9,268                                            |       | 74,667 |   |
| Income tax  expense of taxable REIT subsidiary                                                                                                                                       |       | (4,260                                           | )          | (34,692 | ) |
| **NET  (LOSS) INCOME**                                                                                                                                                               |       | $                                                | (18,857    | ) | $ | 31,218 |   |
|                                                                                                                                                                                 |       |                                             |       |   |   |
| **(Loss)  income per common share – Basic:**                                                                                                                                    |       |                                             |       |   |   |
| Loss from  continuing operations                                                                                                                                                     |       | $                                                | (4.75      | ) | $ | (1.75 | ) |
| Net gain on sale  of condominiums, net of income taxes                                                                                                                               |       | 1.00                                             |       | 7.97 |   |
| Net (loss)  income per common share                                                                                                                                                  |       | $                                                | (3.75      | ) | $ | 6.22 |   |
|                                                                                                                                                                                 |       |                                             |       |   |   |
| **(Loss)  income per common share – Diluted:**                                                                                                                                  |       |                                             |       |   |   |
| Loss from  continuing operations                                                                                                                                                     |       | $                                                | (4.75      | ) | $ | (1.73 | ) |
| Net gain on sale  of condominiums, net of income taxes                                                                                                                               |       | 1.00                                             |       | 7.88 |   |
| Net (loss)  income per common share                                                                                                                                                  |       | $                                                | (3.75      | ) | $ | 6.15 |   |

 

See notes to consolidated financial statements.

 

-4-

 

# **ALEXANDER’S, INC.**

# **CONSOLIDATED STATEMENTS OF CASH FLOWS**

# **(UNAUDITED)**

(Amounts in thousands)

 
| ** **                                                                                | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| **CASH FLOWS FROM OPERATING ACTIVITIES**                              | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Net (loss)  income                                                                        |       | $                                                | (18,857    | ) | $ | 31,218 |   |
| Adjustments to  reconcile net (loss) income to net cash provided by operating activities: |       |                                             |       |   |   |
| Net gain on sale  of condominiums                                                         |       | (9,268                                           | )          | (74,667 | ) |
| Depreciation and  amortization (including amortization of debt issuance costs)            |       | 5,954                                            |       | 5,453 |   |
| Straight-lining  of rental income                                                         |       | (4,158                                           | )          | (6,157 | ) |
| Change in  operating assets and liabilities:                                              |       |                                             |       |   |   |
| Accounts  receivable, net                                                                 |       | (2,107                                           | )          | (1,240 | ) |
| Other assets                                                                              |       | (572                                             | )          | (7,504 | ) |
| Amounts due to  Vornado                                                                   |       | (185                                             | )          | 8,219 |   |
| Accounts payable  and accrued expenses                                                    |       | 7,968                                            |       | 274 |   |
| Liability for  stock appreciation rights                                                  |       | 37,561                                           |       | 22,525 |   |
| Income tax  expense of taxable REIT subsidiary                                            |       | (6,098                                           | )          | 34,692 |   |
| Other  liabilities                                                                        |       | 3,803                                            |       | (8 | ) |
| Net cash  provided by operating activities                                                |       | 14,041                                           |       | 12,805 |   |
|                                                                                      |       |                                             |       |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES**                                                 |       |                                             |       |   |   |
| Proceeds from  the sale of condominiums                                                   |       | 10,601                                           |       | 63,045 |   |
| Real estate  acquisitions                                                                 |       | --                                               |       | (750 | ) |
| Additions to  real estate                                                                 |       | (17,241                                          | )          | (19,067 | ) |
| Restricted cash                                                                           |       | (7,050                                           | )          | (3,031 | ) |
| Net cash (used  in) provided by investing activities                                      |       | (13,690                                          | )          | 40,197 |   |
|                                                                                      |       |                                             |       |   |   |
| **CASH  FLOWS FROM FINANCING ACTIVITIES**                                                 |       |                                             |       |   |   |
| Proceeds from  borrowings                                                                 |       | --                                               |       | 19,780 |   |
| Repayments of  borrowings                                                                 |       | (1,094                                           | )          | (1,021 | ) |
| Exercise of  share options                                                                |       | 70                                               |       | 430 |   |
| Net cash (used  in) provided by financing activities                                      |       | (1,024                                           | )          | 19,189 |   |
|                                                                                      |       |                                             |       |   |   |
| Net (decrease)  increase in cash and cash equivalents                                     |       | (673                                             | )          | 72,191 |   |
| Cash and cash equivalents  at beginning of period                                         |       | 578,406                                          |       | 128,874 |   |
| Cash and cash  equivalents at end of period                                               |       | $                                                | 577,733    |   | $ | 201,065 |   |
|                                                                                      |       |                                             |       |   |   |
| **SUPPLEMENTAL  DISCLOSURE OF CASH FLOW INFORMATION**                                     |       |                                             |       |   |   |
| Cash payments  for interest (of which $5,700 has been capitalized in 2005)                |       | $                                                | 16,427     |   | $ | 16,074 |   |
| Cash payments  for income taxes                                                           |       | $                                                | 10,358     |   | $ | -- |   |

 

See notes to consolidated financial statements.

 

-5-

 

# **ALEXANDER’S, INC.**

# **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

# **(UNAUDITED)**

# ** **

**1.**              Organization

** **

Alexander’s,Inc. is a real estate investment trust (“REIT”), incorporated in Delaware,engaged in leasing, managing, developing and redeveloping its properties. Allreferences to “we,” “us,” “our,” or “Company” refer to Alexander’s, Inc. andits wholly owned subsidiaries. We are managed by, and our properties are leasedand developed by, Vornado Realty Trust (“Vornado”), our manager.

 

**2.**              Basis ofPresentation

** **

Theconsolidated balance sheet as of March 31, 2006, and the consolidated statementsof operations and cash flows for the three months ended March 31, 2006 and 2005are unaudited. In our opinion, all adjustments (which include only normalrecurring adjustments) necessary to present fairly the financial position,results of operations and cash flows have been made. Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America have been condensed or omitted in accordance with Article 10 ofRegulation S-X and the instructions to Form 10-Q. These condensed consolidatedfinancial statements should be read in conjunction with the consolidatedfinancial statements and notes thereto included in our Annual Report on Form10-K for the year ended December 31, 2005, as filed with the Securities andExchange Commission. The results of operations for the three months ended March31, 2006 are not necessarily indicative of the operating results for the fullyear.

 

Theaccompanying condensed consolidated financial statements include our accountsand that of our wholly owned subsidiaries. All significant intercompany amountshave been eliminated. The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires us to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenuesand expenses during the reporting periods. Actual results could differ fromthose estimates.

 

Wecurrently operate in one business segment.

 

**3.**              Recently IssuedAccounting Literature

** **

OnDecember 16, 2004, the Financial Accounting Standards Board (“FASB”) issuedStatement of Financial Accounting Standards No. 123(R),*Share-Based Payment* (“SFAS No. 123R”). SFAS123R replaces SFAS 123 and requires that the compensation cost relating toshare-based payment transactions be recognized in financial statements andmeasured based on the fair value of the equity or liability instruments issued.We adopted SFAS 123R on a modified prospective method on January 1, 2006. Thisadoption did not have a material effect on our consolidated financial statements.

 

In May2005, the FASB issued SFAS 154, *AccountingChanges and Error Corrections - a replacement of APB Opinion No. 20and FASB Statement No. 3*. SFAS 154 changes therequirements for the accounting and reporting for a change in accounting principleby requiring that a voluntary change in accounting principle be appliedretrospectively with all prior period financial statements presented on the newaccounting principle, unless it is impracticable to do so. SFAS 154 alsoprovides that (i) a change in the method of depreciating or amortizing along-lived non-financial asset be accounted for as a change in estimate(prospectively) that was effected by a change in accounting principle, and(2) corrections of errors in previously issued financial statements shouldbe termed a “restatement.”  SFAS 154became effective for accounting changes and correction of errors made in fiscalyears beginning after December 15, 2005. The adoption of SFAS 154 onits effective date did not have a material impact on our consolidated financialstatements.

 

-6-

 

# **ALEXANDER’S, INC.**

# **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

# **(UNAUDITED)**

# ** **

**3.**              Recently IssuedAccounting Literature - continued

** **

InFebruary 2006, the FASB issued SFAS 155, *Accountingfor Certain Hybrid Financial Instruments - an amendment of FASB Statements No.133 and 140*. The purpose of SFAS 155 is to simplify the accountingfor certain hybrid financial instruments by permitting fair valuere-measurement for any hybrid financial instrument that contains an embeddedderivative that otherwise would require bifurcation. SFAS 155 is effective forall financial instruments acquired or issued after the beginning of an entity’sfirst fiscal year that begins after September 15, 2006. We do not believe thatthe adoption of SFAS 155 on January 1, 2007, will have a material impact on ourconsolidated financial statements.

 

InMarch 2006, the FASB issued SFAS 156, *Accountingfor Servicing Financial Assets – an amendment of FASB Statement No. 140*.SFAS 156 requires separate recognition of a servicing asset and a servicingliability each time an entity undertakes an obligation to service a financialasset by entering into a servicing contract. This statement also requires thatservicing assets and liabilities be initially recorded at fair value andsubsequently be adjusted to the fair value at the end of each reporting period.SFAS 156 is effective for an entity’s first fiscal year that begins afterSeptember 15, 2006. We do not believe that the adoption of SFAS 156 on January1, 2007, will have a material impact on our consolidated financial statements.

 

**4.**              Relationship withVornado

** **

Vornadoowned approximately 33.0% of our outstanding common stock as of March 31, 2006.Steven Roth is the Chairman of our Board of Directors and our Chief ExecutiveOfficer, the Managing General Partner of Interstate Properties (“Interstate”),a New Jersey general partnership, and the Chairman of the Board and ChiefExecutive Officer of Vornado. At March 31, 2006, Mr. Roth, Interstate and itsother two general partners, David Mandelbaum and Russell B. Wight, Jr. (who arealso directors of the Company and trustees of Vornado) owned, in the aggregate,27.6% of our outstanding common stock, in addition to the common stock owneddirectly by Vornado, and 9.1% of the outstanding common shares of beneficialinterest of Vornado.

 

We aremanaged by, and our properties are leased and developed by Vornado, pursuant toagreements with one-year terms, expiring in March of each year, which areautomatically renewable.

 

*Managementand Development Agreements*

* *

We payVornado an annual management fee equal to the sum of (i) $3,000,000, (ii) 3% ofgross income from the Kings Plaza Regional Shopping Center, (iii) $0.50 persquare foot of the tenant-occupied office and retail space at 731 LexingtonAvenue and (iv) $214,000, escalating at 3% per annum, for managing the commonarea of 731 Lexington Avenue.

 

Inaddition, Vornado is entitled to a development fee of 6% of development costs,as defined, with minimum guaranteed fees of $750,000 per annum.

 

*Leasing Agreements*

* *

Vornadoalso provides us with leasing services for a fee of 3% of rent for the firstten years of a lease term, 2% of rent for the eleventh through the twentiethyear of a lease term, and 1% of rent for the twenty-first through thirtiethyear of a lease term, subject to the payment of rents by tenants. In the eventof the sale of an asset, the fee is 3% of the gross proceeds, as defined. Suchamounts are payable annually in an amount not to exceed $2,500,000, until thepresent value of such installments, calculated at a discount rate of 9% perannum, equals the amount that would have been paid had they been paid at thetime the transactions which gave rise to the commissions occurred. Pursuant tothe 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 tothe third party real estate brokers.

 

-7-

 

# **ALEXANDER’S, INC.**

# **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

# **(UNAUDITED)**

# ** **

**4.**              Relationship withVornado - continued

** **

*OtherAgreements*

* *

Wehave also entered into agreements with Building Management Services, a wholly ownedsubsidiary of Vornado, to supervise cleaning, engineering and security servicesat our Lexington Avenue and Kings Plaza properties for an annual fee of thecost for such services plus 6%.

 

AtMarch 31, 2006, we owed Vornado $33,110,000 for leasing fees and $1,029,000 formanagement, property management and cleaning fees.

 

Thefollowing table shows the amounts incurred under the agreements describedabove.

 

| ** **                                                                             | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| (Amounts in thousands)                                                       | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
|                                                                                   |       |                                             |       |   |   |
| Company  management fees                                                               |       | $                                                | 750        |   | $ | 750 |   |
| Development fee,  guarantee fee and rent for development office                        |       | 194                                              |       | 1,136 |   |
| Leasing fees                                                                           |       | 964                                              |       | 9,096 |   |
| Property  management fees and payments for cleaning, engineering and security services |       | 871                                              |       | 571 |   |
|                                                                                   |       | $                                                | 2,779      |   | $ | 11,553 |   |

 

Inaddition, to the fees and costs described above, we incurred interest of$2,843,000 in the three months ended March 31, 2005 on a $124,000,000 loan fromVornado, which was repaid on July 6, 2005.

 

**5.**              Debt

** **

The following is a summary of our outstanding debt.

 
| ** **                                                                                                            | ** ** | ** **   | ** ** | ** **                            | ** ** | **Balance at**      | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|--------------|------------|---------------------------------------|------------|--------------------------|------------|
| ** **                                                                                                            | ** ** | **Maturity** |       | **Interest  Rate at  March 31, 2006** | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
| (Amounts in  thousands)                                                                                               |       |         |       |                                  |       |                     |       |   |   |
|                                                                                                                  |       | ** **   |       |                                  |       |                     |       |   |   |
| First mortgage, secured by the office space at the  Lexington Avenue property |       | Feb. 2014    |       | 5.33%                                 |       | $                        | 400,000    |   | $ | 400,000 |   |
| First mortgage,  secured by the retail space at the Lexington Avenue property                                         |       | July 2015    |       | 4.93%                                 |       | 320,000                  | (1)        | 320,000 | (1) |
| First mortgage,  secured by the Kings Plaza Regional Shopping Center                                                  |       | June 2011    |       | 7.46%                                 |       | 209,657                  |       | 210,539 |   |
| First mortgage, secured by the Rego Park I Shopping  Center                   |       | June 2009    |       | 7.25%                                 |       | 80,714                   |       | 80,926 |   |
| First mortgage, secured by the Paramus  property                                             |       | Oct. 2011    |       | 5.92%                                 |       | 68,000                   |       | 68,000 |   |
|                                                                                                                  |       |         |       |                                  |       | $                        | 1,078,371  |   | $ | 1,079,465 |   |

 

----

(1)          In the event of a substantial casualty,up to $75,000,000 of this loan may become recourse to us.

 

**6.**              Net Gain on Sale ofCondominiums

** **

In thethree months ended March 31, 2006 and 2005, we recognized $5,008,000 and$39,975,000, respectively, for the after-tax net gains on sale of residentialcondominium units at 731 Lexington Avenue, under the percentage of completionmethod. As of March 31, 2006, 102 of the 105 residential condominium units weresold and closed and 1 unit was under sales contract. The aggregate after-taxnet gain on sale of the 103 residential condominium units from inception toMarch 31, 2006 was $66,818,000, of which $65,951,000 has been recognized underthe percentage of completion method.

 

-8-

 

# **ALEXANDER’S, INC.**

# **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

# **(UNAUDITED)**

# ** **

**7.**              Commitments andContingencies

 

We arenot a party to, nor is our property the subject of, any material pending legalproceeding other than routine litigation incidental to our business, except forthe Kings Plaza and Flushing properties litigation described below. We believethat these routine legal actions will not be material to our financialcondition or results of operations.

 

Insurance

 

We carry comprehensive liability and all risk propertyinsurance ((i) fire, (ii) flood, (iii) extended coverage,(iv) ”acts of terrorism” as defined in the Terrorism Risk InsuranceExtension Act of 2005 which expires in 2007, and (v) rental lossinsurance) with respect to our assets.

 

On June 30, 2005, we renewed our annual all risk policywith limits of (i) $960,000,000 per occurrence including certified terroristacts and $350,000,000 for non-certified terrorist acts for our 731 LexingtonAvenue property, and (ii) $510,000,000 per occurrence including certifiedterrorist acts and $350,000,000 for non-certified terrorist acts for ourremaining properties. To the extent that we incur losses in excess of ourinsurance coverage, these losses would be borne by us and could be material.

 

Ourdebt instruments, consisting of mortgage loans secured by our properties (whichare generally non-recourse to us), contain customary covenants requiring us tomaintain insurance. Although we believe that we have adequate insurancecoverage under these agreements, we may not be able to obtain an equivalentamount of coverage at reasonable costs in the future.  Further, if lendersinsist on greater coverage than we are able to obtain, or if the Terrorism RiskInsurance Extension Act of 2005 is not extended past 2007, it could adverselyaffect our ability to finance and/or refinance our properties and expand ourportfolio.

 

EnvironmentalRemediation

 

In June 1997, the Kings Plaza Regional Shopping Centercommissioned an Environmental Study and Contamination Assessment Site Investigation(the “Phase II Study”) to evaluate and delineate environmental conditionsdisclosed in a Phase I study. The results of the Phase II Study indicated thepresence of petroleum and bis (2-ethylhexyl) phthalate contamination in thesoil and groundwater. We delineated the contamination, developed a remediationapproach, and in July 2000 entered into a voluntary cleanup agreement with theNew York State Department of Environmental Conservation (“NYSDEC”). We havecompleted most of the remediation work, which we believe was required pursuantto the NYSDEC remedial action workplan. We have accrued $2,675,000 in previousyears, of which $2,625,000 has been paid as of March 31, 2006, for ourestimated obligation with respect to the cleanup of the site. If the NYSDECinsists on a more extensive remediation approach, we could incur additionalcosts.

 

OnDecember 12, 2005, a third party that was retained by us to perform services inconnection with the environmental remediation referred to above, filed acomplaint against us in the Supreme Court of the State of New York allegingthat we failed to honor the terms and conditions under an August 2005 agreement.The complaint seeks approximately $1,800,000 of costs incurred plus interestand legal fees. On March 3, 2006, we filed an answer stating that the thirdparty was only authorized by us to incur costs of up to $500,000 the amount ofthe authorized purchase order. In addition, we filed a counterclaim seeking$1,100,000 in damages based upon the third-party’s failure to honor the termsand conditions of the agreement. We have accrued $500,000 for this claim as ofMarch 31, 2006.

 

-9-

 

# **ALEXANDER’S, INC.**

# **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

# **(UNAUDITED)**

# ** **

**7.             Commitments and Contingencies -continued**

** **

FlushingProperty

 

In the fourth quarter of 2003, we recognized$1,289,000 of income representing a non-refundable deposit of $1,875,000, netof $586,000 of costs associated with the transaction, from a party that hadagreed to purchase this property, as such party had not met its obligationsunder a May 30, 2002 purchase contract. On September 10, 2002, November 7,2002, and July 8, 2004, we received letters from the party demanding return ofthe deposit. On December 28, 2005, the party filed a complaint against us inthe Supreme Court of the State of New York alleging that we failed to honor theterms and conditions of the agreement. The complaint seeks specific performanceand, if specific performance is denied, it seeks the return of the deposit plusinterest and $50,000 in costs. Pursuant to discussions with our legal counsel,we do not believe the party is entitled to either specific performance or areturn of the deposit and are defending the action.

 

Kings Plaza 

 

Weplan to construct a freestanding building adjacent to the mall containingapproximately 120,000 square feet, which has been leased to Lowe’s HomeImprovement Warehouse (“Lowe’s”). This lease is expected to commence in 2007. Thecost of this project will be approximately $11,500,000, net. There can be noassurance that this project will be completed, completed on time or completedfor the budgeted amount.

 

Priorto April 15, 2005, we owned and operated an energy plant that generateselectrical power at this property. On April 15, 2005, we contributed this 35year old plant, which has been fully depreciated, and $750,000 in cash for a25% interest in a joint venture. The joint venture is rebuilding the plant at atotal cost of approximately $18,000,000, of which $9,100,000 has been expendedthrough March 31, 2006. We provided the joint venture with a $15,000,000facility for the construction, of which $7,700,000 (eliminated in consolidation)has been drawn as of March 31, 2006. The facility bears interest at 8% andmatures in April 2020. Pursuant to the provisions of EITF 04-05, we arepresumed to have “control” over the joint venture and accordingly, consolidateour investment in this joint venture. There can be no assurance that thisproject will be completed, completed on time or completed for the budgetedamount.

 

RegoPark II

 

We owntwo land parcels containing approximately 10 acres adjacent to our Rego Park Iproperty in Queens, New York. One parcel comprises the entire square blockbounded by the Horace Harding Service Road (of the Long Island Expressway), 97thStreet, 62nd Drive and Junction Boulevard. The other is a parcel ofapproximately one-quarter square block at the intersection of JunctionBoulevard and the Horace Harding Service Road.

 

Ourplan for the entire square block parcel is a mixed-use, development containingapproximately 600,000 square feet of retail space on four levels, a parkingdeck of approximately 1,400 spaces and may also include up to 450 apartmentunits in one or two towers. On September 20, 2005, we received governmentalapprovals for this project. We have entered into long-term leases with Century21 and Home Depot for 134,000 and 134,500 square feet, respectively, of retailspace at this project.

 

Whilethe current plans for the one-quarter square block parcel are preliminary, theproject may include up to 80,000 square feet of retail space.

 

Therecan be no assurance that these projects will commence, be completed, completedon time or completed for the budgeted amount.

 

Paramus

 

In 2001 we leased 30.3 acres of land located in Paramus,New Jersey to IKEA Property, Inc. The lease has a 40-year term with a purchase option at the end of thetwentieth year for $75,000,000. We have a $68,000,000 interest only, non-recoursemortgage loan on the property from a third party lender. The fixed interestrate on the debt is 5.92% with interest payable monthly until maturity inOctober 2011. The triple-net rent each year is the sum of $700,000 plus theamount of debt service on the mortgage loan. If the purchase option isexercised, we will receive net cash proceeds of approximately $7,000,000 andrecognize a gain on sale of land of approximately $62,000,000. If the purchaseoption is not exercised, the triple-net rent for the last 20 years must includethe debt service sufficient to fully amortize $68,000,000 over the remaining20-year lease term.

 

Lettersof Credit

 

Approximately$4,130,000 in standby letters of credit were issued and outstanding as of March31, 2006.

 

-10-

 

# **ALEXANDER’S, INC.**

# **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

# **(UNAUDITED)**

# ** **

**8.**              Earnings Per Share

** **

Thefollowing table sets forth the computation of basic and diluted earnings pershare. Basic earnings per share is determined using the weighted average sharesof common stock outstanding during the period. Diluted earnings per share isdetermined using the weighted average shares of common stock outstandingassuming all potentially dilutive securities were converted into common sharesat the earliest date possible.

 
| (Amounts in thousands, except share and per share amounts) | ** ** | **Three Months Ended   March 31,** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                                                                                         | ** ** | **2006**                                               | ** ** | **2005** | ** ** |
| **Numerator:**                                                                                     |       |                                                   |       |   |   |
| Loss from continuing operations                                                                    |       | $                                                      | (23,865    | ) | $ | (8,757 | ) |
| Net gain on sale of condominiums, net of income  taxes                                             |       | 5,008                                                  |       | 39,975 |   |
| Net (loss) income available to common stockholders –  Basic and Diluted                       |       | $                                                      | (18,857    | ) | $ | 31,218 |   |
| Weighted average shares outstanding – Basic                                                   |       | 5,024,967                                              |       | 5,015,827 |   |
| Effect of stock options                                                                            |       | —                                                 |       | 59,638 |   |
| Weighted average shares outstanding – Diluted                                                 |       | 5,024,967                                              |       | 5,075,465 |   |
|                                                                                               |       |                                                   |       |   |   |
| **(Loss) income per common share – Basic:**                                                   |       |                                                   |       |   |   |
| Loss from continuing operations                                                                    |       | $                                                      | (4.75      | ) | $ | (1.75 | ) |
| Net gain on sale of condominiums, net of income  taxes                                             |       | 1.00                                                   |       | 7.97 |   |
| Net (loss) income per common share                                                                 |       | $                                                      | (3.75      | ) | $ | 6.22 |   |
|                                                                                               |       |                                                   |       |   |   |
| **(Loss) income per common share – Diluted:**                                                 |       |                                                   |       |   |   |
| Loss from continuing operations                                                                    |       | $                                                      | (4.75      | ) | $ | (1.73 | ) |
| Net gain on sale of condominiums, net of income  taxes                                             |       | 1.00                                                   |       | 7.88 |   |
| Net (loss) income per common share                                                                 |       | $                                                      | (3.75      | ) | $ | 6.15 |   |

 

-11-

 

# **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

# ** **

To the Board of Directorsand Stockholders of

Alexander’s, Inc.

Paramus, New Jersey

 

Wehave reviewed the accompanying condensed consolidated balance sheet ofAlexander’s, Inc. and subsidiaries (the “Company”) as of March 31, 2006, andthe related condensed consolidated statements of operations and cash flows forthe three-month periods ended March 31, 2006 and 2005. These interim financialstatements are the responsibility of the Company’s management.

 

Weconducted our reviews in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). A review of interim financialinformation consists principally of applying analytical procedures and makinginquiries of persons responsible for financial and accounting matters. It issubstantially less in scope than an audit conducted in accordance withstandards of the Public Company Accounting Oversight Board (United States), theobjective of which is the expression of an opinion regarding the financialstatements taken as a whole. Accordingly, we do not express such an opinion.

 

Basedon our reviews, we are not aware of any material modifications that should bemade to such condensed consolidated interim financial statements for them to bein conformity with accounting principles generally accepted in the UnitedStates of America.

 

Wehave previously audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the consolidated balance sheet ofAlexander’s, Inc. and subsidiaries as of December 31, 2005, and the relatedconsolidated statements of operations, stockholders’ equity, and cash flows forthe year then ended (not presented herein); and in our report dated February27, 2006, we expressed an unqualified opinion on those consolidated financialstatements. In our opinion, the information set forth in the accompanyingconsolidated balance sheet as of December 31, 2005 is fairly stated, in allmaterial respects, in relation to the consolidated balance sheet from which ithas been derived.

 

 

/s/ DELOITTE & TOUCHELLP

 

Parsippany, New Jersey

May 1, 2006

 

-12-

 
| **ITEM 2.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|-------------------------------------------------------------------------------------------------|

### ** **

Certainstatements contained herein constitute forward-looking statements as such termis defined in Section 27A of the Securities Act of 1933, as amended, andSection 21E of the Securities Exchange Act of 1934, as amended. Forward-lookingstatements are not guarantees of future performance. Our future results,financial condition, results of operations and business may differ materially fromthose expressed in these forward-looking statements. You can find many of thesestatements by looking for words such as “approximates,” “believes,” “expects,”“anticipates,” “estimates,” “intends,” “plans” “would,” “may,” “will” or othersimilar expressions in this Quarterly Report on Form 10-Q. Theseforward-looking statements represent our intentions, plans, expectations andbeliefs and are subject to numerous assumptions, risks and uncertainties. See“Item 1A - Risk Factors” in our Annual Report on Form 10-K for the yearended December 31, 2005, for more information about important factors thatwould cause actual results to differ materially from the results anticipated bythese forward-looking statements.

 

Weclaim the protection of the safe harbor for forward-looking statementscontained in the Private Securities Litigation Reform Act of 1995 for theseforward-looking statements. You are cautioned not to place undue reliance onthe forward-looking statements, which speak only as of the date of this QuarterlyReport on Form 10-Q or the date of the applicable document incorporated byreference. All subsequent written and oral forward-looking statementsattributable to us or any person acting on our behalf are expressly qualifiedin their entirety by the cautionary statements contained or referred to in thissection. We undertake no obligation to publicly update or revise anyforward-looking statements, whether as a result of new information, futureevents or otherwise.

 

Management’sDiscussion and Analysis of Financial Condition and Results of Operationsincludes a discussion of our consolidated financial statements for the threemonths ended March 31, 2006 and 2005. The preparation of financial statementsin conformity with accounting principles generally accepted in the UnitedStates of America requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting periods. Actual resultscould differ from those estimates.

 

### **Overview**

### ** **

Alexander’s,Inc. is a real estate investment trust (“REIT”), incorporated in Delaware,engaged in leasing, managing, developing and redeveloping its properties. Allreferences to “we,” “us,” “our,” or “Company” refer to Alexander’s, Inc. andits wholly owned subsidiaries. We are managed by, and our properties are leasedand developed by, Vornado Realty Trust (“Vornado”), our manager. We have sixproperties in the greater New York City metropolitan area including the 731Lexington Avenue property, a 1.1 million square foot multi-use building inManhattan, and the Kings Plaza Regional Shopping Center located in Brooklyn.

 

We compete with a large number of real estate propertyowners and developers, some of which may be willing to accept lower returns ontheir investments. Principal factors ofcompetition are rents charged, attractiveness of the location, the quality ofthe property and breadth and quality of the services provided. Our successdepends upon, among other factors, trends of national and local economies, thefinancial condition and operating results of current and prospective tenantsand customers, availability and cost of capital, construction and renovationcosts, taxes, governmental regulations, legislation and population trends.

 

Condominium Sales

 

In thethree months ended March 31, 2006 and 2005, we recognized $5,008,000 and$39,975,000, respectively, for the after-tax net gains on sale of residentialcondominium units at 731 Lexington Avenue under the percentage of completionmethod. As of March 31, 2006, 102 of the 105 residential condominium units weresold and closed and 1 unit was under sales contract. The aggregate after-taxnet gain on sale of the 103 residential condominium units from inception toMarch 31, 2006 was $66,818,000, of which $65,951,000 has been recognized underthe percentage of completion method.

 

Stock Appreciation Rights

 

Stockappreciation rights (“SARs”) are granted at 100% of the market price of ourcommon stock on the date of grant. Compensation expense for each SAR ismeasured by the excess of stock price at the current balance sheet date overthe stock price at the previous balance sheet date. If the stock price is lowerat the current balance sheet date, previously recognized expense is reversedbut not below zero. In the three months ended March 31, 2006 and 2005, werecorded SARs compensation expense of $37,561,000 and $22,525,000, based on ourclosing stock price of $289.00 and $241.50 on March 31, 2006 and 2005,respectively. Our closing stock price on December 31, 2005 and 2004 was $245.50and $215.00, respectively.

 

-13-

 

### **CriticalAccounting Policies**

### ** **

Asummary of our critical accounting policies is included in our Annual Report onForm 10-K for the year ended December 31, 2005 in “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations” and“Note 2 – Summary of Significant Accounting Policies” to the consolidatedfinancial statements included therein. There have been no significant changesto those policies during the first quarter of 2006.

 

### **SignificantTenants**

### ** **

Bloomberg L.P. accountedfor 34% and 36% of our consolidated revenues in the three months ended March31, 2006 and 2005, respectively. Sears accounted for 10% of our consolidatedrevenues in the three months ended March 31, 2006 and 2005. No other tenantaccounted for more than10% of our consolidated revenues.

 

### **Resultsof Operations**

 

We hada net loss of $18,857,000 in the quarter ended March 31, 2006, compared to netincome of $31,218,000 in the prior year’s quarter, a decrease of $50,075,000.Net loss for the quarter ended March 31, 2006 includes $37,561,000 for anaccrual of SARs compensation expense, partially offset by, $5,008,000 for anafter-tax net gain from the sale of residential condominium units at 731Lexington Avenue. Net income for the quarter ended March 31, 2005 includes$39,975,000 for an after-tax net gain from the sale of residential condominiumunits at 731 Lexington Avenue, partially offset by $22,525,000 for an accrualof SARs compensation expense.

 

Propertyrentals were $33,832,000 in the quarter ended March 31, 2006, compared to$31,673,000 in the prior year’s quarter, an increase of $2,159,000. This increase was primarilyattributable to rents from tenants at 731 Lexington Avenue whose space wasplaced into service subsequent to the first quarter of 2005.

 

Tenantexpense reimbursements were $14,544,000 in the quarter ended March 31, 2006,compared to $12,003,000 in the prior year’s quarter, an increase of $2,541,000.This increase was primarily due to reimbursements received from tenants at 731Lexington Avenue under leases that commenced subsequent to the first quarter of2005.

 

Operatingexpenses were $17,233,000 in the quarter ended March 31, 2006, compared to$13,834,000 in the prior year’s quarter, an increase of $3,399,000. Thisincrease resulted primarily from lower amounts being capitalized in the currentperiod as well as additional operating costs being incurred at 731 LexingtonAvenue as a result of the property becoming fully operational in the fourthquarter of 2005.

 

Generaland administrative expenses were $38,841,000 in thequarter ended March 31, 2006, compared to $23,628,000 in the prior year’squarter, an increase of $15,213,000. This increase was primarily due to higher accruals forSARs compensation expense.

 

Depreciationand amortization was $5,293,000 in the quarter ended March 31, 2006, comparedto $4,649,000 in the prior year’s quarter, an increase of $644,000. Thisincrease was primarily due to depreciation on the 731 Lexington Avenue buildingimprovements, which became fully operational in the fourth quarter of 2005.

 

Interestand other income was $6,178,000 in the quarter ended March 31, 2006, comparedto $981,000 in the prior year’s quarter, an increase of $5,197,000. Thisincrease resulted primarily from an increase in average cash balances ofapproximately $445,000,000 and an increase in the average yield on investmentof approximately 2%.

 

Interestand debt expense was $17,052,000 in the quarter ended March 31, 2006, comparedto $11,303,000 in the prior year’s quarter, an increase of $5,749,000. This increasewas primarily due to no interest being capitalized in the current period,compared to $5,700,000 of interest capitalized in the prior period.

 

-14-

 

### **Liquidityand Capital Resources**

### ** **

We arenot a party to, nor is our property the subject of, any material pending legalproceeding other than routine litigation incidental to our business, except forthe Kings Plaza and Flushing properties litigation described in Note 7 to ourconsolidated financial statements. We believe that these routine legal actionswill not be material to our financial condition or results of operations.

 

*Development Projects*

* *

Kings Plaza

 

Weplan to construct a freestanding building adjacent to the mall containingapproximately 120,000 square feet, which has been leased to Lowe’s HomeImprovement Warehouse (“Lowe’s”). This lease is expected to commence in 2007.The cost of this project will be approximately $11,500,000, net. There can beno assurance that this project will be completed, completed on time orcompleted for the budgeted amount.

 

Priorto April 15, 2005, we owned and operated an energy plant that generateselectrical power at this property. On April 15, 2005, we contributed this 35year old plant, which has been fully depreciated, and $750,000 in cash for a25% interest in a joint venture. The joint venture is rebuilding the plant at atotal cost of approximately $18,000,000, of which $9,100,000 has been expendedthrough March 31, 2006. We provided the joint venture with a $15,000,000facility for the construction, of which $7,700,000 (eliminated inconsolidation) has been drawn as of March 31, 2006. The facility bearsinterest at 8% and matures in April 2020. Pursuant to the provisions of EITF04-05, we are presumed to have “control” over the joint venture andaccordingly, consolidate our investment in this joint venture. There can be noassurance that this project will be completed, completed on time or completedfor the budgeted amount.

 

Rego Park II

 

We owntwo land parcels containing approximately 10 acres adjacent to our Rego Park Iproperty in Queens, New York. One parcel comprises the entire square blockbounded by the Horace Harding Service Road (of the Long Island Expressway), 97thStreet, 62nd Drive and Junction Boulevard. The other is a parcel ofapproximately one-quarter square block at the intersection of JunctionBoulevard and the Horace Harding Service Road.

 

Ourplan for the entire square block parcel is a mixed-use, development containingapproximately 600,000 square feet of retail space on four levels, a parkingdeck of approximately 1,400 spaces and may also include up to 450 apartmentunits in one or two towers. On September 20, 2005, we received governmentalapprovals for this project. We have entered into long-term leases with Century21 and Home Depot for 134,000 and 134,500 square feet, respectively, of retailspace at this project.

 

Whilethe current plans for the one-quarter square block parcel are preliminary, theproject may include up to 80,000 square feet of retail space.

 

Therecan be no assurance that these projects will commence, be completed, completedon time or completed for the budgeted amount.

 

*Insurance*

* *

Wecarry comprehensive liability and all risk property insurance ((i) fire,(ii) flood, (iii) extended coverage, (iv) ”acts of terrorism” asdefined in the Terrorism Risk Insurance Extension Act of 2005 which expires in2007, and (v) rental loss insurance) with respect to our assets.

 

OnJune 30, 2005, we renewed our annual all risk policy with limits of (i)$960,000,000 per occurrence including certified terrorist acts and $350,000,000for non-certified terrorist acts for our 731 Lexington Avenue property, and(ii) $510,000,000 per occurrence including certified terrorist acts and$350,000,000 for non-certified terrorist acts for our remaining properties. Tothe extent that we incur losses in excess of our insurance coverage, theselosses would be borne by us and could be material.

 

Ourdebt instruments, consisting of mortgage loans secured by our properties (whichare generally non-recourse to us), contain customary covenants requiring us tomaintain insurance. Although we believe that we have adequate insurancecoverage under these agreements, we may not be able to obtain an equivalentamount of coverage at reasonable costs in the future.  Further, if lendersinsist on greater coverage than we are able to obtain, or if the Terrorism RiskInsurance Extension Act of 2005 is not extended past 2007, it could adverselyaffect our ability to finance and/or refinance our properties and expand ourportfolio

 

-15-

 

*Stock Appreciation Rights*

* *

OnJanuary 10, 2006, the Omnibus Stock Plan Committee of our Board of Directorsgranted Michael Fascitelli, our President, a SAR covering 350,000 shares of ourcommon stock. The exercise price of the SAR is $243.83 per share of commonstock, which is the average of the high and low trading price of our commonstock on the date of grant. The SAR will become exercisable on July 10, 2006,provided Mr. Fascitelli is employed with us on such date, and will expire onMarch 14, 2007.

 

##### ***CashFlows***

##### *** ***

###### *Three Months Ended March 31, 2006*

 

Cashand cash equivalents were $577,733,000 at March 31, 2006, compared to$578,406,000 at December 31, 2005, a decrease of $673,000.

 

Netcash provided by operating activities of $14,041,000 was comprised of (i) thenet change in operating assets and liabilities of $40,370,000, partially offsetby (ii) a net loss of $18,857,000 and (iii) non-cash items of $7,472,000. Theadjustments for non-cash items are primarily comprised of (a) $9,268,000resulting from the gains on sale of condominiums and (b) the effect ofstraight-lining of rental income of $4,158,000, partially offset by (c)depreciation and amortization of $5,954,000.

 

Netcash used in investing activities of $13,690,000 was primarily comprised of (i)restricted cash of $7,050,000 and (ii) capital expenditures of $17,241,000,partially offset by (iii) $10,601,000 of proceeds from the sales of condominiumsat 731 Lexington Avenue.

 

Netcash used in financing activities of $1,024,000 was primarily comprised of debtrepayments of $1,094,000, partially offset by $70,000 for the exercise of shareoptions.

 

###### *Three Months Ended March 31, 2005*

 

Netcash provided by operating activities of $12,805,000 was comprised of(i) net income of $31,218,000, (ii) the net change in operating assets andliabilities of $56,958,000, partially offset by (iii) non-cash items of$75,371,000. The adjustments for non-cash items are comprised of (a)$74,667,000 resulting from the gains on sale of condominiums and (b) the effectof straight-lining of rental income of $6,157,000, partially offset by (c)$5,453,000 of depreciation and amortization.

 

Netcash provided by investing activities of $40,197,000 resulted primarily fromthe proceeds from the sales of condominiums of $63,045,000, partially offset bycapital expenditures of $19,067,000 and restricted cash of $3,031,000. Thecapital expenditures primarily related to the 731 Lexington Avenue developmentproject.

 

Net cash provided by financingactivities of $19,189,000 resulted primarily from borrowings collateralized bythe Lexington Avenue development project of $19,780,000, partially offset bydebt repayments of $1,021,000.

 

-16-

 

###### ***Funds from Operations (“FFO”)***

 

FFO iscomputed in accordance with the definition adopted by the Board of Governors ofthe National Association of Real Estate Investment Trusts (“NAREIT”). NAREITdefines FFO as net income or loss determined in accordance with GenerallyAccepted Accounting Principles (“GAAP”), excluding extraordinary items asdefined under GAAP and gains or losses from sales of previously depreciatedoperating real estate assets, plus specified non-cash items, such as realestate asset depreciation and amortization, and after adjustments forunconsolidated partnerships and joint ventures. FFO and FFO per diluted shareare used by management, investors and industry analysts as supplemental measuresof operating performance of equity REITs. FFO and FFO per diluted share shouldbe evaluated along with GAAP net income and income per diluted share (the mostdirectly comparable GAAP measures), as well as cash flow from operatingactivities, investing activities and financing activities, in evaluating theoperating performance of equity REITs. Management believes that FFO and FFO perdiluted share are helpful to investors as supplemental performance measuresbecause these measures exclude the effect of depreciation, amortization andgains or losses from sales of real estate, all of which are based on historicalcosts which implicitly assumes that the value of real estate diminishespredictably over time. Since real estate values instead have historically risenor fallen with market conditions, these non-GAAP measures can facilitatecomparisons of operating performance between periods and among other equityREITs. FFO does not represent cash generated from operating activities inaccordance with GAAP and is not necessarily indicative of cash available tofund cash needs as disclosed in the Company’s Statements of Cash Flows. FFOshould not be considered as an alternative to net income as an indicator of theCompany’s operating performance or as an alternative to cash flows as a measureof liquidity.

 

NegativeFFO for the quarter ended March 31, 2006 was $13,582,000, or $2.70 per dilutedshare, compared to FFO of $35,849,000, or $7.06 per diluted share for the quarter ended March31, 2005, a decrease of $49,431,000 or $9.76 per diluted share.

 

NegativeFFO for the quarter ended March 31, 2006 includes $37,561,000 for an accrual ofSARs compensation expense, partially offset by, $5,008,000 for an after-tax netgain from the sale of residential condominium units at 731 Lexington Avenue.These items, in the aggregate, decreased FFO by $32,553,000, or $6.48 perdiluted share. FFO for the quarter ended March 31, 2005, includes $39,975,000for an after-tax net gain from the sale of residential condominium units at 731Lexington Avenue, partially offset by, $22,525,000 for an accrual of SARscompensation expense. These items, in the aggregate, increased FFO by$17,450,000, or $3.44 per diluted share.

 

The following table reconciles net (loss) income to(negative FFO) FFO:

 

| ** **                                                                                         | ** ** | **Three Months Ended   March 31,** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------|------------|
| (Amounts in thousands, except share and per share amounts) | ** ** | **2006**                                               | ** ** | **2005** | ** ** |
|                                                                                               |       |                                                   |       |   |   |
| Net (loss) income                                                                                  |       | $                                                      | (18,857    | ) | $ | 31,218 |   |
| Depreciation and amortization of real property                                                     |       | 5,275                                                  |       | 4,631 |   |
| (Negative FFO) FFO                                                                                 |       | $                                                      | (13,582    | ) | $ | 35,849 |   |
|                                                                                               |       |                                                   |       |   |   |
| (Negative FFO) FFO per common share – diluted                                                 |       | $                                                      | (2.70      | ) | $ | 7.06 |   |
|                                                                                               |       |                                                   |       |   |   |
| Weighted average shares used in computing FFO per  common share – diluted                     |       | 5,024,967                                              |       | 5,075,465 |   |

 

-17-

 

### **Item 3.    Quantitative and Qualitative Disclosures About Market Risk**

### ** **

At March 31, 2006, we had $1,078,371,000 of fixed ratedebt at a weighted average interest rate of 5.81% and as such, we have noexposure to changes in interest rates for the remaining terms of our existingdebt.

 

The fair value of our debt, estimated by discountingfuture contractual cash flows of our existing debt using the current ratesavailable to borrowers with similar credit ratings for the remaining terms ofsuch debt, is less than the aggregate carrying amount by approximately$48,318,000 at March 31, 2006.

 

### **Item 4.    Controls and Procedures**

### ** **

(a) *Disclosure Controls andProcedures* – Our management, with the participation of our ChiefExecutive Officer and Chief Financial Officer, has evaluated the effectivenessof our disclosure controls and procedures (as such term is defined in Rules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended)as of the end of the period covered by this Quarterly Report on Form 10-Q.Based on such evaluation, our Chief Executive Officer and Chief FinancialOfficer have concluded that, as of the end of such period, our disclosurecontrols and procedures are effective.

 

(b) *Internal Control OverFinancial Reporting –*There have not been any changes in ourinternal control over financial reporting during the fiscal quarter to whichthis Quarterly Report on Form 10-Q relates that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

 

**PART II. OTHER INFORMATION**

 

### **Item 1.    Legal Proceedings**

### ** **

We are not a party to, nor is our property the subjectof, any material pending legal proceeding other than routine litigationincidental to our business, except for the Kings Plaza and Flushing propertieslitigation described in Note 7 to our consolidated financial statements. Webelieve that these routine legal actions will not be material to our financialcondition or results of operations.

 

### **Item 1A.**            Risk Factors

### ** **

There have been no material changes in our “RiskFactors” as previously disclosed in our Annual Report on Form 10-K for the yearended December 31, 2005.

 

### **Item 2.**                     Unregistered Sales of Equity Securities and Use ofProceeds

### ** **

None.

 

### **Item 3.**                     Defaults Upon Senior Securities

### ** **

None.

 

### **Item 4.**                     Submission of Matters to a Vote of Security Holders

### ** **

None.

 

### **Item 5.**                     Other Information

### ** **

None.

 

### **Item 6.**                     Exhibits

### ** **

(a)                                            Exhibits required by Item 601 of Regulation S-K arefiled herewith and are listed in the attachedExhibit Index.

 

18

 

# **SIGNATURES**

# ** **

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

 
|                    | **ALEXANDER’S, INC**.                            |   |
|-------------------------|-------------------------------------------------------|--------|
|                    | (Registrant)                                          |   |
|                    |                                                  |   |
|                    |                                                  |   |
| Date:  May 1, 2006 | /s/ Joseph  Macnow                                    |   |
|                    | Joseph Macnow                                         |   |
|                    | Executive Vice  President and Chief Financial Officer |   |
|                    | (duly authorized  officer and principal financial and |   |
|                    | accounting  officer)                                  |   |

 

19

 

**EXHIBIT INDEX**

 
| **Exhibit**  **No.** | ** ** | ** **                                                                                                                                                                                      | ** ** | ** ** |
|---------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
|                      |       |                                                                                                                                                                                            |       |       |
| 3.1                       |       | Amended and Restated  Certificate of Incorporation. Incorporated herein by reference from Exhibit  3.1 to the registrant’s Registration Statement on Form S-3 filed on September  20, 1995 |       | *          |
|                      |       |                                                                                                                                                                                            |       |       |
| 3.2                       |       | By-laws,  as amended. Incorporated herein by reference from Exhibit 10.1 to the  registrant’s Quarterly Report on Form 10-Q for the quarter ended September  30, 2000                      |       | *          |
|                      |       |                                                                                                                                                                                            |       |       |
| 15.1                      |       | Letter regarding  unaudited interim financial information                                                                                                                                       |       |       |
|                      |       |                                                                                                                                                                                            |       |       |
| 31.1                      |       | Rule 13a-14(a)  certification of the Chief Executive Officer                                                                                                                                    |       |       |
|                      |       |                                                                                                                                                                                            |       |       |
| 31.2                      |       | Rule 13a-14(a)  certification of the Chief Financial Officer                                                                                                                                    |       |       |
|                      |       |                                                                                                                                                                                            |       |       |
| 32.1                      |       | Section 1350  certification of the Chief Executive Officer                                                                                                                                      |       |       |
|                      |       |                                                                                                                                                                                            |       |       |
| 32.2                      |       | Section 1350  certification of the Chief Financial Officer                                                                                                                                      |       |       |

 

----

*              Incorporated byreference.

 

20