**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****WASHINGTON,DC 20549**

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**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, 2006** |
|                                                    |
| OR                                                      |
|                                                    |
| **o**                                                   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d)** |
| ** **                                              | **OF THE SECURITIES EXCHANGE ACT OF 1934**             |

 

Forthe transition period from                        to                         

CommissionFile Number  **001-6064**

**ALEXANDER’S,INC.**(Exact name of registrant as specified in its charter)
| **Delaware**                               | ** ** | **51-0100517**                        |
|--------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of           |       | (I.R.S. Employer  Identification No.) |
| incorporation or  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, ifchanged since last report)

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for suchshorter 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          o No

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

oLarge Accelerated Filer          x Accelerated Filer          o Non-Accelerated Filer

Indicateby checkmark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act)

o Yes          x No

As of June 30, 2006, there were 5,025,000 shares of commonstock, par value $1 per share, outstanding.

 

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# **ALEXANDER’S,INC.INDEX**

|               | ** ** | ** **                                                                                                   | ** ** | **Page Number** | ** ** |
|---------------|------------|--------------------------------------------------------------------------------------------------------------|------------|----------------------|------------|
|          | ** ** | ** **                                                                                                   | ** ** |                 |       | ** ** |   |
| PART I.       | ** ** | **Financial Information**                                                                                    | ** ** |                 |       | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Item 1.       |       | Financial Statements:                                                                                        |       |                 |       | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
|          |       | Consolidated Balance Sheets (unaudited) as of June  30, 2006 and December 31, 2005                           |       |                 | 3          | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
|          |       | Consolidated Statements of Operations (unaudited)  for the Three and Six Months Ended June 30, 2006 and 2005 |       |                 | 4          | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
|          |       | Consolidated Statements of Cash Flows (unaudited)  for the Six Months Ended June 30, 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                                                  |       |                 | 19         | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Item 4.       |       | Control and Procedures                                                                                       |       |                 | 19         | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| PART II.      | ** ** | **Other Information**                                                                                        | ** ** |                 |       | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Item 1.       |       | Legal Proceedings                                                                                            |       |                 | 19         | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Item 1A.      |       | Risk Factors                                                                                                 |       |                 | 19         | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Item 2.       |       | Unregistered Sales of Equity Securities and Use of  Proceeds                                                 |       |                 | 19         | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Item 3.       |       | Defaults Upon Senior Securities                                                                              |       |                 | 19         | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Item 4.       |       | Submission of Matters to a Vote of Security Holders                                                          |       |                 | 20         | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Item 5.       |       | Other Information                                                                                            |       |                 | 20         | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Item 6.       |       | Exhibits                                                                                                     |       |                 | 20         | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
|          |       |                                                                                                         |       |                 |       | ** ** |   |
| Signatures    |       |                                                                                                         | 21         | ** **           |       |
|          |       |                                                                                                         |       | ** **           |       |
| Exhibit Index |       |                                                                                                         | 22         | ** **           |       |

 

2

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**PART I.  FINANCIAL INFORMATION   Item 1.   *Financial Statements***

# **ALEXANDER’S, INC.CONSOLIDATED BALANCE SHEETS(UNAUDITED)**(Amounts in thousands, except share and per share amounts)

| ** **                                                                                                                          | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                          | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Real estate, at cost:                                                                                                               |       |                    |       |                        |       |
| Land                                                                                                                                |       | $                       | 69,455     |                        | $          | 69,455 |   |
| Buildings, leaseholds and leasehold improvements                                                                                    |       | 602,865                 |       | 594,574                     |       |
| Construction in progress                                                                                                            |       | 24,398                  |       | 35,107                      |       |
| Total                                                                                                                               |       | 696,718                 |       | 699,136                     |       |
| Accumulated depreciation and amortization                                                                                           |       | (97,100                 | )          | (88,976                     | )          |
| Real estate, net                                                                                                                    |       | 599,618                 |       | 610,160                     |       |
|                                                                                                                                |       |                    |       |                        |       |
| Cash and cash  equivalents                                                                                                          |       | 614,357                 |       | 578,406                     |       |
| Restricted cash                                                                                                                     |       | 3,207                   |       | 2,764                       |       |
| Accounts  receivable, net of allowance for doubtful accounts of $617 and $526,  respectively                                        |       | 4,522                   |       | 3,215                       |       |
| Receivable  arising from the straight-lining of rents                                                                               |       | 107,718                 |       | 100,037                     |       |
| Deferred lease  and other property costs, net (including unamortized leasing fees to Vornado  of $43,693 and $44,831, respectively) |       | 70,574                  |       | 72,600                      |       |
| Deferred debt  issuance costs, net                                                                                                  |       | 19,525                  |       | 20,849                      |       |
| Other assets                                                                                                                        |       | 9,100                   |       | 15,286                      |       |
| **TOTAL  ASSETS**                                                                                                                   |       | $                       | 1,428,621  |                        | $          | 1,403,317 |   |
|                                                                                                                                |       |                    |       |                        |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                      | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Debt                                                                                                                                |       | $                       | 1,075,169  |                        | $          | 1,079,465 |   |
| Accounts payable  and accrued expenses                                                                                              |       | 48,525                  |       | 44,867                      |       |
| Liability for  stock appreciation rights                                                                                            |       | 110,470                 |       | 87,563                      |       |
| Amounts due to  Vornado                                                                                                             |       | 34,401                  |       | 34,324                      |       |
| Other  liabilities (including taxes payable of $36,670 and $37,955)                                                                 |       | 38,418                  |       | 53,524                      |       |
| **TOTAL  LIABILITIES**                                                                                                              |       | 1,306,983               |       | 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                                                                                                                  |       | 88,633                  |       | 70,639                      |       |
|                                                                                                                                |       | 120,214                 |       | 102,155                     |       |
| Treasury shares:  148,450 and 149,450 shares, at cost                                                                               |       | (826                    | )          | (831                        | )          |
| **TOTAL  STOCKHOLDERS’ EQUITY**                                                                                                |       | 119,388                 |       | 101,324                     |       |
|                                                                                                                                |       |                    |       |                        |       |
| **TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                |       | $                       | 1,428,621  |                        | $          | 1,403,317 |   |

 

See notes to consolidated financial statements.

3

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**ALEXANDER’S, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)(**Amountsin thousands, except per share amounts)

 

 
| ** **                                                                                                                                                                                                                                                                       | ** ** | **Three Months Ended**

**June 30,** | ** ** | **Six Months Ended**

**June 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                       | ** ** | **2006**                             | ** ** | **2005**                           | ** ** | **2006** | ** ** | **2005** | ** ** |
| **REVENUES**                                                                                                                                                                                                                                                                     |       |                                 |       |                               |       |   |   |   |   |
| Property rentals                                                                                                                                                                                                                                                                 |       | $34,000                              |       | $33,570                            |       | $67,832 |   | $65,243 |   |
| Expense reimbursements                                                                                                                                                                                                                                                           |       | 15,371                               |       | 12,165                             |       | 29,915 |   | 24,168 |   |
| Total revenues                                                                                                                                                                                                                                                                   |       | 49,371                               |       | 45,735                             |       | 97,747 |   | 89,411 |   |
|                                                                                                                                                                                                                                                                             |       |                                 |       |                               |       |   |   |   |   |
| **EXPENSES**                                                                                                                                                                                                                                                                     |       |                                 |       |                               |       |   |   |   |   |
| Operating (including  fees to Vornado of $581, $545, $1,147 and $1,013, respectively)                                                                                                                                                                                            |       | 18,524                               |       | 14,581                             |       | 35,757 |   | 28,415 |   |
| General and  administrative (including a reversal of stock appreciation rights   (“SARs”) expense of $14,654, and SARs expense of $6,163, $22,907 and   $28,688, respectively, and management fees to Vornado of $540 and   $1,080 in each three and six month period) |       | (13,481                              | )          | 7,453                              |       | 25,360 |   | 31,081 |   |
| Depreciation and  amortization                                                                                                                                                                                                                                                   |       | 5,432                                |       | 4,974                              |       | 10,725 |   | 9,623 |   |
| Total expenses                                                                                                                                                                                                                                                                   |       | 10,475                               |       | 27,008                             |       | 71,842 |   | 69,119 |   |
|                                                                                                                                                                                                                                                                             |       |                                 |       |                               |       |   |   |   |   |
| **OPERATING INCOME**                                                                                                                                                                                                                                                             |       | 38,896                               |       | 18,727                             |       | 25,905 |   | 20,292 |   |
|                                                                                                                                                                                                                                                                             |       |                                 |       |                               |       |   |   |   |   |
| Interest and other  income, net                                                                                                                                                                                                                                                  |       | 6,803                                |       | 1,976                              |       | 12,981 |   | 2,957 |   |
| Interest and debt  expense (including interest to Vornado of $2,968 and   $5,811 in the three and six months ended June 30, 2005)                                                                                                                                                |       | (17,096                              | )          | (16,409                            | )          | (34,148 | ) | (27,712 | ) |
| Income (loss) from  continuing operations                                                                                                                                                                                                                                        |       | 28,603                               |       | 4,294                              |       | 4,738 |   | (4,463 | ) |
| Net gain on sale of  condominiums                                                                                                                                                                                                                                                |       | 15,261                               |       | 23,672                             |       | 24,529 |   | 98,339 |   |
| Income tax expense of  taxable REIT subsidiary                                                                                                                                                                                                                                   |       | (7,013                               | )          | (10,502                            | )          | (11,273 | ) | (45,194 | ) |
| **NET INCOME**                                                                                                                                                                                                                                                                   |       | $36,851                              |       | $17,464                            |       | $17,994 |   | $48,682 |   |
|                                                                                                                                                                                                                                                                             |       |                                 |       |                               |       |   |   |   |   |
| **Income per common share — Basic:**                                                                                                                                                                                                                                        |       |                                 |       |                               |       |   |   |   |   |
| Income (loss) from  continuing operations                                                                                                                                                                                                                                        |       | $5.69                                |       | $0.86                              |       | $0.94 |   | $(0.89 | ) |
| Net gain on sale of  condominiums, net of income taxes                                                                                                                                                                                                                           |       | 1.64                                 |       | 2.62                               |       | 2.64 |   | 10.59 |   |
| Net income per common  share                                                                                                                                                                                                                                                     |       | $7.33                                |       | $3.48                              |       | $3.58 |   | $9.70 |   |
|                                                                                                                                                                                                                                                                             |       |                                 |       |                               |       |   |   |   |   |
| **Income per common share — Diluted**:                                                                                                                                                                                                                                      |       |                                 |       |                               |       |   |   |   |   |
| Income (loss) from  continuing operations                                                                                                                                                                                                                                        |       | $5.63                                |       | $0.85                              |       | $0.93 |   | $(0.88 | ) |
| Net gain on sale of  condominiums, net of income taxes                                                                                                                                                                                                                           |       | 1.62                                 |       | 2.59                               |       | 2.61 |   | 10.47 |   |
| Net income per common  share                                                                                                                                                                                                                                                     |       | $7.25                                |       | $3.44                              |       | $3.54 |   | $9.59 |   |

 

See notes to consolidated financial statements.

 

4

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# **ALEXANDER’S,INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)**(Amounts in thousands)

| ** **                                                                         | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                         | ** ** | **2006**                                      | ** ** | **2005** | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES**                                          | ** ** | ** **                                    | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                             | 17,994     |   | $ | 48,682 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                          |       |   |   |
| Net gain on sale  of condominiums                                                  |       | (24,529                                       | )          | (98,339 | ) |
| Depreciation and  amortization (including amortization of debt issuance costs)     |       | 12,049                                        |       | 11,232 |   |
| Straight-lining  of rental income                                                  |       | (7,681                                        | )          | (14,167 | ) |
| Change in operating  assets and liabilities:                                       |       |                                          |       |   |   |
| Accounts  receivable, net                                                          |       | (1,307                                        | )          | 3,160 |   |
| Note receivable                                                                    |       | —                                        |       | (4,201 | ) |
| Other assets                                                                       |       | (1,510                                        | )          | (8,441 | ) |
| Amounts due to  Vornado                                                            |       | 77                                            |       | 8,877 |   |
| Accounts payable  and accrued expenses                                             |       | 3,493                                         |       | (818 | ) |
| Liability for stock  appreciation rights                                           |       | 22,907                                        |       | 28,688 |   |
| Income tax  expense of taxable REIT subsidiary                                     |       | (1,285                                        | )          | 40,324 |   |
| Other  liabilities                                                                 |       | 628                                           |       | (65 | ) |
| Net cash provided by  operating activities                                         |       | 20,836                                        |       | 14,932 |   |
|                                                                               |       |                                          |       |   |   |
| **CASH FLOWS FROM INVESTING  ACTIVITIES**                                          |       |                                          |       |   |   |
| Proceeds from  the sale of condominiums                                            |       | 39,383                                        |       | 261,531 |   |
| Real estate  acquisitions                                                          |       | —                                        |       | (750 | ) |
| Additions to  real estate                                                          |       | (19,599                                       | )          | (48,197 | ) |
| Restricted cash                                                                    |       | (443                                          | )          | (980 | ) |
| Net cash provided by  investing activities                                         |       | 19,341                                        |       | 211,604 |   |
|                                                                               |       |                                          |       |   |   |
| **CASH FLOWS FROM FINANCING  ACTIVITIES**                                          |       |                                          |       |   |   |
| Proceeds from  borrowings                                                          |       | —                                        |       | 24,832 |   |
| Repayments of  borrowings                                                          |       | (4,296                                        | )          | (1,941 | ) |
| Exercise of  share options                                                         |       | 70                                            |       | 634 |   |
| Debt issuance  costs                                                               |       | —                                        |       | (3 | ) |
| Net cash (used in)  provided by financing activities                               |       | (4,226                                        | )          | 23,522 |   |
|                                                                               |       |                                          |       |   |   |
| Net increase in cash  and cash equivalents                                         |       | 35,951                                        |       | 250,058 |   |
| Cash and cash  equivalents at beginning of period                                  |       | 578,406                                       |       | 128,874 |   |
| Cash and cash  equivalents at end of period                                        |       | $                                             | 614,357    |   | $ | 378,932 |   |
|                                                                               |       |                                          |       |   |   |
| **SUPPLEMENTAL DISCLOSURE OF CASH  FLOW INFORMATION**                              |       |                                          |       |   |   |
| Cash payments  for interest (of which $114 and $6,935 have been capitalized)       |       | $                                             | 33,152     |   | $ | 32,990 |   |
| Cash payments for  income taxes                                                    |       | $                                             | 12,558     |   | $ | — |   |

See notes to consolidatedfinancial statements.

5

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**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.  All references to “we,” “us,” “our,” or “Company”refer to Alexander’s, Inc. and its wholly owned subsidiaries.  We are managed by, and our properties areleased and developed by, Vornado Realty Trust (“Vornado”).

**2.    Basis of Presentation**

Theconsolidated balance sheet as of June 30, 2006, and the consolidated statementsof operations for the three and six months ended June 30, 2006 and 2005, andthe consolidated statement of cash flows for the six months ended June 30, 2006and 2005 are unaudited. In our opinion, all adjustments (which include onlynormal recurring adjustments) necessary to present fairly the financialposition, results of operations and cash flows have been made.  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance withaccounting principles generally accepted in the United States of America havebeen condensed or omitted in accordance with Article 10 of Regulation S-X andthe instructions to Form 10-Q. These condensed consolidated financialstatements should be read in conjunction with the consolidated financialstatements and notes thereto included in our Annual Report on Form 10-K for theyear ended December 31, 2005, as filed with the Securities and ExchangeCommission.  The results of operationsfor the three and six months ended June 30, 2006 are not necessarily indicativeof the operating results for the full year.

Theaccompanying condensed consolidated financial statements include our accountsand that of our wholly owned subsidiaries. All significant intercompany amounts have been eliminated.  The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof 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 results could differ from thoseestimates.

Wecurrently operate in one business segment.

**3.    Recently Issued Accounting Literature**

OnDecember 16, 2004, the Financial Accounting Standards Board (“FASB”) issuedStatement of Financial Accounting Standards No. 123(R),*Share-Based Payment* (“SFAS No. 123R”).  SFAS 123R replaces SFAS 123 and requires thatthe compensation cost relating to share-based payment transactions berecognized in financial statements and measured based on the fair value of theequity or liability instruments issued. We adopted SFAS 123R on a modified prospective method on January 1,2006.  This adoption did not have amaterial effect on our consolidated financial statements.

In May 2005, the FASB issued SFAS 154, *Accounting Changes and Error Corrections - a replacementof APB Opinion No. 20 and FASB Statement No. 3*.  SFAS 154 changes the requirements forthe accounting and reporting for a change in accounting principle by requiringthat a voluntary change in accounting principle be applied retrospectively withall prior period financial statements presented on the new accountingprinciple, unless it is impracticable to do so. SFAS 154 also provides that (i) a change in the method ofdepreciating or amortizing a long-lived non-financial asset be accounted for asa change in estimate (prospectively) that was effected by a change inaccounting principle, and (2) corrections of errors in previously issuedfinancial statements should be termed a “restatement.”  SFAS 154 became effective for accountingchanges and correction of errors made in fiscal years beginning afterDecember 15, 2005.  The adoption ofSFAS 154 did not have a material effect on our consolidated financialstatements.

 

6

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# **ALEXANDER’S,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)(UNAUDITED)**

**3.    Recently Issued Accounting 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 ofSFAS 155 is to simplify the accounting for certain hybrid financial instrumentsby permitting fair value re-measurement for any hybrid financial instrumentthat contains an embedded derivative that otherwise would requirebifurcation.  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 that the adoption of SFAS155 on January 1, 2007, will have a material effect on our consolidatedfinancial 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 aservicing asset and a servicing liability each time an entity undertakes anobligation to service a financial asset by entering into a servicingcontract.  This statement also requiresthat servicing assets and liabilities be initially recorded at fair value andsubsequently be adjusted to the fair value at the end of each reportingperiod.  SFAS 156 is effective for anentity’s first fiscal year that begins after September 15, 2006.  We do not believe that the adoption of SFAS156 on January 1, 2007, will have a material effect on our consolidatedfinancial statements.

InJune 2006, the FASB issued Interpretation No. 48, *Accounting for Uncertainty in Income Taxes, an Interpretation of FASBStatement No. 109*(“FIN 48”). FIN 48 clarifies theaccounting for uncertainty in income taxes recognized in a company’s financialstatements and prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return. The Interpretation also provides guidanceon description, classification, interest and penalties, accounting in interimperiods, disclosure and transition. FIN 48 becomes effective onJanuary 1, 2007. We are currently evaluating the impact of adopting thisInterpretation.

**4.    Relationship with Vornado**

Vornadoowned approximately 33.0% of our outstanding common stock as of June 30,2006.  Steven Roth is the Chairman of ourBoard of Directors and our Chief Executive Officer, the Managing GeneralPartner of Interstate Properties (“Interstate”), a New Jersey generalpartnership, and the Chairman of the Board and Chief Executive Officer ofVornado.  At June 30, 2006, 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, 27.7% of our outstanding common stock, in addition tothe common stock owned directly by Vornado, and 9.0% of the outstanding commonshares of beneficial interest of Vornado.

Weare managed by, and our properties are leased and developed by, Vornado,pursuant to agreements with one-year terms, expiring in March of each year,which are automatically renewable.

*Managementand Development Agreements*

Wepay Vornado an annual management fee equal to the sum of (i) $3,000,000, (ii)3% of gross income from the Kings Plaza Regional Shopping Center, (iii) $0.50per square foot of the tenant-occupied office and retail space at 731 LexingtonAvenue and (iv) $220,000, 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.  Pursuant to the leasing agreement, in theevent third party real estate brokers are used, the fees to Vornado increase by1% and Vornado is responsible for the fees to the third party real estatebrokers.  In the event of the sale of anasset, the fee is 3% of the gross proceeds, as defined.  Such amounts are payable annually in anamount 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 wouldhave been paid had they been paid at the time the transactions which gave riseto the commissions occurred.

 

7

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# **ALEXANDER’S,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)(UNAUDITED)**

**4.    Relationship with Vornado - continued**

*OtherAgreements*

Wehave also entered into agreements with Building Management Services, a whollyowned subsidiary of Vornado, to supervise cleaning, engineering and securityservices at our Lexington Avenue and Kings Plaza properties for an annual feeof the cost for such services plus 6%.

AtJune 30, 2006, we owed Vornado $33,094,000 for leasing fees and $1,307,000 formanagement, property management and cleaning fees.

Thefollowing table shows the amounts incurred under the agreements describedabove.
| ** **                                                                             | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| **(Amounts in thousands)**                                                   | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| Company  management fees                                                               |       | $                                               | 750        |                                          | $          | 750 |   | $ | 1,500 |   | $ | 1,500 |   |
| Development fee,  guarantee fee and rent for development office                        |       | 189                                             |       | 853                                           |       | 383 |   | 1,988 |   |
| Leasing fees                                                                           |       | 949                                             |       | 839                                           |       | 1,913 |   | 9,935 |   |
| Property  management fees and payments for cleaning, engineering and security services |       | 461                                             |       | 1,675                                         |       | 1,332 |   | 2,246 |   |
|                                                                                   |       | $                                               | 2,349      |                                          | $          | 4,117 |   | $ | 5,128 |   | $ | 15,669 |   |

In addition, to the feesand costs described above, we incurred interest of $2,968,000 and $5,811,000 inthe three and six months ended June 30, 2005, respectively, on a $124,000,000loan from Vornado, which was repaid on July 6, 2005.

**5.    Debt**

The following is a summary ofour outstanding debt.
| ** **                                                                                                            | ** ** | ** **   | ** ** | ** **                                              | ** ** | **Balance at**     | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|--------------|------------|---------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                                                            | ** ** | **Maturity** | ** ** | **Interest Rate at  June 30, 2006** | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
| **(Amounts in thousands)**                                                                                  | ** ** | ** **   | ** ** | ** **                                              | ** ** | ** **              | ** ** | ** ** | ** ** |
|                                                                                                                  |       |         |       |                                                    |       |                    |       |   |   |
| First mortgage, secured by the office space at the  Lexington Avenue property |       | Feb. 2014    |       | 5.33%                                                   |       | $                       | 397,794    |   | $ | 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%                                                   |       | 208,845                 |       | 210,539 |   |
| First mortgage, secured by the Rego Park I Shopping  Center                   |       | June 2009    |       | 7.25%                                                   |       | 80,530                  |       | 80,926 |   |
| First mortgage, secured by the Paramus  property                                             |       | Oct. 2011    |       | 5.92%                                                   |       | 68,000                  |       | 68,000 |   |
|                                                                                                                  |       |         |       |                                                    |       | $                       | 1,075,169  |   | $ | 1,079,465 |   |

----

(1)             Inthe event of a substantial casualty, up to $75,000,000 of this loan may becomerecourse to us.

8

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# **ALEXANDER’S,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)(UNAUDITED**)

**6.    Net Gain on Sale of Condominiums**

As of June 30, 2006, all of the 105 residentialcondominium units at 731 Lexington Avenue, were sold and closed.  In connection therewith, from inception toJune 30, 2006, we realized approximately $513,800,000 in net sales proceeds,which produced a pre-tax profit of approximately $137,300,000 and an after-taxnet gain of approximately $74,199,000. Of this income, $8,248,000 and $13,170,000 was recognized in the threemonths ended June 30, 2006 and 2005, respectively, and $13,256,000 and$53,145,000 was recognized in the six months ended June 30, 2006 and 2005,respectively.

**7.    Commitments and Contingencies**

Weare not a party to, nor is our property the subject of, any material pendinglegal proceeding other than routine litigation incidental to our business,except for the Kings Plaza and Flushing properties litigation describedbelow.  We believe that these routinelegal actions will not be material to our financial condition or results ofoperations.

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, 2006, we renewed our annual all riskpolicy with limits of (i) $965,000,000 per occurrence, including certifiedterrorist acts and $350,000,000 for non-certified terrorist acts for our 731Lexington Avenue property, and (ii) $500,000,000 per occurrence, includingcertified terrorist acts and $350,000,000 for non-certified terrorist acts forour remaining properties.  To the extentthat we incur losses in excess of our insurance coverage, these losses would beborne 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 believethat we have adequate insurance coverage under these agreements, we may not beable to obtain an equivalent amount of coverage at reasonable costs in thefuture.  Further, if lenders insist on greater coverage than we are ableto obtain, or if the Terrorism Risk Insurance Extension Act of 2005 is notextended past 2007, it could adversely affect our ability to finance and/orrefinance our properties and expand our portfolio.

Environmental Remediation

In June 1997, the Kings Plaza Regional Shopping Centercommissioned an Environmental Study and Contamination Assessment SiteInvestigation (the “Phase II Study”) to evaluate and delineate environmentalconditions disclosed in a Phase I study. The results of the Phase II Study indicated the presence of petroleumand bis (2-ethylhexyl) phthalate contamination in the soil andgroundwater.  We delineated thecontamination, developed a remediation approach, and in July 2000 entered intoa voluntary cleanup agreement with the New York State Department ofEnvironmental Conservation (“NYSDEC”). We have completed most of the remediation work, which we believe wasrequired pursuant to the NYSDEC remedial action workplan.  We have accrued $2,675,000 in previous years,of which $2,666,000 has been paid as of June 30, 2006, for our estimatedobligation with respect to the cleanup of the site.  If the NYSDEC insists on a more extensiveremediation approach, we could incur additional costs.

On December 12, 2005, a third party that was retainedby us to perform services in connection with the environmental remediationreferred to above, filed a complaint against us in the Supreme Court of theState of New York alleging that we failed to honor the terms and conditionsunder an August 2005 agreement.  Thecomplaint seeks approximately $1,800,000 in damages, based on costs incurred,plus interest and legal fees.  On March3, 2006, we filed an answer stating that the third party was only authorized byus, to incur costs of up to $500,000, which we have accrued for, representingthe amount of the authorized purchase order. In addition, we filed a counterclaim seeking $1,100,000 in damages basedupon the third-party’s failure to honor the terms and conditions of theagreement.

In July 2006, we discovered an oil spill at the abovesite.  We are currently investigating theextent of the contamination caused by the spill and will be developing aremediation approach to clean up the site. Although we are currently unable to determine the cost of remediation,we have informed our insurance carriers about the incident.  We do not believe that such costs will bematerial to our financial condition or results of operations.

 

9

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# **ALEXANDER’S,INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)(UNAUDITED)**

**7.    Commitments and Contingencies - continued**

Flushing Property

In the fourth quarter of 2003, we recognized $1,289,000 of incomerepresenting a non-refundable deposit of $1,875,000, net of $586,000 of costsassociated with the transaction, from a party that had agreed to purchase thisproperty, as such party had not met its obligations under a May 30, 2002purchase contract.  On September 10,2002, November 7, 2002, and July 8, 2004, we received letters from the partydemanding return of the deposit.  OnDecember 28, 2005, the party filed a complaint against us in the Supreme Courtof the State of New York alleging that we failed to honor the terms andconditions of the agreement.  Thecomplaint seeks specific performance and, if specific performance is denied, itseeks the return of the deposit plus interest and $50,000 in costs.  Pursuant to discussions with our legalcounsel, we do not believe the party is entitled to either specific performanceor a return of the deposit and are defending against the action.

Kings Plaza 

We plan to construct afreestanding building adjacent to the mall containing approximately 120,000square feet, which has been leased to Lowe’s Home Improvement Warehouse (“Lowe’s”).  This lease is expected to commence in2007.  The cost of this project will beapproximately $11,500,000, net.  Therecan be no assurance that this project will be completed, completed on time orcompleted for the budgeted amount.

Prior to April 15, 2005,we owned and operated an energy plant that generates electrical power at thisproperty.  On April 15, 2005, wecontributed this 35 year old plant, which has been fully depreciated, and$750,000 in cash for a 25% interest in a joint venture.  The joint venture is rebuilding the plant ata total cost of approximately $18,000,000, of which $9,900,000 has beenexpended through June 30, 2006.  Weprovided the joint venture with a $15,000,000 loan facility for theconstruction, of which $8,726,000 (eliminated in consolidation) has been drawnas of June 30, 2006.  The facility bearsinterest at 8% and matures in April 2020. Pursuant to the provisions of EITF 04-05, we are presumed to have “control”over the joint venture and accordingly, consolidate this joint venture.  There can be no assurance that this projectwill be completed, completed on time or completed for the budgeted amount.

Rego Park II

Weown two land parcels containing approximately 10 acres adjacent to our RegoPark I property in Queens, New York.  Oneparcel comprises the entire square block bounded by the Horace Harding ServiceRoad (of the Long Island Expressway), 97th Street, 62nd Drive andJunction Boulevard.  The other is aparcel of approximately one-quarter square block at the intersection ofJunction Boulevard 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 containing approximately 1,400 spaces and may also include up to 450apartment units in one or two towers.  Wehave entered into long-term leases with Century 21, Home Depot and Kohl’s for135,000, 135,000 and 134,000 square feet of retail space, respectively.

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 inParamus, 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 havea $68,000,000 interest only, non-recourse mortgage loan on the property from athird party lender.  The fixed interestrate on the debt is 5.92% with interest payable monthly until maturity inOctober 2011.  The triple-net rent eachyear is the sum of $700,000 plus the amount of debt service on the mortgageloan.  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 purchase option is not exercised, thetriple-net rent for the last 20 years must include the debt service sufficientto fully amortize $68,000,000 over the remaining 20-year lease term.

Letters of Credit

Approximately$3,900,000 in standby letters of credit were issued and outstanding as of June30, 2006.

 

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# **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, including a reconciliation of net income and the number of shares usedin computing basic and diluted earning per share.  Basic earnings per share is determined usingthe weighted average shares of common stock outstanding during the period.  Diluted earnings per share is determinedusing the weighted average shares of common stock outstanding during the periodand assumes all potentially dilutive securities were converted into commonshares at the earliest date possible.
| ** **                                                                                             | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| **(Amounts in thousands, except share and per share amounts)** | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Numerator:**                                                                                         | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income (loss) from continuing operations                                                               |       | $                                               | 28,603     |                                          | $          | 4,294 |   | $ | 4,738 |   | $ | (4,463 | ) |
| Net gain on sale of condominiums, net of income  taxes                                                 |       | 8,248                                           |       | 13,170                                        |       | 13,256 |   | 53,145 |   |
| Net income available to common stockholders—Basic  and Diluted                                    |       | $                                               | 36,851     |                                          | $          | 17,464 |   | $ | 17,994 |   | $ | 48,682 |   |
| Weighted average shares outstanding—Basic                                                         |       | 5,025,000                                       |       | 5,021,899                                     |       | 5,024,983 |   | 5,018,880 |   |
| Effect of stock options                                                                                |       | 59,541                                          |       | 59,214                                        |       | 58,853 |   | 58,464 |   |
| Weighted average shares outstanding—Diluted                                                       |       | 5,084,541                                       |       | 5,081,113                                     |       | 5,083,836 |   | 5,077,344 |   |
|                                                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **Income  per common share — Basic:**                                                             | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income (loss) from continuing operations                                                               |       | $                                               | 5.69       |                                          | $          | 0.86 |   | $ | 0.94 |   | $ | (0.89 | ) |
| Net gain on sale  of condominiums, net of income taxes                                                 |       | 1.64                                            |       | 2.62                                          |       | 2.64 |   | 10.59 |   |
| Net income per common share                                                                            |       | $                                               | 7.33       |                                          | $          | 3.48 |   | $ | 3.58 |   | $ | 9.70 |   |
|                                                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| **Income  per common share — Diluted:**                                                           | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income (loss) from continuing operations                                                               |       | $                                               | 5.63       |                                          | $          | 0.85 |   | $ | 0.93 |   | $ | (0.88 | ) |
| Net gain on sale  of condominiums, net of income taxes                                                 |       | 1.62                                            |       | 2.59                                          |       | 2.61 |   | 10.47 |   |
| Net income per  common share                                                                           |       | $                                               | 7.25       |                                          | $          | 3.44 |   | $ | 3.54 |   | $ | 9.59 |   |

 

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# **REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directorsand Stockholders ofAlexander’s, Inc.Paramus, New Jersey

Wehave reviewed the accompanying condensed consolidated balance sheet ofAlexander’s, Inc. and subsidiaries (the “Company”) as of June 30, 2006, and therelated condensed consolidated statements of operations for the three month andsix month periods ended June 30, 2006 and 2005 and cash flows for the six monthperiods ended June 30, 2006 and 2005. These interim financial statements are the responsibility of the Company’smanagement.

Weconducted our reviews in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). A review of interim financial information consists principally ofapplying analytical procedures and making inquiries of persons responsible forfinancial 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 be madeto such condensed consolidated interim financial statements for them to be inconformity with accounting principles generally accepted in the United Statesof 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, theinformation set forth in the accompanying consolidated balance sheet as ofDecember 31, 2005 is fairly stated, in all material respects, in relation tothe consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHELLP

Parsippany, New JerseyJuly 31, 2006

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**ITEM2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**

Certain statements contained herein constituteforward-looking statements as such term is defined in Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities ExchangeAct 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 from those expressedin these forward-looking statements.  Youcan find many of these statements by looking for words such as “approximates,” “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 ourintentions, plans, expectations and beliefs and are subject to numerousassumptions, risks and uncertainties. See “Item 1A - Risk Factors” in our Annual Report on Form 10-Kfor the year ended December 31, 2005, for more information about importantfactors that would cause actual results to differ materially from the resultsanticipated by these forward-looking statements.

We claim the protection of the safe harbor forforward-looking statements contained in the Private Securities LitigationReform Act of 1995 for these forward-looking statements.  You are cautioned not to place undue relianceon the forward-looking statements, which speak only as of the date of thisQuarterly Report on Form 10-Q or the date of the applicable documentincorporated by reference.  Allsubsequent written and oral forward-looking statements attributable to us orany person acting on our behalf are expressly qualified in their entirety bythe cautionary statements contained or referred to in this section. Weundertake no obligation to publicly update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise.

Management’sDiscussion and Analysis of Financial Condition and Results of Operationsincludes a discussion of our consolidated financial statements for the threeand six months ended June 30, 2006 and 2005. The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requires us tomake estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting periods.  Actualresults could differ from those estimates.

### **Overview**

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

We compete with a largenumber of real estate property owners and developers, some of which may bewilling to accept lower returns on their investments.  Principal factors of competition are rentscharged, attractiveness of the location, the quality of the property andbreadth and quality of the services provided. Our success depends upon, among other factors, trends of national andlocal economies, the financial condition and operating results of current andprospective tenants and customers, availability and cost of capital,construction and renovation costs, taxes, governmental regulations, legislationand population trends.

 

Condominium Sales

 

Asof June 30, 2006, all of the 105 residential condominium units at 731 LexingtonAvenue, were sold and closed.  Inconnection therewith, from inception to June 30, 2006, we realizedapproximately $513,800,000 in net sales proceeds, which produced a pre-taxprofit of approximately $137,300,000 and an after-tax net gain of approximately$74,199,000.  Of this income, $8,248,000and $13,170,000 was recognized in the three months ended June 30, 2006 and2005, respectively, and $13,256,000 and $53,145,000 was recognized in the sixmonths ended June 30, 2006 and 2005, respectively.

Stock Appreciation Rights

Stockappreciation rights (“SARs”) are granted at 100% of the market price of ourcommon stock on the date of grant.  Compensationexpense for each SAR is measured by the excess of stock price at the currentbalance sheet date over the stock price at the previous balance sheetdate.  If the stock price is lower at thecurrent balance sheet date, previously recognized expense is reversed but notbelow zero.  Based on our closing stockprice of $271.76 at June 30, 2006 (compared to $289.00 at March 31, 2006 and$245.50 at December 31, 2005), we reversed $14,654,000 of previously recognizedexpense in the three months ended June 30, 2006 and recorded $22,907,000 forand accrual of SARs compensation expense in the six months ended June 30,2006.  The three and six months endedJune 30, 2005 include accruals of $6,163,000 and $28,688,000, respectively, forSARs compensation expense based on our closing stock price of $248.75 at June30, 2005.

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**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 “Note2 — Summary of Significant Accounting Policies” to the consolidated financialstatements included therein.  There havebeen no significant changes to those policies during 2006.

**SignificantTenants**

Bloomberg L.P.accounted for 35% and 36% of our consolidated revenues in the six months endedJune 30, 2006 and 2005, respectively.  Noother tenant accounted for more than 10% of our consolidated revenues.

**Results ofOperations for the Quarters Ended June, 30, 2006 and 2005**

Netincome for the quarter ended June 30, 2006 was $36,851,000, or $7.25 perdiluted share, compared to $17,464,000, or $3.44 per diluted share, for thequarter ended June 30, 2005.  Net incomefor the quarter ended June 30, 2006 includes, $14,654,000 for the reversal of aportion of the accrual for SARs compensation expense and $8,248,000 for anafter-tax net gain from the sale of residential condominium units at 731Lexington Avenue.  These items, in theaggregate, increased net income by $22,902,000, or $4.50 per dilutedshare.  Net income for the quarter endedJune 30, 2005 includes, $13,170,000 for an after-tax net gain from the sale ofresidential condominium units at 731 Lexington Avenue, partially offset by$6,163,000 for an accrual of SARs compensation expense.  These items, in the aggregate, increased netincome by $7,007,000, or $1.38 per diluted share.

Propertyrentals were $34,000,000 in the quarter ended June 30, 2006, compared to$33,570,000 in the prior year’s quarter, an increase of $430,000.  This increase was primarily attributable to rentsfrom tenants at 731 Lexington Avenue whose space was placed into servicesubsequent to the second quarter of 2005.

Tenantexpense reimbursements were $15,371,000 in the quarter ended June 30, 2006,compared to $12,165,000 in the prior year’s quarter, an increase of$3,206,000.  This increase was primarilyfrom tenants at 731 Lexington Avenue under leases that commenced subsequent tothe second quarter of 2005.

Operating expenses were $18,524,000 in the quarterended June 30, 2006, compared to $14,581,000 in the prior year’s quarter, anincrease of $3,943,000.  This increasewas primarily due to operating costs incurred at 731 Lexington Avenue, whichare not fully recoverable in accordance with tenants’ base year leases.

General and administrative expenses includes $14,654,000 in thequarter ended June 30, 2006, for the reversal of a portion of the accrual forSARs compensation expense and $6,163,000 for an accrual of SARs compensationexpense in the quarter ended June 30, 2005. Adjusting general and administrative expenses for SARs, current quartergeneral and administrative expenses are $117,000 lower than the prior year’squarter.  This decrease was primarily dueto lower professional fees.

Interestand other income was $6,803,000 in the quarter ended June 30, 2006, compared to$1,976,000 in the prior year’s quarter, an increase of $4,827,000.  This increase resulted primarily from higheraverage cash balances of approximately $307,000,000 and an increase in averageyields on investments of approximately 2%.

Interestand debt expense was $17,096,000 in the quarter ended June 30, 2006, comparedto $16,409,000 in the prior year’s quarter, an increase of $687,000.  This increase was primarily due to loweramounts of capitalized interest in the current quarter, partially offset by adecrease in average interest rates.

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**Resultsof Operations for the Six Months Ended June, 30, 2006 and 2005**

Netincome for the six months ended June 30, 2006 was $17,994,000, or $3.54 perdiluted share, compared to $48,682,000, or $9.59 per diluted share, for the sixmonths ended June 30, 2005.  Net incomefor the six months ended June 30, 2006 includes, $22,907,000 for an accrual ofSARs compensation expense, partially offset by $13,256,000 for an after-tax netgain from the sale of residential condominium units at 731 LexingtonAvenue.  These items, in the aggregate,decreased net income by $9,651,000, or $1.90 per diluted share.  Net income for the six months ended June 30,2005 includes, $53,145,000 for an after-tax net gain from the sale ofresidential condominium units at 731 Lexington Avenue, partially offset by$28,688,000 for an accrual of SARs compensation expense.  These items, in the aggregate, increased netincome by $24,457,000, or $4.82 per diluted share.

Propertyrentals were $67,832,000 in the six months ended June 30, 2006, compared to$65,243,000 in the prior year’s six months, an increase of $2,589,000.  This increase was primarily attributable to rentsfrom tenants at 731 Lexington Avenue whose space was placed into servicesubsequent to the second quarter of 2005.

Tenantexpense reimbursements were $29,915,000 in the six months ended June 30, 2006,compared to $24,168,000 in the prior year’s six months, an increase of$5,747,000.  This increase was primarilyfrom tenants at 731 Lexington Avenue under leases that commenced subsequent tothe second quarter of 2005.

Operating expenses were $35,757,000 in the six monthsended June 30, 2006, compared to $28,415,000 in the prior year’s six months, anincrease of $7,342,000.  This increasewas primarily due to operating costs incurred at 731 Lexington Avenue, whichare not fully recoverable in accordance with tenants’ base year leases.

General and administrative expenses were $25,360,000 in the sixmonths ended June 30, 2006, compared to $31,081,000 in the prior year’s sixmonths, a decrease of $5,721,000.  This decrease was primarily due to lower accrualsfor SARs compensation expense.

Interestand other income was $12,981,000 in the six months ended June 30, 2006,compared to $2,957,000 in the prior year’s six months, an increase of$10,024,000.  This increase resultedprimarily from higher average cash balances of approximately $376,000,000 andan increase in average yields on investments of approximately 2%.

Interestand debt expense was $34,148,000 in the six months ended June 30, 2006,compared to $27,712,000 in the prior year’s six months, an increase of$6,436,000.  This increase was primarilydue to a decrease in capitalized interest.

 

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**Liquidity andCapital Resources**

Weare not a party to, nor is our property the subject of, any material pendinglegal proceeding other than routine litigation incidental to our business,except for the Kings Plaza and Flushing properties litigation described in Note7 to our consolidated financial statements. We believe that these routine legal actions will not be material to ourfinancial condition or results of operations.

*DevelopmentProjects*

Kings Plaza

We plan to construct a freestanding building adjacentto the mall containing approximately 120,000 square feet, which has been leasedto Lowe’s Home Improvement Warehouse (“Lowe’s”). This lease is expected tocommence in 2007. The cost of this project will be approximately $11,500,000,net.  There can be no assurance that thisproject will be completed, completed on time or completed for the budgetedamount.

Prior to April 15, 2005,we owned and operated an energy plant that generates electrical power at thisproperty.  On April 15, 2005, wecontributed this 35 year old plant, which has been fully depreciated, and$750,000 in cash for a 25% interest in a joint venture.  The joint venture is rebuilding the plant ata total cost of approximately $18,000,000, of which $9,900,000 has beenexpended through June 30, 2006.  Weprovided the joint venture with a $15,000,000 loan facility for theconstruction, of which $8,726,000 (eliminated in consolidation) has been drawnas of June 30, 2006.  The facility bearsinterest at 8% and matures in April 2020. Pursuant to the provisions of EITF 04-05, we are presumed to have “control”over the joint venture and accordingly, consolidate this joint venture.  There can be no assurance that this projectwill be completed, completed on time or completed for the budgeted amount.

Rego Park II

We own two land parcels containing approximately 10acres adjacent to our Rego Park I property in Queens, New York.  One parcel comprises the entire square blockbounded by the Horace Harding Service Road (of the Long Island Expressway), 97th Street, 62nd Drive andJunction Boulevard.  The other is aparcel of approximately one-quarter square block at the intersection ofJunction Boulevard and the Horace Harding Service Road.

Our plan for the entire square block parcel is a mixed-usedevelopment containing approximately 600,000 square feet of retail space onfour levels, a parking deck containing approximately 1,400 spaces and may alsoinclude up to 450 apartment units in one or two towers.  We have entered into long-term leases withCentury 21, Home Depot and Kohl’s for 135,000, 135,000 and 134,000 square feetof retail space, respectively.

While the current plans for the one-quarter squareblock parcel are preliminary, the project may include up to 80,000 square feetof retail space.

There can be no assurance that these projects willcommence, be completed, completed on time or completed for the budgeted amount.

*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, 2006, we renewed our annual all riskpolicy with limits of (i) $965,000,000 per occurrence, including certifiedterrorist acts and $350,000,000 for non-certified terrorist acts for our 731Lexington Avenue property, and (ii) $500,000,000 per occurrence, includingcertified terrorist acts and $350,000,000 for non-certified terrorist acts forour remaining properties.  To the extentthat we incur losses in excess of our insurance coverage, these losses would beborne by us and could be material.

Our debt instruments, consisting of mortgage loanssecured by our properties (which are generally non-recourse to us), containcustomary covenants requiring us to maintain insurance.  Although we believe that we have adequateinsurance coverage under these agreements, we may not be able to obtain anequivalent amount of coverage at reasonable costs in the future.  Further,if lenders insist on greater coverage than we are able to obtain, or if theTerrorism Risk Insurance Extension Act of 2005 is not extended past 2007, itcould adversely affect our ability to finance and/or refinance our propertiesand expand our portfolio.

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***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 theSAR is $243.83 per share of common stock, which is the average of the high andlow trading price of our common stock on the date of grant.  The SAR became exercisable on July 10, 2006,and will expire on March 14, 2007.

***Cash Flows***

###### Six Months Ended June 30, 2006

Cashand cash equivalents were $614,357,000 at June 30, 2006, compared to$578,406,000 at December 31, 2005, a decrease of $35,951,000.

Netcash provided by operating activities of $20,836,000 was comprised of (i) netincome of $17,994,000 and (ii) the net change in operating assets andliabilities of $23,003,000, partially offset by, (iii) non-cash items of$20,161,000.  The adjustments fornon-cash items are primarily comprised of (a) $24,529,000 resulting from thenet gains on sale of condominiums and (b) the effect of straight-lining ofrental income of $7,681,000, partially offset by, (c) depreciation andamortization of $12,049,000.

Netcash provided by investing activities of $19,341,000 was primarily comprised of(i) $39,383,000 of proceeds from the sales of condominiums at 731 Lexington,partially offset by, (ii) capital expenditures of $19,599,000 and (iii)restricted cash of $443,000.

Netcash used in financing activities of $4,226,000 was primarily comprised of debtrepayments of $4,296,000, partially offset by $70,000 for the exercise of shareoptions.

###### Six Months Ended June 30, 2005

Netcash provided by operating activities of $14,932,000 was comprised of (i) netincome of $48,682,000 and (ii) the net change in operating assets andliabilities of $27,200,000, partially offset by non-cash items of$60,950,000.  The adjustments fornon-cash items are comprised of (a) $58,015,000 resulting from the after-taxgain on the sales of condominiums and (b) the effect of straight-lining ofrental income of $14,167,000, partially offset by (c) $11,232,000 ofdepreciation and amortization.

Netcash provided by investing activities of $211,604,000 resulted primarily fromthe proceeds from the sales of condominiums of $261,531,000, partially offsetby capital expenditures of $48,197,000. The capital expenditures primarily related to the 731 Lexington Avenuedevelopment project.

Netcash provided by financing activities of $23,522,000 resulted primarily fromborrowings collateralized by the Lexington Avenue development project of$24,832,000, partially offset by debt repayments of $1,941,000.

 

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**Funds fromOperations (“FFO”)**

FFO is computed in accordance with the definitionadopted by the Board of Governors of the National Association of Real EstateInvestment 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 share are used by management,investors and industry analysts as supplemental measures of operatingperformance of equity REITs.  FFO and FFOper diluted share should be evaluated along with GAAP net income and income perdiluted share (the most directly comparable GAAP measures), as well as cashflow from operating activities, investing activities and financing activities,in evaluating the operating 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 estatevalues instead have historically risen or fallen with market conditions, thesenon-GAAP measures can facilitate comparisons of operating performance betweenperiods and among other equity REITs.

FFO does not represent cash generated from operatingactivities in accordance with GAAP and is not necessarily indicative of cashavailable to fund cash needs as disclosed in the Company’s Statements of CashFlows.  FFO should not be considered asan alternative to net income as an indicator of the Company’s operatingperformance or as an alternative to cash flows as a measure of liquidity. 

***FFO for the Quarter and SixMonths Ended June 30, 2006 and 2005***

FFO for the quarter ended June 30, 2006 was$42,265,000, or $8.31 per diluted share, compared to $22,416,000, or $4.41 perdiluted share for the quarter ended June 30, 2005.  FFO for the quarter ended June 30, 2006includes, $14,654,000 for the reversal of a portion of the accrual for SARscompensation expense and $8,248,000 for an after-tax net gain from the sale ofresidential condominium units at 731 Lexington Avenue.  These items, in the aggregate, increased FFOby $22,902,000, or $4.50 per diluted share. FFO for the quarter ended June 30, 2005 includes, $13,170,000 for anafter-tax net gain from the sale of residential condominium units at 731Lexington Avenue, partially offset by, $6,163,000 for an accrual of SARscompensation expense.  These items, inthe aggregate, increased FFO by $7,007,000, or $1.38 per diluted share.

FFO for the six months ended June 30, 2006 was$28,683,000, or $5.64 per diluted share, compared to $58,265,000, or $11.48 perdiluted share for the sixmonths ended June 30, 2005.  FFOfor the six months ended June 30, 2006 includes, $22,907,000 for an accrual ofSARs compensation expense, partially offset by, $13,256,000 for an after-taxnet gain from the sale of residential condominium units at 731 LexingtonAvenue.  These items, in the aggregate,decreased FFO by $9,651,000, or $1.90 per diluted share.  FFO for the six months ended June 30, 2005,includes, $53,145,000 for an after-tax net gain from the sale of residentialcondominium units at 731 Lexington Avenue, partially offset by, $28,688,000 foran accrual of SARs compensation expense. These items, in the aggregate, increased FFO by $24,457,000, or $4.82per diluted share.

The following tablereconciles net income to FFO:
| ** **                                                                                             | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| **(Amounts in thousands, except share and per share amounts)** | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| Net income                                                                                             |       | $                                               | 36,851     |                                          | $          | 17,464 |   | $ | 17,994 |   | $ | 48,682 |   |
| Depreciation and  amortization of real property                                                        |       | 5,414                                           |       | 4,952                                         |       | 10,689 |   | 9,583 |   |
| FFO                                                                                                    |       | $                                               | 42,265     |                                          | $          | 22,416 |   | $ | 28,683 |   | $ | 58,265 |   |
|                                                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| FFO per common  share—diluted                                                                     |       | $                                               | 8.31       |                                          | $          | 4.41 |   | $ | 5.64 |   | $ | 11.48 |   |
|                                                                                                   |       |                                            |       |                                          |       |   |   |   |   |
| Weighted average shares  used in computing FFO per   common share—diluted                         |       | 5,084,541                                       |       | 5,081,113                                     |       | 5,083,836 |   | 5,077,344 |   |

 

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**Item 3.**                          Quantitativeand Qualitative Disclosures About Market Risk

AtJune 30, 2006, we had $1,075,169,000 of fixed rate debt at a weighted averageinterest rate of 5.80% and as such, we have no exposure to changes in interestrates for the remaining terms of our existing debt.

Thefair value of our debt, estimated by discounting future contractual cash flowsof our existing debt using the current rates available to borrowers withsimilar credit ratings for the remaining terms of such debt, is less than theaggregate carrying amount by approximately $67,476,000 at June 30, 2006.

**Item 4.**                          Controlsand Procedures

(a) *Disclosure Controls and Procedures* — Our management, withthe participation of our Chief Executive Officer and Chief Financial Officer,has evaluated the effectiveness of our disclosure controls and procedures (assuch term is defined in Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934, as amended) as of the end of the period covered by thisQuarterly Report on Form 10-Q.  Based onsuch evaluation, our Chief Executive Officer and Chief Financial Officer haveconcluded that, as of the end of such period, our disclosure controls andprocedures are effective.

(b) *Internal Control Over Financial Reporting —*There have notbeen any changes in our internal control over financial reporting during thefiscal quarter to which this Quarterly Report on Form 10-Q relates that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

**PART II.  OTHERINFORMATION**

**Item 1.**                          LegalProceedings

Weare not a party to, nor is our property the subject of, any material pendinglegal proceeding other than routine litigation incidental to our business,except for the Kings Plaza and Flushing properties litigation described in Note7 to our consolidated financial statements. We believe that these routine legal actions will not be material to ourfinancial condition or results of operations.

**Item 1A.**                 Risk Factors

Therehave been no material changes in our “Risk Factors” as previously disclosed inour Annual Report on Form 10-K for the year ended December 31, 2005.

**Item 2.**                          UnregisteredSales of Equity Securities and Use of Proceeds

None.

**Item 3.**                          DefaultsUpon Senior Securities

None.

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**Item 4.**                          Submission of Matters to aVote of Security Holders

OnMay 18, 2006, we held our Annual Meeting of Stockholders.  Three proposals were presented for approvalfor which the stockholders voted, in person or by proxy.  The results of the voting are shown below:

(i)                   The election ofthree nominees to serve on the Board of Directors for a term of three years oruntil their respective successors are duly elected and qualified.

| Nominees               | ** ** | ** ** | ** ** | **Term**  | ** ** | **Votes Cast  For** | ** ** | **Votes Withheld** | ** ** |
|------------------------|------------|------------|------------|-----------|------------|--------------------------|------------|-------------------------|------------|
| David Mandelbaum       |       | 3  years   |       | 3,861,806 |       | 439,199                  |       |
| Arthur I.  Sonnenblick |       | 3  years   |       | 3,861,709 |       | 434,266                  |       |
| Dr. Richard R.  West   |       | 3  years   |       | 3,860,809 |       | 435,196                  |       |

In addtition to the threenominees elected above, Steven Roth, Michael D. Fascitelli, Neil Underberg,Russel B. Wight, Jr., Thomas R. DiBenedetto and Stephen Mann continued to serveas Trustees after the meeting.

Because of the nature of the election of the Board ofDirectors, there were no abstentions or broker non-votes.

(ii)                The considerationand approval of the 2006 Omnibus Stock Plan.

| **Votes Cast** | ** ** | **Votes Cast** | ** ** | ** **      |
|----------------|------------|----------------|------------|-----------------|
| **For**        | ** ** | **Against**    | ** ** | **Abstentions** |
| 4,040,568      |       | 254,945        |       | 402             |

 

Because of the nature of the approval of the 2006Omnibus Stock Plan, there were no broker non-votes.

(iii)             The ratification ofthe appointment of Deloitte & Touche LLP as our independent auditors.

| **Votes Cast** | ** ** | **Votes Cast** | ** ** | ** **      |
|----------------|------------|----------------|------------|-----------------|
| **For**        | ** ** | **Against**    | ** ** | **Abstentions** |
| 4,295,265      |       | 197            |       | 543             |

 

Because of the nature of the ratification of ourindependent auditors, there were no broker non-votes.

**Item 5.**                          OtherInformation

None.

**Item 6.**                          Exhibits

(a)             Exhibitsrequired by Item 601 of Regulation S-K are filed herewith and are listed in theattached Exhibit Index.

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
| ** **           |   | **ALEXANDER’S, INC.**                            |
|----------------------|--------|-------------------------------------------------------|
|                 |   | (Registrant)                                          |
|                 |   |                                                  |
|                 |   |                                                  |
| Date: July 31,  2006 |   | /s/ Joseph Macnow                                     |
|                 |   | Joseph Macnow                                         |
|                 |   | Executive Vice  President and Chief Financial Officer |
|                 |   | (duly authorized  officer and principal financial and |
|                 |   | accounting  officer)                                  |

 

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## **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                                                                                                                                      |       |       |

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*                    Incorporatedby reference.

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