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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  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 June 30, 2004 OR [  ]
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period fromto Commission File Number 001-6064 ALEXANDERS, INC. 
  Delaware
    
    51-0100517(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)210 Route 4 East, Paramus, New Jersey
    
    07652(Address of principal executive office)
    
    (Zip Code)
 (201) 587-8541 
  N/A 
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. [X]   Yes
    
    
    
    [  ]   No
 Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [X]   Yes
    
    
    
    [  ]   No
 As of July 23, 2004, there were 5,009,350 shares of common stock, par value $1
per share, outstanding.




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ALEXANDERS, INC. AND SUBSIDIARIES
INDEX Page NumberPART I. Financial InformationItem 1. Financial Statements:Consolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003
    
    
    3Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2004 and June 30, 2003
    
    
    4Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2004 and June 30, 2003
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6Report of Independent Registered Public Accounting Firm
    
    
    12Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Control and Procedures
    
    
    18PART II. Other InformationItem 1. Legal Proceedings
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Item 6. Exhibits and Reports on Form 8-K
    
    
    19Signatures
    
    
    20Exhibit Index
    
    
    21LETTER OF DELOITTE & TOUCHE  LLPCERTIFICATIONCERTIFICATIONCERTIFICATIONCERTIFICATION
  2




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PART I. FINANCIAL INFORMATION 
 Item 1.Financial Statements ALEXANDERS, INC. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
  June 30,
    
    December 31,2004
    
    2003(Unaudited)ASSETSReal estate, at cost:Land
    
    $
    91,677
    
    
    $
    91,496Buildings, leaseholds and leasehold improvements
    
    
    464,667
    
    
    
    371,353Construction in progress
    
    
    323,715
    
    
    
    346,166Air rights acquired for 731 Lexington Avenue
    
    
    17,531
    
    
    
    17,531Total
    
    
    897,590
    
    
    
    826,546Accumulated depreciation and amortization
    
    
    (68,184
    )
    
    
    (62,744
    )Real estate, net
    
    
    829,406
    
    
    
    763,802Asset held for sale
    
    
    432
    
    
    
    432Cash and cash equivalents
    
    
    111,488
    
    
    
    21,336Escrow deposits and restricted cash
    
    
    45,917
    
    
    
    16,291Accounts receivable, net of allowance for doubtful accounts of $232 and
$55
    
    
    4,028
    
    
    
    3,101Receivable arising from the straight-lining of rents
    
    
    53,697
    
    
    
    27,412Deferred lease and other property costs (including unamortized leasing
fees to Vornado Realty Trust (Vornado) of $39,402 and $31,021), net
    
    
    69,151
    
    
    
    61,594Deferred debt expense, net
    
    
    16,032
    
    
    
    10,806Other assets
    
    
    8,731
    
    
    
    16,222TOTAL ASSETS
    
    $
    1,138,882
    
    
    $
    920,996LIABILITIES AND STOCKHOLDERS EQUITYDebt (including $124,000 due to Vornado)
    
    $
    901,372
    
    
    $
    731,485Amounts due to Vornado
    
    
    45,850
    
    
    
    34,427Accounts payable and accrued expenses
    
    
    40,954
    
    
    
    47,402Liability for stock appreciation rights
    
    
    81,535
    
    
    
    44,917Other liabilities
    
    
    38,119
    
    
    
    11,842TOTAL LIABILITIES
    
    
    1,107,830
    
    
    
    870,073COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITYPreferred 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, 5,173,450 shares
    
    
    5,174
    
    
    
    5,174Additional capital
    
    
    25,393
    
    
    
    24,843Retained earnings
    
    
    1,397
    
    
    
    21,86631,964
    
    
    
    51,883Treasury shares: 164,100 and 172,600 shares at cost
    
    
    (912
    )
    
    
    (960
    )TOTAL STOCKHOLDERS EQUITY
    
    
    31,052
    
    
    
    50,923TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    1,138,882
    
    
    $
    920,996
 See notes to consolidated financial statements. 3




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ALEXANDERS, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2003

    
    2004
    
    2003REVENUESProperty rentals
    
    $
    27,136
    
    
    $
    12,958
    
    
    $
    51,703
    
    
    $
    25,781Expense reimbursements
    
    
    7,663
    
    
    
    7,198
    
    
    
    16,861
    
    
    
    14,098Total revenues
    
    
    34,799
    
    
    
    20,156
    
    
    
    68,564
    
    
    
    39,879EXPENSESOperating (including management fees to
Vornado of $593, $368, $972 and $731)
    
    
    10,741
    
    
    
    9,119
    
    
    
    21,237
    
    
    
    18,428General and administrative (including stock
appreciation rights compensation expense of
$6,579, $9,923, $36,618 and $9,923 and
management fees to Vornado of $540 and
$1,080 in each three and six month period)
    
    
    7,656
    
    
    
    10,940
    
    
    
    38,861
    
    
    
    11,866Depreciation and amortization
    
    
    3,878
    
    
    
    1,649
    
    
    
    7,408
    
    
    
    3,256Total expenses
    
    
    22,275
    
    
    
    21,708
    
    
    
    67,506
    
    
    
    33,550OPERATING INCOME (LOSS)
    
    
    12,524
    
    
    
    (1,552
    )
    
    
    1,058
    
    
    
    6,329Interest and other income, net
    
    
    279
    
    
    
    215
    
    
    
    737
    
    
    
    338Interest and debt expense (including interest
on loans from Vornado)
    
    
    (10,280
    )
    
    
    (3,059
    )
    
    
    (19,214
    )
    
    
    (6,259
    )Write off of unamortized deferred debt expense
    
    
    
    
    
    
    
    
    
    
    (3,050
    )
    
    
    NET INCOME (LOSS)
    
    $
    2,523
    
    
    $
    (4,396
    )
    
    $
    (20,469
    )
    
    $
    408Net income (loss) per common share  basic
    
    $
    0.50
    
    
    $
    (0.88
    )
    
    $
    (4.09
    )
    
    $
    0.08Net income (loss) per common share  diluted
    
    $
    0.50
    
    
    $
    (0.88
    )
    
    $
    (4.09
    )
    
    $
    0.08
 See notes to consolidated financial statements. 4




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ALEXANDERS, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
  Six Months Ended June 30,2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIESNet (loss) income
    
    $
    (20,469
    )
    
    $
    408Adjustments to reconcile net (loss) income to net cash provided
by operating activities:Write off of unamortized deferred debt expense
    
    
    3,050
    
    
    
    Depreciation and amortization (including deferred debt expense)
    
    
    9,067
    
    
    
    5,172Straight-lining of rental income
    
    
    (26,285
    )
    
    
    (1,009
    )Change in operating assets and liabilities:Accounts receivable, net
    
    
    (927
    )
    
    
    551Amounts due to Vornado
    
    
    8,715
    
    
    
    (662
    )Accounts payable and accrued expenses
    
    
    1,601
    
    
    
    (121
    )Liability for stock appreciation rights
    
    
    36,618
    
    
    
    9,923Other liabilities
    
    
    48
    
    
    
    (200
    )Other
    
    
    (2,043
    )
    
    
    1,860Net cash provided by operating activities
    
    
    9,375
    
    
    
    15,922CASH FLOWS FROM INVESTING ACTIVITIESAdditions to real estate
    
    
    (83,617
    )
    
    
    (127,585
    )Cash restricted for operating liabilities
    
    
    (3,397
    )
    
    
    (1,374
    )Net cash used in investing activities
    
    
    (87,014
    )
    
    
    (128,959
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowings (including $0 and $5,000 from Vornado)
    
    
    424,832
    
    
    
    92,457Repayments of borrowings
    
    
    (254,945
    )
    
    
    (1,357
    )Deferred debt expense
    
    
    (2,694
    )
    
    
    Exercise of share options
    
    
    598
    
    
    
    Net cash provided by financing activities
    
    
    167,791
    
    
    
    91,100Net increase (decrease) in cash and cash equivalents
    
    
    90,152
    
    
    
    (21,937
    )Cash and cash equivalents at beginning of period
    
    
    21,336
    
    
    
    45,239Cash and cash equivalents at end of period
    
    $
    111,488
    
    
    $
    23,302SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash payments for interest (of which $12,567 and $18,120 have
been capitalized)
    
    $
    29,378
    
    
    $
    22,367
 See notes to consolidated financial statements. 5




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ALEXANDERS, INC. AND SUBSIDIARIES 
 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. The activities of Alexanders, Inc. are conducted through its
manager, Vornado Realty Trust (Vornado). 2. BASIS OF PRESENTATION The consolidated balance sheet as of June 30, 2004, the consolidated
statements of operations for the three and six months ended June 30, 2004 and
2003, and the consolidated statements of cash flows for the six months ended
June 30, 2004 and 2003 are unaudited. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows
have been made. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted in accordance with Article 10 of Regulation S-X and the instructions to
Form 10-Q. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Annual Report on Form 10-K of Alexanders, Inc. for the year
ended December 31, 2003 as filed with the Securities and Exchange Commission.
The results of operations for the three and six months ended June 30, 2004 are
not necessarily indicative of the operating results for the full year. The accompanying consolidated financial statements include the accounts of
Alexanders, Inc. and all of its wholly owned subsidiaries (collectively, the
Company). All significant intercompany amounts have been eliminated. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates. Certain amounts in the prior periods consolidated financial
statements have been reclassified to conform to the current period
presentation. The Company currently operates in one business segment. 3. RELATIONSHIP WITH VORNADO REALTY TRUST Vornado owned 33.0% of the common stock of Alexanders, Inc. as of June
30, 2004. Steven Roth is the Chairman of the Board and Chief Executive Officer
of the Company, the Managing General Partner of Interstate Properties
(Interstate), a New Jersey general partnership, and the Chairman of the Board
and Chief Executive Officer of Vornado. At June 30, 2004, Mr. Roth, Interstate
and its other two general partners, David Mandelbaum and Russell B. Wight, Jr.
(who are also directors of the Company and trustees of Vornado) owned, in the
aggregate, 27.5% of the outstanding common stock of Alexanders, Inc., in
addition to the common stock owned directly by Vornado, and 11.0% of the
outstanding common shares of beneficial interest of Vornado. The
Company is managed, and its properties are leased and developed, by Vornado pursuant
to agreements with one-year terms, expiring
in March of each year, which are automatically renewable. In conjunction with
the original closing of the 731 Lexington Avenue construction loan (the
Construction Loan) on July 3, 2002, these agreements were modified to cover
the Companys 731 Lexington Avenue property separately. Further, the
management and development agreements with Vornado for the 731 Lexington Avenue
property were amended to provide for a term lasting until substantial
completion of the property with automatic renewals, and for the payment of the
731 Lexington Avenue development fee upon the earlier of January 3, 2006 or the
full repayment of the Construction Loan encumbering the property. On May 27, 2004, the Company entered into a further agreement with Vornado
under which Vornado provides property management services to the Company for an
annual fee of $0.50 per square foot of tenant-occupied office and retail space
at 731 Lexington Avenue. In addition, as of February 2003, the Company hired
Building Maintenance Services (BMS), a wholly owned subsidiary of Vornado, to
supervise the cleaning, engineering and security services at 731 Lexington
Avenue 6




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ALEXANDERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) for a fee of 6% of the
Companys costs for such services. Both of these
agreements expire in March of
each year and are automatically renewable. Vornado is paid a development fee equal to 6% of development costs, as
defined, with a minimum guaranteed fee and cash payment of $750,000 per annum.
For the Companys 731 Lexington Avenue project, the development fee is
estimated to be $26,300,000. Further, Vornado has agreed to guarantee to the
construction lender, the lien free, timely completion of the construction of
the 731 Lexington Avenue project and funding of project costs in excess of a
stated loan budget, if not funded by the Company (the Completion Guarantee).
The $6,300,000 estimated fee payable by the Company to Vornado for the
Completion Guarantee is 1% of construction costs, as defined, and is due at the
same time that the development fee is due. In addition, if Vornado should
advance any funds under the Completion Guarantee in excess of $21,000,000,
which was the amount available at June 30, 2004 under the line of credit with
Vornado, discussed below, interest on those advances would be at 15% per annum. The annual fee payable to Vornado for management of the Company is
$3,000,000 and, for property management at the Companys Kings Plaza Regional
Shopping Center (the Mall) is 3% of the Malls annual gross income. Vornado also provides all leasing services for the Company for a fee of
(i) 3% of the gross proceeds, as defined, from the sale of an asset and (ii),
in the event of a lease or sublease of an asset, 3% of rent for the first ten
years of a lease term, 2% of rent for the eleventh through the twentieth year
of a lease term, and 1% of rent for the twenty-first through thirtieth year of
a lease term, subject to the payment of rents by tenants. Such amounts are
payable annually in an amount not to exceed $2,500,000, until the present value
of such installments, calculated at a discount rate of 9% per annum, equals the
amount that would have been paid had they been paid at the time the
transactions which gave rise to the commissions occurred. Pursuant to the
leasing agreement, in the event third party real estate brokers are used, the
fees to Vornado increase by 1% and Vornado is responsible for the fees to the
third party real estate brokers, except in connection with the Bloomberg L.P.
lease, where the tenant paid the third party broker directly. At June 30, 2004, the Company owed Vornado (i) $16,934,000 for development
fees, (ii) $23,326,000 for leasing fees, (iii) $4,482,000 for the guarantee
fee, (iv) $505,000 for interest, and (v) $603,000 for management fees and
property management and cleaning fees. The following table shows the amounts accrued under the agreements
discussed above. Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(amounts in thousands)
    
    2004
    
    2003
    
    2004
    
    2003Company management fees
    
    $
    750
    
    
    $
    750
    
    
    $
    1,500
    
    
    $
    1,500Development fee, guarantee fee and
rent for development office
    
    
    1,609
    
    
    
    3,578
    
    
    
    3,312
    
    
    
    6,948Leasing fees
    
    
    5,813
    
    
    
    90
    
    
    
    10,203
    
    
    
    215Property management fees and payments for
cleaning, engineering and security services
    
    
    461
    
    
    
    199
    
    
    
    1,123
    
    
    
    352$
    8,633
    
    
    $
    4,617
    
    
    $
    16,138
    
    
    $
    9,015
 At June 30, 2004, in addition to the fees and costs described above, the
Company was indebted to Vornado in the amount of $124,000,000 comprised of (i)
a $95,000,000 note and (ii) $29,000,000 under a $50,000,000 line of credit
(which carries a 1% unused commitment fee). Effective April 1, 2004, the term
loan and line of credit were modified to reduce the spread from 9.48% to 6.00%
and accordingly, the current interest rate on the loan and line of credit is
9.00%. The rate resets quarterly using the 6.00% spread to one-year treasuries
with a 3% floor for treasuries. On July 3, 2002, in conjunction with the
original closing of the Construction Loan, the maturity of the Vornado debt was
extended to the earlier of January 3, 2006 or the date the Construction Loan is
fully repaid. The Company incurred interest (including the 1% unused
commitment fee) on this debt of $2,874,000 and $3,837,000 in the three months
ended June 30, 2004 and 2003, respectively, and $6,839,000 and $7,615,000 in
the six months ended June 30, 2004 and 2003, respectively. 7




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ALEXANDERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 4. 731 LEXINGTON AVENUE 731 Lexington Avenue development is an approximately 1.3 million square
foot multi-use building. The building contains approximately 885,000 net
rentable square feet of office space, approximately 171,000 net rentable square
feet of retail space and approximately 248,000 net saleable square feet of
residential space consisting of 105 condominium units (through a taxable REIT
subsidiary). Of the construction budget of $630,000,000 (which excludes the
development and guarantee fees to Vornado), $448,200,000 has been expended
through June 30, 2004 and there is an additional $34,100,000 to which the
Company has committed at such date. Construction is expected to be completed
in 2005. At June 30, 2004, 707,000 square feet of office space has been leased and
delivered to tenants including 695,000 square feet delivered to Bloomberg L.P.
in November and December 2003. Payment of base rent for the Bloomberg L.P.
space commences nine months from delivery of each parcel of space; rent
recognition on a straight-line basis commenced on delivery. At June 30, 2004, 119,000 square feet of retail space has been leased and
delivered to tenants including (i) 83,000 square feet delivered to The Home
Depot on March 29, 2004 and (ii) 27,000 square feet delivered to Hennes &
Mauritz on May 15, 2004. Payment of base rent on the 119,000 square feet
commences six to nine months from delivery of each space; rent recognition on a
straight-line basis commenced on delivery. The residential space is comprised of 105 condominium units. The original
offering plan filed for these units, as amended for price increases through
June 30, 2004, would produce an aggregate sale price of approximately
$500,000,000 (reflecting the value of existing contracts and the offering price
for the remaining units). As of June 30, 2004, the Company has received
deposits of $36,654,000 on sales of the condominium units. During the six months ended June 30, 2004, the Company transferred
approximately $93,480,000 from Construction in progress to Land and
Buildings, leaseholds and leasehold improvements, representing the space
delivered to tenants and placed into service during such period. Financing of the Project On February 13, 2004, the Company completed a $400,000,000 mortgage
financing on the office space. The loan was placed by German American Capital
Corporation, an affiliate of Deutsche Bank. The loan bears interest at 5.33%,
matures in February 2014 and, beginning in the third year, provides for
principal payments based on a 25-year amortization schedule such that over the
remaining eight years of the loan, ten years of amortization will be
paid. $7,233,000 of the $9,926,000 of "Deferred debt expense, net"
associated with this financing was included in "Other assets" in the
Consolidated Balance Sheet at December 31, 2003 and was reclassified
in the three months ended March 31, 2004. Of the loan proceeds, $253,529,000 was used to repay the entire amount
outstanding under the previously existing Construction Loan with Hypo Real
Estate Capital Corporation. The Construction Loan was modified on February 13, 2004 so that the
remaining availability was $237,000,000, which was approximately the amount
estimated to complete the 731 Lexington Avenue project at the closing date (not
including the development and guarantee fees to Vornado). The interest rate of
the Construction Loan of LIBOR plus 2.5% (3.82% at June 30, 2004) and the
maturity date of January 2006, with two one-year extensions, were not changed.
The collateral for the Construction Loan is the same except that the office
space has been removed from the lien. Further, the Construction Loan permits
the release of the retail space for a payment of $15 million and requires all
proceeds from the sale of the residential condominium units to be applied to
the Construction Loan balance until it is fully repaid. In connection with
reducing the principal amount of the Construction Loan, the Company wrote off
$3,050,000, the proportionate share of unamortized deferred debt expense, in
the first quarter of 2004 (shown in the Consolidated Statement of Operations as
Write off of unamortized deferred debt expense). Vornado has agreed to
guarantee to the construction lender, the lien free, timely completion of the
construction of 731 Lexington Avenue and funding of project costs in excess of
a stated loan budget, if not funded by the Company. If Vornado should advance
any funds under the Completion Guarantee in excess of $21,000,000, which was
the amount available at June 30, 2004 under the line of credit with Vornado,
interest on those advances would be at 15% per annum. 8




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ALEXANDERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

There can be no assurance that the 731 Lexington Avenue project will be
completed on time or completed for the budgeted amount. Any failure to
complete the 731 Lexington Avenue project on time or within budget may
adversely affect future cash flows and the Companys financial condition.

5. LEASES

The Company leases space to tenants in retail centers and an office
building. Future base rental revenue under these non-cancelable operating
leases is as follows (amounts in thousands):

Year Ending December 31,2004
    
    $
    27,7752005
    
    
    90,1662006
    
    
    89,4372007
    
    
    86,3572008
    
    
    90,292Thereafter
    
    
    1,653,801


Bloomberg L.P. and Sears accounted for 36% and 12% of the Companys
consolidated revenues in the six months ended June 30, 2004, respectively.
Sears accounted for 20% of consolidated revenues in the six months ended June
30, 2003.

6. DEBT

The following is a summary of the Companys outstanding debt.



|                                                                                      |  |           |  |      |      |                 |  |            |         |              |         |   |         |   |         | 
|------------------------------------------------------------------------------------- |  | --------- |  | ---- | ---- | --------------- |  | ---------- | ------- | ------------ | ------- | - | ------- | - | ------- | 
|                                                                                      |  |           |  |      |      | InterestRate at |  | Balance at
|                                                                                      |  |           |  |      |      | June 30,        |  | June 30,   |         | December 31,
|(amounts in thousands except for percentages)                                         |  | Maturity  |  | 2004 |      | 2004            |  | 2003      
|Fixed rate:                                                                           |  |           |  |      |      |                 |  |            |         |              |         |   |         |   |         | 
|First mortgage secured by the office space at
731 Lexington Avenue                    |  | Feb. 2014 |  |      | 5.33 | %               |  | $          | 400,000 |              |         | $ |        |  
|First mortgage secured by the Kings Plaza
Regional Shopping Center                    |  | June 2011 |  |      | 7.46 | %               |  |            | 215,170 |              |         |   | 216,586 |  
|First mortgage secured by the Rego Park I
Shopping Center                             |  | June 2009 |  |      | 7.25 | %               |  |            | 82,000  |              |         |   | 82,000  |  
|First mortgage secured by the Paramus property                                        |  | Oct. 2011 |  |      | 5.92 | %               |  |            | 68,000  |              |         |   | 68,000  |  
|Variable rate:                                                                        |  |           |  |      |      |                 |  |            |         |              |         |   |         |   |         | 
|Term loan and line of credit to Vornado                                               |  | Jan. 2006 |  |      | 9.00 | %               |  |            | 124,000 |              |         |   | 124,000 |  
|Construction loan secured by the retail and
residential space at 731 Lexington Avenue |  | Jan. 2006 |  |      | 3.82 | %               |  |            | 12,202  |              |         |   | 240,899 |  
|                                                                                      |  |           |  |      |      |                 |  |            |         |              |         |   |         |   |         | 
|                                                                                      |  |           |  |      |      |                 |  |            |         | $            | 901,372 |   |         | $ | 731,485 | 
|                                                                                      |  |           |  |      |      |                 |  |            |         |              |         |   |         |   |         | 

At June 30, 2004, the principal repayments for the next five years and
thereafter are as follows (amounts in thousands):

Year Ending December 31,2004
    
    $
    1,8102005
    
    
    3,8952006
    
    
    140,4012007
    
    
    4,5262008
    
    
    4,817Thereafter
    
    
    745,923


9



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##### Table of Contents



ALEXANDERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 7. COMMITMENTS AND CONTINGENCIES Neither Alexanders, Inc. nor any of its subsidiaries is a party to, nor
is their property the subject of, any material pending legal proceeding other
than routine litigation incidental to their businesses. The Company believes
that these routine legal actions will not be material to the Companys
financial condition or results of operations. Flushing In the quarter ended December 31, 2003, the Company recognized $1,289,000
of income representing a non-refundable deposit of $1,875,000 from a party that
had agreed to purchase the Companys Flushing property, net of $586,000 of
costs associated with the transaction, as the party had not met its obligations
under a May 30, 2002 purchase contract. On September 10, 2002, November 7,
2002, and July 8, 2004, the Company received letters from the party demanding
return of the deposit. The Company, after consulting with its legal counsel,
does not believe the party is entitled to a return of the deposit. There can
be no assurance that the party will not institute legal action and, if it does,
that it will not be successful in requiring the Company to return all or a
portion of the deposit. Insurance The Company carries comprehensive liability and all-risk property
insurance (fire, flood, extended coverage and rental loss insurance) with
respect to its assets but is at risk for financial loss in excess of the
policies limits. Such a loss could be material. Pursuant to the Terrorism Risk Insurance Act of 2002, regulated insurers
must offer coverage through 2005 in their commercial property policies for
losses resulting from defined acts of terrorism. As a result of the
legislation, since June 2003, the Company has maintained $500,000,000 of
coverage per occurrence for certified terrorist acts, as defined in the
legislation, and $200,000,000 per occurrence for non-certified acts. The
Company is at risk for financial loss in excess of these limits, which loss
could be material. The Companys debt instruments, consisting of mortgage loans secured by
its properties (which are generally non-recourse to the Company), contain
customary covenants requiring the Company to maintain insurance. There can be
no assurance that the lenders under these instruments will not take the
position that a future exclusion from all-risk insurance coverage for losses
due to terrorist acts is a breach of these debt instruments, allowing the
lenders to declare an event of default and accelerate repayment of debt. In
addition, if lenders insist on coverage for these risks and the Company is
unable to obtain coverage once the Terrorism Risk Insurance Act of 2002 has
lapsed, it may adversely affect the Companys ability to finance and/or
refinance its properties and businesses. Environmental Remediation In June 1997, the Kings Plaza Regional Shopping Center commissioned an
Environmental Study and Contamination Assessment Site Investigation (the Phase
II Study) to evaluate and delineate environmental conditions disclosed in a
Phase I study. The results of the Phase II Study indicated the presence of
petroleum and bis (2-ethylhexyl) phthalate contamination in the soil and
groundwater. The Company has delineated the contamination and has developed a
remediation approach, which is ongoing. The New York State Department of
Environmental Conservation (NYDEC) has approved a portion of the remediation
approach. The Company accrued $2,675,000 in previous years, of which
$2,488,000 has been paid as of June 30, 2004, for its estimated obligation with
respect to the cleanup of the site, and which includes costs of (i) remedial
investigation, (ii) feasibility studies, (iii) remedial design, (iv) remedial
action and (v) professional fees. If NYDEC insists on a more extensive
remediation approach, the Company could incur additional obligations. The Company has concluded that the large majority of the contamination at
the site is historic and the result of past activities of third parties.
Although the Company is pursuing claims against potentially responsible third
parties, and negotiations are ongoing with a former owner of the property,
there can be no assurance as to the extent that the Company will be successful
in obtaining recovery from such parties of the remediation costs incurred. In
addition, the costs associated with further pursuit of responsible parties may
be prohibitive. The Company has not recorded an asset as of June 30, 2004 for
possible recoveries of environmental remediation costs from potentially
responsible third parties. 10




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ALEXANDERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) Kings Plaza The Company plans to construct a two-story freestanding building adjacent
to the Kings Plaza Regional Shopping Center of approximately 200,000 square
feet. The first floor of approximately 120,000 square feet has been
leased to Lowes Home Improvement Warehouse (Lowes) and the lease is expected to
commence in 2006. The cost of the project will be approximately $15,000,000,
net of a reimbursement from Lowes and before reimbursement, if any, from the
second story tenant(s). There can be no assurance that this project will be
completed, completed on time or completed for the budgeted amount. Letters of Credit Approximately $4,130,000 in standby letters of credit were issued at June
30, 2004. 8. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted income
(loss) per share. Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(amounts in thousands except share and per share amounts)
    
    2004
    
    2003
    
    2004
    
    2003Numerator:Net income (loss)
    
    $
    2,523
    
    
    $
    (4,396
    )
    
    $
    (20,469
    )
    
    $
    408Denominator:Denominator for basic earnings per share  weighted average
shares
    
    
    5,007,141
    
    
    
    5,000,850
    
    
    
    5,004,655
    
    
    
    5,000,850Dilutive effect of stock options
    
    
    53,769
    
    
    
    
    
    
    
    
    
    
    
    1,217Denominator for diluted earnings per share  weighted
average shares and dilutive effect of stock options
    
    
    5,060,910
    
    
    
    5,000,850
    
    
    
    5,004,655
    
    
    
    5,002,067Net income (loss) per common shareBasic
    
    $
    0.50
    
    
    $
    (0.88
    )
    
    $
    (4.09
    )
    
    $
    0.08Diluted
    
    $
    0.50
    
    
    $
    (0.88
    )
    
    $
    (4.09
    )
    
    $
    0.08
 Options to purchase 96,500 shares of the common stock of Alexanders, Inc.
were considered in the computation of diluted earnings per share. These
options are not included in the calculations of dilutive losses per share as
they are anti-dilutive in those cases. 9. ASSET HELD FOR SALE On May 5, 2004, the Company entered into an agreement to sell 1.29 acres
of land in White Plains, New York for $4,500,000, which would result in a gain
of approximately $3,800,000. The Company has received a deposit of $225,000
from the purchaser. The sale is expected to close in the third quarter of
2004. 11




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders of Alexanders, Inc.
Paramus, New Jersey We have reviewed the accompanying condensed consolidated balance sheet of
Alexanders, Inc. and subsidiaries (the Company) as of June 30, 2004, and the
related condensed consolidated statements of operations for the three-month and
six-month periods ended June 30, 2004 and 2003, and of cash flows for the
six-month periods ended June 30, 2004 and 2003. These interim financial
statements are the responsibility of the Companys management. We conducted our reviews in accordance with standards of the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion. Based on our reviews, we are not aware of any material modifications that
should be made to such condensed consolidated interim financial statements for
them to be in conformity with accounting principles generally accepted in the
United States of America. We have previously audited, in accordance with standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet of Alexanders, Inc. and subsidiaries as of December 31, 2003, and the
related consolidated statements of operations, stockholders equity, and cash
flows for the year then ended (not presented herein); and in our report dated
March 2, 2004, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 2003 is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived. DELOITTE & TOUCHE LLP Parsippany, New Jersey
August 4, 2004 12




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements contained herein and throughout this Quarterly Report
on Form 10-Q constitute forward-looking statements as such term is defined in
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements are
not guarantees of performance. The Companys future results, financial
condition, results of operations and business may differ materially from those
expressed in these forward-looking statements. You can find many of these
statements by looking for words such as believes, expects, anticipates,
estimates, intends, plans, would, may, will or other similar
expressions in this Quarterly Report on Form 10-Q. These forward-looking
statements represent our intentions, plans, expectations and beliefs and are
subject to numerous assumptions, risks and uncertainties. Many of the factors
that will determine these items are beyond our ability to control or predict.
Factors that might cause such a material difference include, but are not
limited to: (a) national, regional and local economic conditions; (b) the
consequences of any armed conflict involving, or terrorist attack against, the
United States; (c) our ability to secure adequate insurance; (d) local
conditions, such as an oversupply of space or a reduction in demand for real
estate in the area; (e) competition from other available space; (f) whether
tenants consider a property attractive; (g) the financial condition of our
tenants, including the extent of tenant bankruptcies or defaults; (h) whether
we are able to pass some or all of any increased operating costs we incur
through to our tenants; (i) how well we manage our properties; (j) any increase
in interest rates; (k) any decreases in market rental rates; (l) the timing and
costs associated with property development, improvements and rentals; (m)
changes in taxation or zoning laws; (n) government regulations; (o) our failure
to continue to qualify as a real estate investment trust; (p) the availability
of financing on acceptable terms or at all; (q) potential liabilities under
environmental or other laws or regulations; (r) general competitive factors;
(s) dependence upon Vornado Realty Trust (Vornado); and (t) possible
conflicts of interest with Vornado. For these forward-looking statements, the Company claims the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. You are cautioned not to place undue
reliance on the forward-looking statements, which speak only as of the date of
this Quarterly Report on Form 10-Q or the date of the applicable document
incorporated by reference. All subsequent written and oral forward-looking
statements attributable to the Company or any person acting on its behalf are
expressly qualified in their entirety by the cautionary statements contained or
referred to in this section. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Overview Managements Discussion and Analysis of Financial Condition and Results of
Operations includes a discussion of the Companys consolidated financial
statements for the three and six months ended June 30, 2004 and 2003. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates. A summary of the Companys critical accounting policies is included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2003 in
Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations and Note 2  Summary of Significant Accounting
Policies to the consolidated financial statements included therein. There
have been no significant changes to those policies during the six months ended
June 30, 2004. Application of Critical Accounting Policies Real Estate As construction of 731 Lexington Avenue progresses and as components of
the building are placed into service, the Company ceases capitalizing property
operating expenses and interest expense and expenses these items, as well as
depreciation, for those components. During the six months ended June 30, 2004,
the Company transferred approximately $93,480,000 from Construction in
progress to Land and Buildings, leaseholds and leasehold improvements,
representing the space delivered to tenants and placed into service during such
period. 13




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##### Table of Contents



Condominium Sales Income on deposits received for sales of residential condominium units at
the 731 Lexington Avenue project has been deferred in accordance with the
deposit method of Statement of Financial Accounting Standards No. 66,
Accounting for Sales of Real Estate. As of June 30, 2004, the Company has
received deposits of $36,654,000 on sales of the condominium units (included on
the Consolidated Balance Sheets as an asset in Escrow deposits and restricted
cash and as a liability in Other liabilities). Stock Appreciation Rights Compensation expense for each stock appreciation right (SAR) is measured
by the excess of the stock price at the current balance sheet date over the
stock price at the previous balance sheet date. If the stock price is lower at
the current balance sheet date, any previously recognized expense for a SAR
would be reversed but not in excess of the net previously recognized expense.
Based on Alexanders, Inc. closing stock price of $167.74 at June 30, 2004
(compared to $160.00 at March 31, 2004 and $124.66 at December 31, 2003), the
Company recorded SARs compensation expense of $6,579,000 and $36,618,000 in the
three and six months ended June 30, 2004, respectively. The Company recorded
SARs compensation expense of $9,923,000 in the three and six months ended June
30, 2003. Results of Operations The Company had net income of $2,523,000 for the quarter ended June 30,
2004, compared to a net loss of $4,396,000 in the prior year quarter, and a net
loss of $20,469,000 for the six months ended June 30, 2004, compared to net
income of $408,000 in the prior year period. The results for the current year
quarter and six months include (i) accruals of $6,579,000 and $36,618,000,
respectively, for SARs compensation expense and (ii) $3,050,000 resulting from
the write off of unamortized deferred debt expense in connection with the
reduction of the principal amount of the construction loan for the 731
Lexington Avenue project (the Construction Loan). The results in the prior
year include accruals of $9,923,000 in each period for SARs compensation
expense. Property rentals were $27,136,000 in the quarter ended June 30, 2004,
compared to $12,958,000 in the prior year quarter, an increase of $14,178,000,
and $51,703,000 in the six months ended June 30, 2004, compared to $25,781,000
in the prior year period, an increase of $25,922,000. These increases were
primarily attributable to rent recognition on a straight-line basis under
leases with tenants to whom space was delivered at 731 Lexington Avenue. The
following table shows the amounts recognized. (amounts in thousands) Three Months Ended
    
    Six Months EndedTenant
    
    Delivery Date
    
    Square Feet
    
    June 30, 2004
    
    June 30, 2004Bloomberg L.P.
    
    Various(1)
    
    
    695,000
    
    
    $
    11,337
    
    
    $
    22,653The Home Depot
    
    Mar. 29, 2004
    
    
    83,000
    
    
    
    1,915
    
    
    
    1,991Hennes & Mauritz
    
    May 15, 2004
    
    
    27,000
    
    
    
    705
    
    
    
    705Other tenants
    
    Various
    
    
    22,000
    
    
    
    546
    
    
    
    546$
    14,503
    
    
    $
    25,895
   (1)Space was delivered as follows: November 14, 2003  605,000 square feet; December 26, 2003  83,000
square feet; and February 9, 2004  7,000 square feet. Tenant expense reimbursements were $7,663,000 in the quarter ended June
30, 2004, compared to $7,198,000 in the prior year quarter, an increase of
$465,000, and $16,861,000 in the six months ended June 30, 2004, compared to
$14,098,000 in the prior year period, an increase of $2,763,000. These
increases were largely due to (i) reimbursements from Bloomberg L.P. and (ii) a
non-recurring billing adjustment of $394,000 for two tenants at the Kings Plaza
Regional Shopping Center. Operating expenses were $10,741,000 in the quarter ended June 30, 2004,
compared to $9,119,000 in the prior year quarter, an increase of $1,622,000,
and $21,237,000 in the six months ended June 30, 2004, compared to $18,428,000
in the prior year period, an increase of $2,809,000. Of these increases,
$2,720,000 resulted from operating expenses at 731 Lexington Avenue of which
$2,095,000 were reimbursed by Bloomberg L.P. and $685,000 were non-reimbursable
expenses incurred during tenants construction periods. 14




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##### Table of Contents



General and administrative expenses were $7,656,000 in the quarter ended
June 30, 2004, compared to $10,940,000 in the prior year quarter, a decrease of
$3,284,000, and $38,861,000 in the six months ended June 30, 2004, compared to
$11,866,000 in the prior year period, an increase of $26,995,000. The decrease
for the three month period primarily resulted from a decrease in the accrual
for SARs compensation expense. The increase for the six month period primarily
resulted from an increase in the accrual for SARs compensation expense. Depreciation and amortization expense was $3,878,000 in the quarter ended
June 30, 2004, compared to $1,649,000 in the prior year quarter, an increase of
$2,229,000, and $7,408,000 in the six months ended June 30, 2004, compared to
$3,256,000 in the prior year period, an increase of $4,152,000. These
increases were due to depreciation on the space delivered to tenants at 731
Lexington Avenue, as noted above. Interest and other income, net, was $279,000 in the quarter ended June 30,
2004, compared to $215,000 in the prior year quarter, an increase of $64,000,
and $737,000 in the six months ended June 30, 2004, compared to $338,000 in the
prior year period, an increase of $399,000. These increases resulted primarily
from larger average cash balances in the current year periods. Interest and debt expense was $10,280,000 in the quarter ended June 30,
2004, compared to $3,059,000 in the prior year quarter, an increase of
$7,221,000, and $19,214,000 in the six months ended June 30, 2004, compared to
$6,259,000 in the prior year period, an increase of $12,955,000. These
increases resulted from (i) lower amounts of capitalized interest in the
current year periods as the Company began to place portions of 731 Lexington
Avenue in service beginning in November 2003 (respective interest of $5,838,000
and $12,567,000 has been capitalized in 2004, as compared to $9,388,000 and
$18,120,000 in 2003) and (ii) an increase in average debt outstanding chiefly
due to the $400,000,000 731 Lexington Avenue office financing and the
Construction Loan (from approximately $571,000,000 to $854,000,000 in the
current year six month period), partially offset by (iii) a decline in average
interest rate (from approximately 7.82% to 6.79% in the current year six month
period). In connection with reducing the principal amount of the Construction Loan
on February 13, 2004, the Company wrote off $3,050,000, the proportionate share
of unamortized deferred debt expense, in the first quarter of 2004. Liquidity and Capital Resources In the aggregate, the Companys operating properties do not generate
sufficient cash flow to pay all of its expenses. After the completion of the
731 Lexington Avenue property, which is expected in 2005, the Company expects
that cash flow will become positive. Development Projects 731 Lexington Avenue 731 Lexington Avenue is an approximately 1.3 million square foot multi-use
building. The building contains approximately 885,000 net rentable square feet
of office space, approximately 171,000 net rentable square feet of retail space
and approximately 248,000 net saleable square feet of residential space
consisting of 105 condominium units (through a taxable REIT subsidiary). Of
the construction budget of $630,000,000 (which excludes the development and
guarantee fees to Vornado), $448,200,000 has been expended through June 30,
2004 and there is an additional $34,100,000 to which the Company has committed
at such date. Construction is expected to be completed in 2005. At June 30, 2004, 707,000 square feet of office space has been leased and
delivered to tenants including 695,000 square feet delivered to Bloomberg L.P.
in November and December 2003. Payment of base rent for the Bloomberg L.P.
space commences nine months from delivery of each parcel of space; rent
recognition on a straight-line basis commenced on delivery. At June 30, 2004, 119,000 square feet of retail space has been leased and
delivered to tenants including (i) 83,000 square feet delivered to The Home
Depot on March 29, 2004 and (ii) 27,000 square feet delivered to Hennes &
Mauritz on May 15, 2004. Payment of base rent on the 119,000 square feet
commences six to nine months from delivery of each space; rent recognition on a
straight-line basis commenced on delivery. The residential space is comprised of 105 condominium units. The original
offering plan filed for these units, as amended for price increases through
June 30, 2004, would produce an aggregate sale price of approximately
$500,000,000 (reflecting the value of existing contracts and the offering price
for the remaining units). As of June 30, 2004, the Company has received
deposits of $36,654,000 on sales of the condominium units. 15




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##### Table of Contents



During the six months ended June 30, 2004, the Company transferred
approximately $93,480,000 from Construction in progress to Land and
Buildings, leaseholds and leasehold improvements, representing the space
delivered to tenants and placed into service during such period. Financing of the Project On February 13, 2004, the Company completed a $400,000,000 mortgage
financing on the office space. The loan was placed by German American Capital
Corporation, an affiliate of Deutsche Bank. The loan bears interest at 5.33%,
matures in February 2014 and, beginning in the third year, provides for
principal payments based on a 25-year amortization schedule such that over the
remaining eight years of the loan, ten years of amortization will be paid. Of
the loan proceeds, $253,529,000 were used to repay the entire amount
outstanding under the previously existing Construction Loan with Hypo Real
Estate Capital Corporation. The Construction Loan was modified on February 13, 2004 so that the
remaining availability was $237,000,000, which was approximately the amount
estimated to complete the 731 Lexington Avenue project at the closing date (not
including the development and guarantee fees to Vornado). The interest rate of
the Construction Loan of LIBOR plus 2.5% (3.82% at June 30, 2004) and the
maturity date of January 2006, with two one-year extensions, were not changed.
The collateral for the Construction Loan is the same except that the office
space has been removed from the lien. Further, the Construction Loan permits
the release of the retail space for a payment of $15 million and requires all
proceeds from the sale of the residential condominium units to be applied to
the Construction Loan balance until it is fully repaid. Vornado has agreed to
guarantee to the construction lender, the lien free, timely completion of the
construction of 731 Lexington Avenue and funding of project costs in excess of
a stated loan budget, if not funded by the Company (the Completion
Guarantee). If Vornado should advance any funds under the Completion
Guarantee in excess of $21,000,000, which was the amount available at June 30,
2004 under the line of credit with Vornado, interest on those advances would be
at 15% per annum. Proceeds from the Mortgage Financing As noted above, $253,529,000 of the proceeds from the $400,000,000
mortgage financing on the 731 Lexington Avenue office space were used to repay
the entire amount outstanding under the previously existing Construction Loan.
$12,559,000 of the proceeds were used to fund escrow accounts required under
the financing arrangement (reflected on the Consolidated Balance Sheet as
Escrow deposits and restricted cash) including a reserve of $5,747,000 at
June 30, 2004, which will be used for interest payments until Bloomberg L.P.
begins to pay rent under its lease. The remaining proceeds, after $1,328,000
of financing costs, were $132,584,000; the Company has subsequently used
approximately $43,000,000 of these proceeds to fund capital expenditures for
the 731 Lexington Avenue project in lieu of borrowings under the Construction
Loan. There can be no assurance that the 731 Lexington Avenue project will be
completed on time or completed for the budgeted amount. Any failure to
complete the 731 Lexington Avenue project on time or within budget may
adversely affect future cash flows and funds from operations and the Companys
financial condition. Kings Plaza The Company plans to construct a two-story freestanding building adjacent
to the Kings Plaza Regional Shopping Center of approximately 200,000 square
feet. The first story of approximately 120,000 square feet has been
leased to Lowes Home Improvement Warehouse (Lowes) and the lease is expected to
commence in 2006. The cost of the project will be approximately $15,000,000,
net of a reimbursement from Lowes and before reimbursement, if any, from the
second story tenant(s). There can be no assurance that this project will be
completed, completed on time or completed for the budgeted amount. Asset Held for Sale On May 5, 2004, the Company entered into an agreement to sell 1.29 acres
of land it owns in White Plains, New York for $4,500,000, which would result in
a gain of approximately $3,800,000. The Company has received a deposit of
$225,000 from the purchaser. The sale is expected to close in the third
quarter of 2004. Flushing In the quarter ended December 31, 2003, the Company recognized $1,289,000
of income representing a non-refundable deposit of $1,875,000 from a party that
had agreed to purchase the Companys Flushing property, net of 16




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##### Table of Contents



$586,000 of costs associated with the transaction, as the party had not
met its obligations under a May 30, 2002 purchase contract. On September 10,
2002, November 7, 2002, and July 8, 2004, the Company received letters from the
party demanding return of the deposit. The Company, after consulting with its
legal counsel, does not believe the party is entitled to a return of the
deposit. There can be no assurance that the party will not institute legal
action and, if it does, that it will not be successful in requiring the Company
to return all or a portion of the deposit. Insurance Pursuant to the Terrorism Risk Insurance Act of 2002, regulated insurers
must offer coverage through 2005 in their commercial property policies for
losses resulting from defined acts of terrorism. As a result of the
legislation, since June 2003, the Company has maintained $500,000,000 of
coverage per occurrence for certified terrorist acts, as defined in the
legislation, and $200,000,000 per occurrence for non-certified acts. The
Company is at risk for financial loss in excess of these limits, which loss
could be material. The Companys debt instruments, consisting of mortgage loans secured by
its properties (which are generally non-recourse to the Company), contain
customary covenants requiring the Company to maintain insurance. There can be
no assurance that the lenders under these instruments will not take the
position that a future exclusion from all-risk insurance coverage for losses
due to terrorist acts is a breach of these debt instruments, allowing the
lenders to declare an event of default and accelerate repayment of debt. In
addition, if lenders insist on coverage for these risks and the Company is
unable to obtain coverage once the Terrorism Risk Insurance Act of 2002 has
lapsed, it may adversely affect the Companys ability to finance and/or
refinance its properties and businesses. Stock Appreciation Rights As of June 30, 2004, 850,000 SARs were outstanding and exercisable at a
weighted average exercise price of $71.82. The agreements for these SARs
require that they be settled in cash. Had the holders of these SARs chosen to
exercise their rights as of June 30, 2004, the Company would have had to pay
$81,535,000 in cash. Any further appreciation in the Alexanders, Inc. stock
price from the closing stock price of $167.74 at June 30, 2004 will increase
the cash the Company would have to pay upon exercise and may impact liquidity
by requiring the Company to secure additional borrowings to replace such a cash
outflow. Cash Flows Six Months Ended June 30, 2004 Net cash provided by operating activities of $9,375,000 was comprised of
(i) the net change in operating assets and liabilities of $44,012,000,
partially offset by (ii) a net loss of $20,469,000 and (iii) non-cash items of
$14,168,000. The adjustments for non-cash items were comprised of (a) the
effect of straight-lining of rental income of $26,285,000, partially offset by
(b) $9,067,000 of depreciation and amortization and (c) $3,050,000 resulting
from the write off of unamortized deferred debt expense. Net cash used in investing activities of $87,014,000 was comprised of
capital expenditures of $83,617,000 and net cash restricted for operating
liabilities of $3,397,000. The capital expenditures primarily related to the
731 Lexington Avenue project. Net cash provided by financing activities of $167,791,000 resulted
primarily from borrowings collateralized by 731 Lexington Avenue of
$424,832,000, partially offset by debt repayments of $254,945,000 and debt
issuance costs of $2,694,000. Six Months Ended June 30, 2003 Net cash provided by operating activities of $15,922,000 was comprised of
(i) net income of $408,000, (ii) non-cash items of $4,163,000 and (iii) the net
change in operating assets and liabilities of $11,351,000. The adjustments for
non-cash items were comprised of (a) depreciation and amortization of
$5,172,000, partially offset by (b) the effect of straight-lining of rental
income of $1,009,000. Net cash used in investing activities of $128,959,000 was primarily
comprised of capital expenditures of $127,585,000. The capital expenditures
were primarily related to the 731 Lexington Avenue project. Net cash provided by financing activities of $91,100,000 resulted from
borrowings of $92,457,000 primarily to fund capital expenditures for the 731
Lexington Avenue project, partially offset by debt repayments of $1,357,000. 17




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##### Table of Contents



Funds from Operations for the Three and Six Months Ended June 30, 2004 and 2003 Funds from Operations (FFO) was a positive $6,401,000 in the quarter
ended June 30, 2004, compared to a negative $2,747,000 in the prior year
quarter, an increase of $9,148,000, and a negative $13,061,000 in the six
months ended June 30, 2004, compared to a positive $3,664,000 in the prior year
period, a decrease of $16,725,000. FFO for the three and six months ended June
30, 2004 includes (i) accruals for SARs compensation expense of $6,579,000 and
$36,618,000, respectively, and (ii) $3,050,000 resulting from the write off of
unamortized deferred debt expense in connection with the reduction of the
principal amount of the Construction Loan for the 731 Lexington Avenue project.
FFO for the three and six months ended June 30, 2003 includes an accrual for
SARs compensation expense of $9,923,000 in each period. The following table
reconciles net income (loss) to FFO. Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(amounts in thousands)
    
    2004
    
    2003
    
    2004
    
    2003Net income (loss)
    
    $
    2,523
    
    
    $
    (4,396
    )
    
    $
    (20,469
    )
    
    $
    408Depreciation and amortization of real property
    
    
    3,878
    
    
    
    1,649
    
    
    
    7,408
    
    
    
    3,256Funds from operations
    
    $
    6,401
    
    
    $
    (2,747
    )
    
    $
    (13,061
    )
    
    $
    3,664
 FFO does not represent cash generated from operating activities in
accordance with accounting principles generally accepted in the United States
of America and is not necessarily indicative of cash available to fund cash
needs, which is disclosed in the consolidated statements of cash flows. There
are no material legal or functional restrictions on the use of FFO. FFO should
not be considered as an alternative to net income (loss) as an indicator of the
Companys operating performance. Management considers FFO a relevant
supplemental measure of operating performance because it provides a basis for
comparison among real estate investment trusts. FFO is computed in accordance
with the National Association of Real Estate Investment Trusts (NAREIT)
standards, which may not be comparable to FFO reported by other real estate
investment trusts that do not define the term in accordance with NAREITs
definition or that interpret NAREITs definition differently. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following table summarizes the Companys exposure to a change in
interest rates. AnnualEffect ofWeighted
    
    Change In(amounts in thousands except
    
    June 30, 2004
    
    Average Interest
    
    Base Ratesper share amounts and percentages)
    
    Balance
    
    Rate
    
    of 1%Variable rate
    
    $
    136,202
    
    
    
    8.54
    %
    
    $
    1,362Fixed rate
    
    
    765,170
    
    
    
    6.19
    %
    
    
    $
    901,372
    
    
    
    
    
    
    
    1,362Total effect on annual net earnings per share  diluted
    
    
    
    
    
    
    
    
    
    $
    0.27
 The fair value of the Companys debt, estimated by discounting future cash
flows using the current rates available to borrowers with similar credit
ratings for the remaining terms of such debt, is less than the aggregate
carrying amount by approximately $50,674,000 at June 30, 2004. Such fair value
estimates are not necessarily indicative of the amounts that would be paid upon
liquidation of the Companys debt. 
 ITEM 4. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures The Companys management, with
the participation of the Companys Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Companys disclosure controls
and procedures (as such term is defined in Rules 13a-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, the
Companys Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of such period, the Companys disclosure controls and
procedures are effective. (b) Internal Control Over Financial Reporting There have not been any
changes in the Companys internal control over financial reporting during the
fiscal quarter to which this Quarterly Report on Form 10-Q relates that have
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting. 18




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##### Table of Contents



PART II. OTHER INFORMATION 
 Item 1. Legal Proceedings Neither Alexanders, Inc. nor any of its subsidiaries is a party to, nor
is their property the subject of, any material pending legal proceeding other
than routine litigation incidental to their businesses. The Company believes
that these routine legal actions will not be material to the Companys
financial condition or results of operations. 
 Item 4. Submission of Matters to a Vote of Security Holders On May 27, 2004, the Company held its Annual Meeting of Stockholders. Two
proposals were presented for approval for which the stockholders voted, in
person or by proxy. The results of the voting are shown below.  1)The election of three nominees to serve on the Board of Directors for
a term of three years or until their respective successors are duly
elected and qualified. Votes Cast
    
    VotesNominees
    
    For
    
    WithheldMichael D. Fascitelli
    
    
    4,373,119
    
    
    
    129,189David Mandelbaum
    
    
    4,492,770
    
    
    
    9,538Dr. Richard R. West
    
    
    4,492,270
    
    
    
    10,038
  Because of the nature of the election of directors, there were no
abstentions or broker non-votes.2)The ratification of the appointment of Deloitte & Touche LLP as the
Companys independent auditors. Votes Cast
    
    Votes CastFor
    
    Against
    
    Abstentions4,501,687
    
    
    512
    
    
    
    109
  Because of the nature of the ratification of the Companys independent
auditors, there were no broker non-votes. 
 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation S-K are filed herewith and
are listed in the attached Exhibit Index. (b) Reports on Form 8-K  During the quarter covered by this Quarterly Report on Form 10-Q,
Alexanders, Inc. filed the following report on Form 8-K: Period Covered (Dateof Event Reported)
    
    Items Reported
    
    Date FiledMay 27, 2004
    
    Election of Companys Chief
Executive Officer, Steven Roth, to
additional position of Chairman of
the Board, and appointment of
Stephen Mann, former Chairman, to
position of Chief Operating Officer
    
    June 1, 2004
 19




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. ALEXANDERS, INC.(Registrant)Date: August 5, 2004
    
    /s/ Joseph MacnowJoseph MacnowExecutive Vice President and Chief Financial Officer
(duly authorized officer and principal
financial and accounting officer)
 20




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##### Table of Contents



EXHIBIT INDEX ExhibitNo.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 March 31, 2000
    
    *15.1
    
    Letter regarding unaudited interim financial information31.1
    
    Rule 13a-14(a) certification of the Chief Executive Officer31.2
    
    Rule 13a-14(a) certification of the Chief Financial Officer32.1
    
    Section 1350 certification of the Chief Executive Officer32.2
    
    Section 1350 certification of the Chief Financial Officer
   *
    
    Incorporated by reference. 21