Alexander's
Annual Report 2010

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ALEXANDER’S, INC. ANNUAL REPORT TO STOCKHOLDERS 2010 This Annual Report is printed on recycled paper and is recyclable. EXHIBIT INDEX ON PAGE 66 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ⌧ (cid:134) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended: December 31, 2010 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission File Number: to 001-6064 ALEXANDER’S, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 51-0100517 (IRS Employer Identification No.) 210 Route 4 East, Paramus, New Jersey (Address of principal executive offices) 07652 (Zip Code) Registrant’s telephone number, including area code (201) 587-8541 Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, $1 par value per share Name of each exchange on which registered New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act. YES (cid:134) NO ⌧ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. YES (cid:134) NO ⌧ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ⌧ NO (cid:134) Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). (cid:134) Yes (cid:134) No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:134) Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (cid:134) Large Accelerated Filer (cid:134) Non-Accelerated Filer (Do not check if smaller reporting company) ⌧ Accelerated Filer (cid:134) Smaller Reporting Company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES (cid:134) NO ⌧ The aggregate market value of the voting and non-voting shares of common stock held by non-affiliates of the registrant, (i.e., by persons other than officers and directors of Alexander’s, Inc.) was $622,802,000 at June 30, 2010. As of December 31, 2010 there were 5,105,936 shares of the registrant’s common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Part III: Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 26, 2011. Item Part I. Part II. Part III. 1. 1A. 1B. 2. 3. 5. 6. 7. 7A. 8. 9. 9A. 9B. 10. 11. 12. 13. 14. TABLE OF CONTENTS Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures about Market Risk Financial Statements and Supplementary Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance(1) Executive Compensation(1) Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters(1) Certain Relationships and Related Transactions, and Director Independence(1) Principal Accounting Fees and Services(1) Part IV. 15. Exhibits and Financial Statement Schedules Signatures _____________________________ Page 4 7 15 16 20 21 23 24 37 38 56 56 59 59 60 60 60 60 61 62 (1) These items are omitted in part or in whole because the registrant will file a definitive Proxy Statement pursuant to Regulation 14A under the Securities Exchange Act of 1934 with the Securities and Exchange Commission no later than 120 days after December 31, 2010, portions of which are incorporated by reference herein. 2 FORWARD-LOOKING STATEMENTS Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition, results of operations and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in this Annual Report on Form 10-K. We also note the following forward-looking statements: in the case of our development projects, the estimated completion date, estimated project costs and costs to complete; and estimates of dividends on shares of our common stock. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For a further discussion of factors that could materially affect the outcome of our forward-looking statements, see “Item 1A - Risk Factors” in this Annual Report on Form 10-K. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly, any revisions to our forward-looking statements to reflect events or circumstances after the date of this Annual Report on Form 10-K. 3 ITEM 1. BUSINESS GENERAL PART I Alexander’s, Inc. (NYSE: ALX) 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,” “Company” and “Alexander’s” refer to Alexander’s, Inc. and its consolidated subsidiaries. We are managed by, and our properties are leased and developed by, Vornado Realty Trust (“Vornado”) (NYSE: VNO). We have seven properties in the greater New York City metropolitan area consisting of: Operating properties (i) the 731 Lexington Avenue property, a 1,307,000 square foot multi-use building, comprising the entire square block bounded by Lexington Avenue, East 59th Street, Third Avenue and East 58th Street in Manhattan. The building contains 885,000 and 174,000 of net rentable square feet of office and retail space, respectively, which we own, and 248,000 square feet of residential space consisting of 105 condominium units, which we sold. Bloomberg L.P. (“Bloomberg”) occupies all of the office space. The Home Depot (83,000 square feet), The Container Store (34,000 square feet) and Hennes & Mauritz (27,000 square feet) are the principal retail tenants; (ii) the Kings Plaza Regional Shopping Center contains 1,210,000 square feet and is located on Flatbush Avenue in Brooklyn. The center is anchored by a 339,000 square foot Macy’s (owned by Macy’s, Inc.), a 289,000 square foot Sears department store and a 114,000 square foot Lowe’s on land leased from us; (iii) the Rego Park I Shopping Center contains 343,000 square feet and is located on Queens Boulevard and 63rd Road in Queens. The center is anchored by a 195,000 square foot Sears department store, a 46,000 square foot Bed Bath & Beyond and a 36,000 square foot Marshalls. In January 2011, we leased 50,000 square feet to Burlington Coat Factory; (iv) the Rego Park II property, a newly developed 615,000 square foot shopping center, is located adjacent to our Rego Park I property in Queens. As of December 31, 2010, 89% of the center is in service and such portion is 100% leased, primarily to three anchor tenants: a 145,000 square foot Costco, a 135,000 square foot Century 21 and a 133,000 square foot Kohl’s. In addition 47,000 square feet is leased to Toys “R” Us/Babies “R” Us, a one-third owned affiliate of Vornado; (v) the Paramus property, located at the intersection of Routes 4 and 17 in Paramus, New Jersey, consists of 30.3 acres of land leased to IKEA Property, Inc.; (vi) the Flushing property, a 167,000 square foot building, is located at Roosevelt Avenue and Main Street in Queens and is sub-leased to New World Mall LLC for the remainder of our ground lease term; and Property to be developed (vii) the Rego Park III property is a 3.4 acre land parcel adjacent to our Rego Park II property in Queens at the intersection of Junction Boulevard and the Horace Harding Service Road. 4 Business Environment Substantially all businesses, including ours, were negatively affected by the 2008/2009 economic recession and illiquidity and volatility in the capital and financial markets. Although there are signs of an economic recovery and greater stability in the capital and financial markets, it is not possible for us to predict whether these trends will continue in the future or quantify the impact of these or any other trends on our financial results. Significant Tenants Bloomberg accounted for $83,137,000, $77,988,000 and $66,333,000, or 34%, 35% and 31% of our consolidated revenues in the years ended December 31, 2010, 2009 and 2008, respectively. No other tenant accounted for more than 10% of our consolidated revenues in any of the last three years. If we were to lose Bloomberg as a tenant, or if Bloomberg were to fail or become unable to perform its obligations under its lease, it would adversely affect our results of operations and financial condition. We receive and evaluate certain confidential financial information and metrics from Bloomberg on a semi-annual basis. In addition, we access and evaluate financial information regarding Bloomberg from private sources, as well as publicly available data. Relationship with Vornado At December 31, 2010, Vornado owned 32.4% of our outstanding common stock. Steven Roth is the Chairman of our Board of Directors and Chief Executive Officer, the Managing General Partner of Interstate Properties (“Interstate”), a New Jersey general partnership, and the Chairman of the Board of Trustees of Vornado. At December 31, 2010, 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, 27.2% of our outstanding common stock, in addition to the 2.3% they indirectly own through Vornado. Michael D. Fascitelli, President and Chief Executive Officer of Vornado, is our President and a member of our Board of Directors. Joseph Macnow, our Executive Vice President and Chief Financial Officer, holds the same position with Vornado. We are managed by, and our properties are leased and developed by, Vornado, pursuant to agreements which expire in March of each year and are automatically renewable. Vornado is a fully-integrated REIT with significant experience in managing, leasing, developing, and operating retail and office properties. Environmental Matters In July 2006, we discovered an oil spill at our Kings Plaza Regional Shopping Center. We have notified the New York State Department of Environmental Conservation (“NYSDEC”) about the spill and have developed a remediation plan. The NYSDEC has approved a portion of the remediation plan and clean up is ongoing. The estimated costs associated with the clean up will aggregate approximately $2,500,000. We have paid $500,000 of such amount and the remainder is covered under our insurance policy. Competition We operate in a highly competitive environment. All of our properties are located in the greater New York City metropolitan area. We compete with a large number of property owners and developers. Principal factors of competition are the amount of rent charged, attractiveness of location and quality and breadth of services provided. Our success depends upon, among other factors, trends of national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, taxes, governmental regulations and legislation, population trends, zoning laws, and our ability to lease, sublease or sell our properties, at profitable levels. Our success is also subject to our ability to refinance existing debt as it comes due and on acceptable terms. 5 Employees We currently have 80 employees. Executive Office Our executive office is located at 210 Route 4 East, Paramus, New Jersey, 07652 and our telephone number is (201) 587- 8541. Available Information Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports, as well as Reports on Forms 3, 4 and 5 regarding officers, directors, and 10% beneficial owners filed or furnished pursuant to Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934, are available free of charge on our website (www.alx-inc.com) as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Also available on our website are copies of our (i) Audit Committee Charter, (ii) Compensation Committee Charter, (iii) Code of Business Conduct and Ethics and (iv) Corporate Governance Guidelines. In the event of any changes to these items, revised copies will be made available on our website. Copies of these documents are also available directly from us, free of charge. On April 11, 2000, Vornado and Interstate filed with the SEC, the 26th amendment to a Form 13D indicating that they, as a group, own in excess of 51% of our common stock. This ownership level makes us a “controlled” company for the purposes of the New York Stock Exchange, Inc.’s Corporate Governance Standards (the “NYSE Rules”). This means that we are not required to, among other things, have a majority of the members of our Board of Directors be independent under the NYSE Rules, have all of the members of our Compensation Committee be independent under the NYSE Rules or to have a Nominating Committee. While we have voluntarily complied with a majority of the independence requirements of the NYSE Rules, we are under no obligation to do so and this situation may change at any time. 6 ITEM 1A. RISK FACTORS Material factors that may adversely affect our business and operations are summarized below. REAL ESTATE INVESTMENTS’ VALUE AND INCOME FLUCTUATE DUE TO VARIOUS FACTORS. The value of real estate fluctuates depending on conditions in the general economy and the real estate business. These conditions may also adversely impact our revenues and cash flows. The factors that affect the value of our real estate include, among other things: changes in real estate taxes and other expenses; national, regional and local economic conditions; competition from other available space; local conditions such as an oversupply of space or a reduction in demand for real estate in the area; how well we manage our properties; changes in market rental rates; the timing and costs associated with property improvements and rentals; • • • • • • • whether we are able to pass all or portions of any increases in operating costs through to tenants; • • whether tenants and users such as customers and shoppers consider a property attractive; • • • • • • • • • • • the financial condition of our tenants, including the extent of tenant bankruptcies or defaults; availability of financing on acceptable terms or at all; fluctuations in interest rates; our ability to obtain adequate insurance; changes in zoning laws and taxation; government regulation; consequences of any armed conflict involving, or terrorist attack against, the United States; potential liability under environmental or other laws or regulations; natural disasters; general competitive factors; and climate changes. The rents we receive and the occupancy levels at our properties may decline as a result of adverse changes in any of these factors. If our rental revenues and/or occupancy levels decline, we generally would expect to have less cash available to pay our indebtedness and for distribution to our stockholders. In addition, some of our major expenses, including mortgage payments, real estate taxes and maintenance costs generally do not decline when the related rents decline. Capital markets and economic conditions can materially affect our financial condition and results of operations and the value of our debt and equity securities. There are many factors that can affect the value of our debt and equity securities, including the state of the capital markets and economy which have recently negatively affected substantially all businesses, including ours. Demand for office and retail space may decline nationwide as it did in 2008 and 2009, due to bankruptcies, downsizing, layoffs and cost cutting. The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our tenants. Our inability or the inability of our tenants to timely refinance maturing liabilities and access the capital markets to meet liquidity needs may materially effect our financial condition and results of operations and the value of our debt and equity securities. Real estate is a competitive business. We operate in a highly competitive environment. All of our properties are located in the greater New York City metropolitan area. We compete with a large number of real estate property owners and developers, some of which may be willing to accept lower returns on their investments. Principal factors of competition are rents charged, attractiveness of location, the quality of the property and breadth and quality of services provided. Our success depends upon, among other factors, trends of national and local economies, the financial condition and operating results of current and prospective tenants and customers, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends. 7 We depend on leasing space to tenants on economically favorable terms and collecting rent from tenants who may not be able to pay. Our financial results depend significantly on leasing space in our properties to tenants on economically favorable terms. In addition, because a majority of our income is derived from renting real property, our income, funds available to pay indebtedness and funds available for distribution to stockholders will decrease if certain of our tenants cannot pay their rent or if we are not able to maintain our level of occupancy on favorable terms. If a tenant does not pay its rent, we might not be able to enforce our rights as landlord without delays and might incur substantial legal and other costs. During periods of economic adversity, there may be an increase in the number of tenants that cannot pay their rent and an increase in vacancy rates. Bankruptcy or insolvency of tenants may decrease our revenues, net income and available cash. From time to time, some of our tenants have declared bankruptcy, and other tenants may declare bankruptcy or become insolvent in the future. In the case of our shopping centers, the bankruptcy or insolvency of a major tenant could cause us to have difficulty leasing the remainder of the affected property. Our leases generally do not contain restrictions designed to ensure the creditworthiness of our tenants. As a result, the bankruptcy or insolvency of a major tenant could result in a lower level of net income and funds available for the payment of our indebtedness or distribution to stockholders. Some of our tenants represent a significant portion of our revenues. Loss of these tenant relationships or deterioration in the tenants’ credit quality could adversely affect our financial condition or results of operation. Bloomberg accounted for $83,137,000, $77,988,000 and $66,333,000, or 34%, 35% and 31% of our consolidated revenues in the years ended December 31, 2010, 2009 and 2008, respectively. No other tenant accounted for more than 10% of our consolidated revenues in any of the last three years. If we were to lose Bloomberg as a tenant, or if Bloomberg were to fail or become unable to perform its obligations under its lease, it would adversely affect our results of operations and financial condition. Inflation or deflation may adversely affect our financial condition and results of operations. Although neither inflation nor deflation has materially impacted our operations in the recent past, increased inflation could have a pronounced negative impact on our mortgages and interest rates and general and administrative expenses, as these costs could increase at a rate higher than our rents. Inflation could also have an adverse effect on consumer spending which could impact our tenants’ sales and, in turn, our percentage rents, where applicable. Conversely, deflation could lead to downward pressure on rents and other sources of income. Our business and operations would suffer in the event of system failures. Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal information technology systems, our systems are vulnerable to damages from any number of sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and telecommunication failures. Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by such disruptions. 8 We may incur costs to comply with environmental laws. Our operations and properties are subject to various federal, state and local laws and regulations concerning the protection of the environment including air and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property. The owner or operator may also be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination. These laws often impose liability without regard to whether the owner or operator knew of the release of the substances or caused such release. The presence of contamination or the failure to remediate contamination may impair our ability to sell or lease real estate or to borrow using the real estate as collateral. Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling and also govern emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) and underground storage tanks are also regulated by federal and state laws. We are also subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals. We could incur fines for environmental compliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or tanks or related claims arising out of environmental contamination or human exposure at or from our properties. In July 2006, we discovered an oil spill at our Kings Plaza Regional Shopping Center. We have notified the New York State Department of Environmental Conservation (“NYSDEC”) about the spill and have developed a remediation plan. The NYSDEC has approved a portion of the remediation plan and clean up is ongoing. The estimated costs associated with the clean up will aggregate approximately $2,500,000. We have paid $500,000 of such amount and the remainder is covered under our insurance policy. Each of our properties has been subjected to varying degrees of environmental assessment at various times. Except as referenced above, the environmental assessments did not, as of the date of this Annual Report on Form 10-K, reveal any environmental condition material to our business. However, identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, discovery of additional sites, human exposure to the contamination or changes in cleanup or compliance requirements could result in significant costs to us. Some of our potential losses may not be covered by insurance. We maintain general liability insurance with limits of $300,000,000 per occurrence and all-risk property and rental value insurance coverage with limits of $1.7 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as floods and earthquakes on each of our properties. There can be no assurance that we will be able to maintain similar levels of insurance coverage in the future in amounts and on terms that are commercially reasonable. We are responsible for deductibles and losses in excess of our insurance coverage, which could be material. Our mortgage loans are non-recourse to us, except for $75,000,000 of the $320,000,000 mortgage on our 731 Lexington Avenue property, in the event of a substantial casualty, as defined. Our mortgage loans contain customary covenants requiring us to maintain insurance. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance our properties. Compliance or failure to comply with the Americans with Disabilities Act or other safety regulations and requirements could result in substantial costs. The Americans with Disabilities Act (“ADA”) generally requires that public buildings, including our properties, meet certain federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. If, under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could adversely affect our financial condition and results of operations, as well as the amount of cash available for distribution to stockholders. Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations. 9 OUR INVESTMENTS ARE CONCENTRATED IN THE GREATER NEW YORK CITY METROPOLITAN AREA. CIRCUMSTANCES AFFECTING THIS AREA GENERALLY COULD ADVERSELY AFFECT OUR BUSINESS. All of our properties are in the greater New York City metropolitan area and are affected by the economic cycles and risks inherent in that area. All of our revenues come from properties located in the greater New York City metropolitan area. Real estate markets are subject to economic downturns and we cannot predict how economic conditions will impact this market in either the short or long term. Declines in the economy or a decline in the real estate market in this area could hurt our financial performance and the value of our properties. The factors affecting economic conditions in this area include: • • • • • • • • • financial performance and productivity of the publishing, advertising, financial, technology, retail, insurance and real estate industries; unemployment levels; business layoffs or downsizing; industry slowdowns; relocations of businesses; changing demographics; increased telecommuting and use of alternative work places; infrastructure quality; and any oversupply of, or reduced demand for, real estate. It is impossible for us to assess the future effects of trends in the economic and investment climates of the greater New York City metropolitan region, and more generally of the United States, on the real estate market in this area. Local, national or global economic downturns, would negatively affect our businesses and profitability. Terrorist attacks, such as those of September 11, 2001 in New York City, may adversely affect the value of our properties and our ability to generate cash flow. All of our properties are located in the greater New York City metropolitan area. In the aftermath of a terrorist attack, tenants in this area may choose to relocate their businesses to less populated, lower-profile areas of the United States that are not as likely to be targets of future terrorist activity and fewer customers may choose to patronize businesses in this area. This would trigger a decrease in the demand for space in these markets, which could increase vacancies in our properties and force us to lease our properties on less favorable terms. As a result, the value of our properties and the level of our revenues could decline materially. We are subject to risks that affect the general retail environment. A substantial portion of our properties are in the retail shopping center real estate market. This means that we are subject to factors that affect the retail environment generally, including the level of consumer spending and consumer confidence, unemployment rates, the threat of terrorism and increasing competition from discount retailers, outlet malls, retail websites and catalog companies. These factors could adversely affect the financial condition of our retail tenants and the willingness of retailers to lease space in our shopping centers. We face risks associated with our tenants being designated “Prohibited Persons” by the Office of Foreign Assets Control. Pursuant to Executive Order 13224 and other laws, the Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC”) maintains a list of persons designated as terrorists or who are otherwise blocked or banned (“Prohibited Persons”) from conducting business or engaging in transactions in the United States. Our leases, loans and other agreements may require us to comply with OFAC requirements. If a tenant or other party with whom we conduct business is placed on the OFAC list we may be required to terminate the lease or other agreement. Any such termination could result in a loss of revenue or otherwise negatively affect our financial results and cash flows. 10 WE MAY ACQUIRE OR SELL ASSETS OR DEVELOP PROPERTIES. OUR FAILURE OR INABILITY TO CONSUMMATE THESE TRANSACTIONS OR MANAGE THESE TRANSACTIONS COULD ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL RESULTS. We may acquire or develop properties and this may create risks. Although our stated business strategy is not to engage in acquisitions, we may acquire or develop properties when we believe that an acquisition or development project is otherwise consistent with our business strategy. We may not, however, succeed in consummating desired acquisitions or in completing developments on time or within budget. In addition, we may face competition in pursuing acquisition or development opportunities that could increase our costs. When we do pursue a project or acquisition, we may not succeed in leasing newly developed or acquired properties at rents sufficient to cover costs of acquisition or development and operations. Difficulties in integrating acquisitions may prove costly or time-consuming and could divert management’s attention. Acquisitions or developments in new markets or types of properties where we do not have the same level of market knowledge may result in weaker than anticipated performance. We may abandon acquisition or development opportunities that we have begun pursuing and consequently fail to recover expenses already incurred and have devoted management time to a matter not consummated. It may be difficult to buy and sell real estate quickly, which may limit our flexibility. Real estate investments are relatively difficult to buy and sell quickly. Consequently, we may have limited ability to vary our portfolio promptly in response to changes in economic or other conditions. Moreover, our ability to buy, sell, or finance real estate assets may be adversely affected during periods of uncertainty or unfavorable conditions in the credit markets as we, or potential buyers of our assets, may experience difficulty in obtaining financing. OUR ORGANIZATIONAL AND FINANCIAL STRUCTURE GIVES RISE TO OPERATIONAL AND FINANCIAL RISKS. We depend on dividends and distributions from our direct and indirect subsidiaries. The creditors of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the subsidiaries may pay any dividends or distributions to us. Substantially all of our properties and assets are held through subsidiaries. We depend on cash distributions and dividends from our subsidiaries for substantially all of our cash flow. The creditors of each of our direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligations to them when due and payable before that subsidiary may make distributions or dividends to us. Thus, our ability to pay dividends, if any, to our security holders depends on our subsidiaries’ ability to first satisfy their obligations to their creditors and our ability to satisfy our obligations, if any, to our creditors. In addition, our participation in any distribution of the assets of any of our direct or indirect subsidiaries upon the liquidation, reorganization or insolvency of the subsidiary, is only after the claims of the creditors, including trade creditors, and preferred security holders, if any, of the applicable direct or indirect subsidiaries are satisfied. Our existing financing documents contain covenants and restrictions that may restrict our operational and financial flexibility. At December 31, 2010, substantially all of the individual properties we own were encumbered by mortgages. These mortgages contain covenants that limit our ability to incur additional indebtedness on these properties, provide for lender approval of tenants’ leases in certain circumstances, and provide for yield maintenance or defeasance premiums to prepay them. These mortgages may significantly restrict our operational and financial flexibility. In addition, if we were to fail to perform our obligations under existing indebtedness or become insolvent or were liquidated, secured creditors would be entitled to payment in full from the proceeds of the sale of the pledged assets prior to any proceeds being paid to other creditors or to any holders of our securities. In such an event, it is possible that we would have insufficient assets remaining to make payments to other creditors or to any holders of our securities. 11 We have indebtedness, and this indebtedness and the cost to service it, may increase and debt refinancing may not be available on acceptable terms. As of December 31, 2010, total debt outstanding was $1,246,411,000. Our ratio of total debt to total enterprise value was 42.2% at December 31, 2010. “Enterprise value” means the market equity value of our common stock, plus debt, less cash and cash equivalents at such date. In addition, we have significant debt service obligations. For the year ended December 31, 2010, our scheduled cash payments for principal and interest were $92,770,000. In the future, we may incur additional debt, and thus increase the ratio of total debt to total enterprise value. If our level of indebtedness increases, there may be an increased risk of default which could adversely affect our financial condition and results of operations. In addition, in a rising interest rate environment, the cost of refinancing our existing debt and any new debt or market rate security or instrument may increase. Continued uncertainty in the equity and credit markets may negatively impact our ability to obtain financing on reasonable terms or at all, which may negatively affect our ability to refinance our debt. We may issue stock appreciations rights and other forms of stock-based compensation, and the cash required to settle these awards may impact our liquidity. In the past, we have issued stock appreciation rights (“SARs”) and other forms of stock-based compensation. As of December 31, 2010, no SARs or other forms of stock-based compensation were outstanding. We may in the future issue SARs and other forms of stock-based compensation as a form of executive compensation, and the cash required to settle these awards may impact our liquidity. We might fail to qualify or remain qualified as a REIT, and may be required to pay income taxes at corporate rates. Although we believe that we will remain organized and will continue to operate so as to qualify as a REIT for federal income tax purposes, we might fail to remain qualified. Our qualification as a REIT for federal income tax purposes is governed by highly technical and complex provisions of the Internal Revenue Code (the “Code”) for which there are only limited judicial or administrative interpretations. Our qualification as a REIT also depends on various facts and circumstances that are not entirely within our control. In addition, legislation, new regulations, administrative interpretations or court decisions might significantly change the tax laws with respect to the requirements for qualification as a REIT or the federal income tax consequences of qualifying as a REIT. If, with respect to any taxable year, we fail to maintain our qualification as a REIT and do not qualify under statutory relief provisions, we could not deduct distributions to stockholders in computing our taxable income and would have to pay federal income tax on our taxable income at regular corporate rates. The federal income tax payable would include any applicable alternative minimum tax. If we had to pay federal income tax, the amount of money available to distribute to stockholders and pay our indebtedness would be reduced for the year or years involved, and we would no longer be required to make distributions to stockholders. In addition, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, unless we were entitled to relief under the relevant statutory provisions. Although we currently intend to operate in a manner designed to allow us to qualify as a REIT, future economic, market, legal, tax or other considerations may cause us to revoke the REIT election or fail to qualify as a REIT. We face possible adverse changes in tax laws, which may result in an increase in our tax liability. From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. The shortfall in tax revenues for states and municipalities in recent years may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income. These increased tax costs could adversely affect our financial condition and results of operations and the amount of cash available for payment of dividends. Loss of our key personnel could harm our operations and adversely affect the value of our common stock. We are dependent on the efforts of Steven Roth, our Chief Executive Officer, and Michael D. Fascitelli, our President. Although we believe that we could find replacements for these key personnel, the loss of their services could harm our operations and adversely affect the value of our common stock. 12 ALEXANDER’S CHARTER DOCUMENTS AND APPLICABLE LAW MAY HINDER ANY ATTEMPT TO ACQUIRE US. Provisions in Alexander’s certificate of incorporation and by laws, as well as provisions of the Code and Delaware corporate law, may delay or prevent a change in control of the Company or a tender offer, even if such action might be beneficial to stockholders, and limit the stockholders’ opportunity to receive a potential premium for their shares of common stock over then prevailing market prices. Primarily to facilitate maintenance of its qualification as a REIT, Alexander’s certificate of incorporation generally prohibits ownership, directly, indirectly or beneficially, by any single stockholder of more than 9.9% of the outstanding shares of preferred stock of any class or 4.9% of outstanding common stock of any class. The Board of Directors may waive or modify these ownership limits with respect to one or more persons if it is satisfied that ownership in excess of these limits will not jeopardize Alexander’s status as a REIT for federal income tax purposes. In addition, the Board of Directors has, subject to certain conditions and limitations, exempted Vornado and certain of its affiliates from these ownership limitations. Stock owned in violation of these ownership limits will be subject to the loss of rights and other restrictions. These ownership limits may have the effect of inhibiting or impeding a change in control. Alexander’s Board of Directors is divided into three classes of directors. Directors of each class are chosen for three-year staggered terms. Staggered terms of directors may have the effect of delaying or preventing changes in control or management, even though changes in management or a change in control might be in the best interest of our stockholders. In addition, Alexander’s charter documents authorize the Board of Directors to: • • • • cause Alexander’s to issue additional authorized but unissued common stock or preferred stock; classify or reclassify, in one or more series, any unissued preferred stock; set the preferences, rights and other terms of any classified or reclassified stock that Alexander’s issues; and increase, without stockholder approval, the number of shares of beneficial interest that Alexander’s may issue. The Board of Directors could establish a series of preferred stock with terms that could delay, deter or prevent a change in control of Alexander’s or other transaction that might involve a premium price or otherwise be in the best interest of our stockholders, although the Board of Directors does not, at present, intend to establish a series of preferred stock of this kind. Alexander’s charter documents contain other provisions that may delay, deter or prevent a change in control of the Company or other transaction that might involve a premium price or otherwise be in the best interest of our stockholders. In addition, Vornado and Interstate (the three general partners of which are both trustees of Vornado and Directors of Alexander’s) together beneficially own approximately 59.6% of our outstanding shares of common stock. This degree of ownership is likely to reduce the possibility of a tender offer or an attempt to change control of the Company by a third party. We may change our policies without obtaining the approval of our stockholders. Our operating and financial policies, including our policies with respect to acquisitions of real estate or other assets, growth, operations, indebtedness, capitalization and dividends, are exclusively determined by our Board of Directors. Accordingly, our stockholders do not control these policies. 13 OUR OWNERSHIP STRUCTURE AND RELATED-PARTY TRANSACTIONS MAY GIVE RISE TO CONFLICTS OF INTEREST. Steven Roth, Vornado and Interstate may exercise substantial influence over us. They and some of our other directors and officers have interests or positions in other entities that may compete with us. At December 31, 2010, Interstate and its partners owned approximately 7.0% of the common shares of beneficial interest of Vornado and approximately 27.2% of our outstanding common stock. Steven Roth, David Mandelbaum and Russell B. Wight, Jr. are the partners of Interstate. Mr. Roth is the Chairman of our Board of Directors and Chief Executive Officer, the Chairman of the Board of Trustees of Vornado and the Managing General Partner of Interstate. Mr. Wight and Mr. Mandelbaum are both trustees of Vornado and members of our Board of Directors. In addition, Vornado manages and leases the real estate assets of Interstate. At December 31, 2010, Vornado owned 32.4% of our outstanding common stock, in addition to the 27.2% owned by Interstate and its partners. In addition to the relationships described in the immediately preceding paragraph, Michael D. Fascitelli, President and Chief Executive Officer of Vornado, is our President and a member of our Board of Directors. Dr. Richard West is a trustee of Vornado and a member of our Board of Directors. Joseph Macnow, our Executive Vice President and Chief Financial Officer, holds the same position with Vornado. Because of their overlapping interests, Vornado, Mr. Roth, Interstate and the other individuals noted in the preceding paragraphs may have substantial influence over Alexander’s, and on the outcome of any matters submitted to Alexander’s stockholders for approval. In addition, certain decisions concerning our operations or financial structure may present conflicts of interest among Vornado, Messrs. Roth, Mandelbaum and Wight and Interstate and other security holders. Vornado, Mr. Roth and Interstate may, in the future, engage in a wide variety of activities in the real estate business which may result in conflicts of interest with respect to matters affecting us, such as, which of these entities or persons, if any, may take advantage of potential business opportunities, the business focus of these entities, the types of properties and geographic locations in which these entities make investments, potential competition between business activities conducted, or sought to be conducted, by us, competition for properties and tenants, possible corporate transactions such as acquisitions, and other strategic decisions affecting the future of these entities. There may be conflicts of interest between Vornado, its affiliates and us. Vornado manages, develops and leases our properties under agreements that have one-year terms expiring in March of each year, which are automatically renewable. Because we share common senior management with Vornado and because five of the trustees of Vornado also constitute the majority of our directors, the terms of the foregoing agreements and any future agreements may not be comparable to those we could have negotiated with an unaffiliated third party. For a description of Interstate’s ownership of Vornado and Alexander’s, see “Steven Roth, Vornado and Interstate may exercise substantial influence over us. They and some of our other directors and officers have interests or positions in other entities that may compete with us.” above. 14 THE NUMBER OF SHARES OF ALEXANDER’S COMMON STOCK AND THE MARKET FOR THOSE SHARES GIVE RISE TO VARIOUS RISKS. The price of our common shares has been volatile and may fluctuate. The trading price of our common shares has been volatile and may continue to fluctuate widely as a result of a number of factors, many of which are outside of our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have in the past and may in the future adversely affect the market price of our common shares. Among the factors that could affect the price of our common shares are: • • • • • • • • • • • • • • • our financial condition and performance; the financial condition of our tenants, including the extent of tenant bankruptcies or defaults; actual or anticipated quarterly fluctuations in our operating results and financial condition; the reputation of REITs and real estate investments generally and the attractiveness of REIT equity securities in comparison to other equity securities, including securities issued by other real estate companies, and fixed income securities; uncertainly and volatility in the equity and credit markets; changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other real estate investment trusts; failure to meet analysts’ revenue or earnings estimates; speculation in the press or investment community; strategic actions by us or our competitors, such as acquisitions or restructurings; the extent of institutional investor interest in us; the extent of short-selling of our common shares and the shares of our competitors; fluctuations in the stock price and operating results of our competitors; general financial and economic market conditions and, in particular, developments related to market conditions for real estate investment trusts and other real estate related companies; domestic and international economic factors unrelated to our performance; and all other risk factors addressed elsewhere in this document. A significant decline in our stock price could result in substantial losses for stockholders. Alexander’s has additional shares of its common stock available for future issuance, which could decrease the market price of the common stock currently outstanding. The interest of our current stockholders could be diluted if we issue additional equity securities. As of December 31, 2010, we had authorized but unissued 4,826,550 shares of common stock, par value of $1.00 per share and 3,000,000 shares of preferred stock, par value $1.00 per share. In addition, 895,000 shares are available for future grant under the terms of our 2006 Omnibus Stock Plan. These awards may be granted in the form of options, restricted stock, SARs or other equity-based interests, and if granted, would reduce that number of shares available for future grants, provided however that an award that may be settled only in cash, would not reduce the number of shares available under the plan. We cannot predict the impact that future issuances of common or preferred stock or any exercise of outstanding options or grants of additional equity-based interests would have on the market price of our common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved comments from the staff of the Securities and Exchange Commission as of the date of this Annual Report on Form 10-K. 15 ITEM 2. PROPERTIES The following table shows the location, ownership, approximate size (excluding parking garages) and occupancy of each of our properties as of December 31, 2010. Land Acreage Building Square Feet Occupancy Rate Average Annualized Rent Per Square Foot 697,000 188,000 885,000 83,000 34,000 27,000 30,000 174,000 1,059,000 100% $ 82.14 100% 161.23 415,000 94% 61.57 Tenants Bloomberg L.P. Bloomberg L.P. The Home Depot The Container Store Hennes & Mauritz Various 106 Mall tenants Macy’s (owned by Macy’s, Inc.) Sears Lowe’s (ground lessee) Best Buy Lease Expiration/ Option Expiration(s) 2029/2039 2015/2020 2025/2035 2021 2019 Various Various N/A 2023/2033 2028/2053 2032 Sears 2021 Burlington Coat Factory (lease not commenced) Bed Bath & Beyond Marshalls Old Navy 2022/2027 2013/2021 2021 2021 85% 32.28 Costco Century 21 Kohl’s Toys "R"Us/Babies "R" Us Various 2034/2059 2030/2050 2030/2050 2021/2036 Various 100% 38.01 Property Operating Properties: 731 Lexington Avenue New York, New York Office Retail Kings Plaza Regional Shopping Center Brooklyn, New York Rego Park I Queens, New York Rego Park II Queens, New York In Service Under Development Routes 4 and 17 Paramus, New Jersey Roosevelt Avenue and Main Street Queens, New York (ground leased through January 2037) 1.9 24.3 4.8 6.6 339,000 289,000 114,000 53,000 1,210,000 195,000 50,000 46,000 36,000 16,000 343,000 145,000 135,000 133,000 47,000 90,000 550,000 65,000 615,000 30.3 - 100% - IKEA (ground lessee) 2041 1 167,000 100% 14.99 New World Mall LLC 2027/2037 Property to be Developed: Rego Park III, adjacent to Rego Park II Queens, New York 3.4 - 3,394,000 - - - - 16 ITEM 2. PROPERTIES – continued Operating Properties 731 Lexington Avenue The 731 Lexington Avenue property, a 1,307,000 square foot multi-use building, comprises the entire square block bounded by Lexington Avenue, East 59th Street, Third Avenue and East 58th Street in Manhattan, New York, and is situated in the heart of one of Manhattan’s busiest business and shopping districts, with convenient access to several subway and bus lines. The property is located across the street from Bloomingdale’s flagship store and only a few blocks away from Fifth Avenue and 57th Street. The building contains 885,000 and 174,000 of net rentable square feet of office and retail space, respectively, which we own, and 248,000 square feet of residential space consisting of 105 condominium units, which we sold. Bloomberg L.P. occupies all of the office space. The Home Depot (83,000 square feet), The Container Store (34,000 square feet) and Hennes & Mauritz (27,000 square feet) are the principal retail tenants. The office and retail spaces are encumbered by first mortgage loans with balances of $351,751,000 and $320,000,000, respectively, as of December 31, 2010. These loans mature in February 2014 and July 2015 and bear interest at 5.33% and 4.93%, respectively. Kings Plaza Regional Shopping Center The Kings Plaza Regional Shopping Center contains 1,210,000 square feet and is located on Flatbush Avenue in Brooklyn, New York. The center is anchored by a 339,000 square foot Macy’s (owned by Macy’s, Inc.), a 289,000 square foot Sears department store and a 114,000 square foot Lowe’s on land leased from us. Among the features are a marina, a parking deck (3,739 spaces) and an energy plant that generates electricity for the center. The following table sets forth lease expirations for the Mall tenants in the center as of December 31, 2010, for each of the next ten years, assuming none of the tenants exercise their renewal options. Number of Square Feet of Expiring Leases 6 13 14 10 Expiring Leases 12,067 42,600 35,652 37,965 Year Month to month 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 11 6 7 13 8 10 6 44,256 8,656 25,275 46,051 27,622 26,749 59,494 Annual Rent of Expiring Leases $ Total 1,076,292 2,225,484 2,489,844 2,495,220 3,153,720 635,652 1,633,548 2,979,468 1,893,744 1,919,256 2,791,656 $ Per Square Foot 89.19 52.24 69.84 65.72 71.26 73.43 64.63 64.70 68.56 71.75 46.92 Percent of Total Leased Square Feet 2.9% 10.1% 8.5% 9.0% 10.5% 2.1% 6.0% 11.0% 6.6% 6.4% 14.1% Percent of 2010 Gross Annual Rentals 4.2% 8.6% 9.6% 9.6% 12.2% 2.5% 6.3% 11.5% 7.3% 7.4% 10.8% 17 ITEM 2. PROPERTIES – continued Mall sales per square foot were $618 and $628 for the years ended December 31, 2010 and 2009, respectively. The following table sets forth the occupancy rate and the average annual rent per square foot for the Mall stores for each of the past five years. As of December 31, Occupancy Rate 2010 2009 2008 2007 2006 94% 92% 94% 94% 94% Average Annual Base Rent Per Square Foot $ 61.57 59.32 56.86 55.95 52.78 The center is encumbered by a first mortgage loan with a balance of $151,214,000 at December 31, 2010. The loan matures in June 2011 and bears interest at 7.46%. Rego Park I The Rego Park I Shopping Center contains 343,000 square feet and is located on Queens Boulevard and 63rd Road in Queens, New York. The center is anchored by a 195,000 square foot Sears department store, a 46,000 square foot Bed Bath & Beyond and a 36,000 square foot Marshalls. In January 2011, we leased 50,000 square feet to Burlington Coat Factory. The center contains a parking deck (1,265 spaces) that provides for paid parking. The center is encumbered by a 100% cash collateralized loan with a balance of $78,246,000 at December 31, 2010. The loan matures in March 2012, bears interest at 0.75% and is prepayable at any time without penalty. Rego Park II The Rego Park II property, a newly developed 615,000 square foot shopping center, is located adjacent to our Rego Park I property in Queens, New York. As of December 31, 2010, 89% of the center is in service and such portion is 100% leased, primarily to three anchor tenants: a 145,000 square foot Costco, a 135,000 square foot Century 21 and a 133,000 square foot Kohl’s. In addition, 47,000 square feet is leased to Toys “R” Us/Babies “R” Us, a one-third owned affiliate of Vornado. The center contains a parking deck (1,315 spaces) that provides paid parking. In December 2010, we repaid a portion of the construction loan and extended its maturity date to December 2011. The loan has a balance of $277,200,000 at December 31, 2010 and bears interest at LIBOR plus 1.20% (1.46% at December 31, 2010.) Paramus We own 30.3 acres of land located at the intersection of Routes 4 and 17 in Paramus, New Jersey. The property is located directly across from the Garden State Plaza regional shopping mall and is within two miles of three other regional shopping malls and ten miles of New York City. This land is leased to IKEA Property, Inc. The lease has a 40-year term expiring in 2041, with a purchase option in 2021 for $75,000,000. We have a $68,000,000 interest only, non-recourse mortgage loan on the property from a third-party lender. The fixed interest rate on the debt is 5.92% with interest payable monthly until maturity in October 2011. The annual triple-net rent is the sum of $700,000 plus the amount of debt service on the mortgage loan. If the purchase option is exercised, we will receive net cash proceeds of approximately $7,000,000 and recognize a net gain on the sale of the land of approximately $62,000,000. If the purchase option is not exercised, the triple-net rent for the last 20 years must include debt service sufficient to fully amortize $68,000,000 over the remaining 20-year lease term. 18 ITEM 2. PROPERTIES – continued Flushing The Flushing property is located at Roosevelt Avenue and Main Street in the downtown, commercial section of Flushing, Queens, New York. Roosevelt Avenue and Main Street are active shopping districts and there are many national retailers located in the area. A subway entrance is located directly in front of the property with bus service across the street. The property comprises a four-floor building containing 167,000 square feet and a parking garage, which is sub-leased to New World Mall, LLC for the remainder of our ground lease term. In 2003, we recognized $1,289,000 of income representing a non-refundable purchase deposit of $1,875,000, net of $586,000 of costs associated with the transaction, from a party that agreed to purchase this property; as such party had not met its obligations under a May 30, 2002 purchase contract. On September 10, 2002, November 7, 2002, and July 8, 2004, we received letters from the party demanding return of the deposit. On December 28, 2005, the party filed a complaint against us in the New York State Court alleging that we failed to honor the terms and conditions of the agreement. The complaint sought specific performance and, if specific performance was denied, it sought a return of the deposit plus interest and $50,000 in costs. In August 2010, the New York State Court entered judgment denying specific performance and ordered us to return the deposit together with accrued interest and fees. We have filed a notice of appeal and this judgment is stayed pending the appeal. As a result of the judgment, included as a component of “general and administrative” expenses on our consolidated statement of income for the year ended December 31, 2010 is a $3,135,000 litigation loss accrual, representing the amount of the deposit, accrued interest and fees. Property to be Developed Rego Park III We own approximately 3.4 acres of land adjacent to our Rego Park II property in Queens, New York, which comprises a one-quarter square block and is located at the intersection of Junction Boulevard and the Horace Harding Service Road. The land is currently being used for public paid parking and while the current plans for the development of this parcel are preliminary, it may include up to 80,000 square feet of retail space. There can be no assurance that this project will commence, be completed, completed on time or completed for the budgeted amount. Insurance We maintain general liability insurance with limits of $300,000,000 per occurrence and all-risk property and rental value insurance coverage with limits of $1.7 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as floods and earthquakes on each of our properties. There can be no assurance that we will be able to maintain similar levels of insurance coverage in the future in amounts and on terms that are commercially reasonable. We are responsible for deductibles and losses in excess of our insurance coverage, which could be material. Our mortgage loans are non-recourse to us, except for $75,000,000 of the $320,000,000 mortgage on our 731 Lexington Avenue property, in the event of a substantial casualty, as defined. Our mortgage loans contain customary covenants requiring us to maintain insurance. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance our properties. 19 ITEM 3. LEGAL PROCEEDINGS We are from time to time involved in legal actions arising in the ordinary course of business. In our opinion, after consultation with our legal counsel, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows. For a discussion of the litigation concerning our Flushing, New York, property, see “Item 2. Properties – Operating Properties – Flushing.” 20 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange under the symbol “ALX.” Set forth below are the high and low closing prices for the shares of our common stock for each full quarterly period within the two most recent years and any dividends paid per share during such periods. High 2010 Low Year Ended December 31, 2009 Dividends High Low Dividends $ 312.28 $ 267.94 $ - $ 266.93 $ 125.88 $ 340.00 282.03 347.83 297.16 421.82 314.45 2.50 2.50 2.50 303.14 160.46 325.22 250.00 314.05 260.15 - - - - Quarter First Second Third Fourth In order to maintain our qualification as a REIT under the Internal Revenue Code, we must distribute at least 90% of our taxable income to stockholders. Because the balance of our net operating loss carryover (“NOL”) has exceeded taxable income in the past, there was no distribution requirement and accordingly no dividends were paid. In 2010, our estimated taxable income exceeded the remaining balance of our NOL and we began paying a regular quarterly dividend of $2.50 per share (estimated quarterly taxable income) beginning in the second quarter of 2010. On January 12, 2011, we increased our regular quarterly dividend to $3.00 per share (an indicated annual rate of $12.00 per share). As of December 31, 2010, there were approximately 376 holders of record of our common stock. Recent Sales of Unregistered Securities During 2010, we did not sell any unregistered securities. Recent Purchases of Equity Securities During 2010, we did not repurchase any of our equity securities. 21 Performance Graph The following graph is a comparison of the five-year cumulative return of our common stock, the Standard & Poor’s 500 Index (the “S&P 500 Index”) and the National Association of Real Estate Investment Trusts’ (“NAREIT”) All Equity Index (excluding health care real estate investment trusts), a peer group index. The graph assumes that $100 was invested on December 31, 2005 in our common stock, the S&P 500 Index and the NAREIT All Equity Index and that all dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our stock will continue in line with the same or similar trends depicted in the graph below. Alexander’s S&P 500 Index The NAREIT All Equity Index 2005 100 100 100 2006 171 116 135 2007 144 122 114 2008 105 77 71 2009 124 97 91 2010 172 112 116 22 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial and operating data. This data should be read in conjunction with the consolidated financial statements and notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K. This data may not be comparable to, or indicative of, future operating results. (Amounts in thousands, except per share amounts) 2010 Year Ended December 31, 2008 2007 2009 2006 Total revenues Income (loss) before net gain on sale of condominiums(1) Net gain on sale of condominiums after income taxes Net income (loss) Net (income) loss attributable to the noncontrolling interest Net income (loss) attributable to Alexander’s Income (loss) per common share: Income (loss) per common share – basic Income (loss) per common share – diluted Balance sheet data: Total assets Real estate, at cost Accumulated depreciation and amortization Debt Total equity $ $ $ $ $ $ 241,350 $ 223,529 $ 211,097 $ 207,980 $ 198,772 67,445 $ - 67,445 132,941 $ - 132,941 76,295 $ - 76,295 115,509 $ - 115,509 (89,334) 13,256 (76,078) (1,016) 66,429 $ (751) 132,190 $ (7) 76,288 $ (1,168) 114,341 $ 1,095 (74,983) 13.01 $ 25.90 $ 15.05 $ 22.68 $ (14.92) 13.01 $ 25.89 $ 14.96 $ 22.44 $ (14.92) 1,679,300 $ 1,703,769 $ 1,603,568 $ 967,975 1,025,234 1,050,291 114,235 132,386 157,232 1,221,255 1,278,964 1,246,411 180,751 314,626 343,776 1,532,410 $ 1,447,242 692,388 80,779 1,068,498 28,337 835,081 96,183 1,110,197 137,426 __________________________ (1) Includes reversals of stock appreciation rights ("SARs") compensation expense of $34,275, $20,254 and $43,536 in 2009, 2008 and 2007, respectively, and an accrual for SARs compensation expense of $148,613 in 2006. 23 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Overview Alexander’s, Inc. (NYSE: ALX) is a real estate investment trust (“REIT”), incorporated in Delaware, engaged in leasing, managing, developing and redeveloping properties. All references to “we,” “us,” “our,” “Company,” and “Alexander’s”, refer to Alexander’s, Inc. and its consolidated subsidiaries. We are managed by, and our properties are leased and developed by, Vornado Realty Trust (“Vornado”) (NYSE: VNO). We have seven properties in the greater New York City metropolitan area. We compete with a large number of property owners and developers. Our success depends upon, among other factors, trends of national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, taxes, governmental regulations and legislation, population trends, zoning laws, and our ability to lease, sublease or sell our properties, at profitable levels. Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due. Substantially all businesses, including ours, were negatively affected by the 2008/2009 economic recession and illiquidity and volatility in the capital and financial markets. Although there are signs of an economic recovery and greater stability in the capital and financial markets, it is not possible for us to predict whether these trends will continue in the future or quantify the impact of these or any other trends on our financial results. In January 2011, we leased 50,000 square feet at our Rego Park I Shopping Center to Burlington Coat Factory. Year Ended December 31, 2010 Financial Results Summary Net income attributable to common stockholders for the year ended December 31, 2010 was $66,429,000, or $13.01 per diluted share, compared to $132,190,000, or $25.89 per diluted share, for the year ended December 31, 2009. Funds from operations attributable to common stockholders (“FFO”) for the year ended December 31, 2010 was $97,271,000, or $19.05 per diluted share, compared to $158,960,000, or $31.14 per diluted share, for the year ended December 31, 2009. Net income attributable to common stockholders and FFO for the years ended December 31, 2010 and 2009 include income of $5,113,000 and $42,472,000, respectively, or $1.00 and $8.32 per diluted share, respectively, from the reversal of a portion of the liability for income taxes due to the expiration of the applicable statute of limitations. The year ended December 31, 2010 also includes $3,135,000, or $0.61 per diluted share, for a litigation loss accrual related to our Flushing property and the year ended December 31, 2009 includes $34,275,000, or $6.71 per diluted share, for the reversal of a portion of previously recognized stock appreciation rights compensation expense. Quarter Ended December 31, 2010 Financial Results Summary Net income attributable to common stockholders for the quarter ended December 31, 2010 was $17,891,000, or $3.50 per diluted share, compared to $15,102,000, or $2.96 per diluted share, for the quarter ended December 31, 2009. FFO for the quarter ended December 31, 2010 was $25,982,000, or $5.09 per diluted share, compared to $22,372,000, or $4.38 per diluted share, for the quarter ended December 31, 2009. Significant Tenants Bloomberg L.P. (“Bloomberg”) accounted for $83,137,000, $77,988,000, and $66,333,000, or 34%, 35% and 31%, of our consolidated revenues in the years ended December 31, 2010, 2009 and 2008, respectively. No other tenant accounted for more than 10% of our consolidated revenues in any of the last three years. If we were to lose Bloomberg as a tenant, or if Bloomberg were to fail or become unable to perform its obligations under its lease, it would adversely affect our results of operations and financial condition. We receive and evaluate certain confidential financial information and metrics from Bloomberg on a semi-annual basis. In addition, we access and evaluate financial information regarding Bloomberg from private sources, as well as publicly available data. 24 Recently Issued Accounting Literature On January 21, 2010, the Financial Accounting Standards Board (“FASB”) issued an update to Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, adding new requirements for disclosures about transfers into and out of Levels 1 and 2 fair value measurements and additional disclosures about the activity within Level 3 fair value measurements. The adoption of this guidance on January 1, 2010 did not have any effect on our consolidated financial statements. On June 12, 2009, the FASB issued an update to ASC 810, Consolidation, which modifies the existing quantitative guidance used in determining the primary beneficiary of a variable interest entity (“VIE”) by requiring entities to qualitatively assess whether an enterprise is a primary beneficiary, based on whether the entity has (i) power over the significant activities of the VIE, and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The adoption of this guidance on January 1, 2010 did not have any effect on our consolidated financial statements. Critical Accounting Policies and Estimates Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Set forth below is a summary of our accounting policies that we believe are critical to the preparation of our consolidated financial statements. This summary should be read in conjunction with a more complete discussion of our accounting policies included in Note 2 to the consolidated financial statements in this Annual Report on Form 10-K. Real Estate Real estate is carried at cost, net of accumulated depreciation and amortization. As of December 31, 2010 and 2009, the carrying amount of our real estate, net of accumulated depreciation, was $893,059,000 and $892,848,000, respectively. Maintenance and repairs are charged to operations as incurred. Depreciation requires an estimate by management of the useful life of each property and improvement as well as an allocation of the costs associated with a property to its various components. If we do not allocate these costs appropriately or incorrectly estimate the useful lives of our real estate, depreciation expense may be misstated. As real estate is undergoing development activities, all property operating expenses, including interest expense, are capitalized to the cost of the real property to the extent that we believe such costs are recoverable through the value of the property. Our properties and related intangible assets, including properties to be developed in the future, currently under development and those that are substantially completed and are to be held and used, are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Estimates of future cash flows are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. For our development properties, estimates of future cash flows also include all future expenditures necessary to develop the asset, including interest payments that will be capitalized as part of the cost of the asset. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and is measured based on the excess of the property’s carrying amount over its estimated fair value. If our estimates of future cash flows, anticipated holding periods, or fair values change, based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses. 25 Critical Accounting Policies and Estimates - Continued Allowance for Doubtful Accounts We periodically evaluate the collectibility of amounts due from tenants, including the receivable arising from the straight- lining of rents, and maintain an allowance for doubtful accounts ($1,047,000 and $1,736,000 as of December 31, 2010 and 2009, respectively) for estimated losses resulting from the inability of tenants to make required payments under the lease agreements. We exercise judgment in establishing these allowances and consider payment history and current credit status in developing these estimates. These estimates may differ from actual results, which could be material to our consolidated financial statements. Revenue Recognition We have the following revenue sources and revenue recognition policies: • Base Rent (revenue arising from tenant leases) – These rents are recognized over the non-cancelable term of the related leases on a straight-line basis, which includes the effects of rent steps and free rent abatements under the leases. We commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease. • Percentage Rent (revenue arising from retail tenant leases that is contingent upon the sales of tenants exceeding defined thresholds) – These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been achieved). • Expense Reimbursements (revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective properties) – This revenue is accrued in the same periods as the expenses are incurred. • Parking income (revenue arising from the rental of parking space at our properties) – This income is recognized as cash is received. Before we recognize revenue, we assess its collectability. If our assessment of the collectability of revenue changes, the impact on our consolidated financial statements could be material. Income Taxes We operate in a manner intended to enable us to continue to qualify as a Real Estate Investment Trust (“REIT”) under Sections 856 – 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to maintain our qualification as a REIT under the Code, we must distribute at least 90% of our taxable income to stockholders each year. To the extent we do not distribute all of our taxable income, we would be subject to corporate level income taxes. Because the balance of our net operating loss carryover (“NOL”) has exceeded taxable income in the past, there was no distribution requirement. In 2010, our estimated taxable income exceeded the remaining balance of our NOL and we began paying a regular quarterly dividend which approximated our taxable income. Under ASC 740, Income Taxes, deferred income taxes would be recognized for temporary differences between the financial reporting basis of assets and liabilities and their respective tax basis and for operating loss and tax credit carry- forwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including tax planning strategies and other factors. As of December 31, 2010 and 2009, there were no deferred tax assets or liabilities on our consolidated balance sheets. 26 Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 Property Rentals Property rentals were $166,403,000 in the year ended December 31, 2010, compared to $155,275,000 in the year ended December 31, 2009, an increase of $11,128,000. This increase was primarily attributable to tenants at the Rego Park II property whose space was placed into service subsequent to the second half of 2009 and during 2010. Expense Reimbursements Tenant expense reimbursements were $74,947,000 in the year ended December 31, 2010, compared to $68,254,000 in the year ended December 31, 2009, an increase of $6,693,000. This increase was primarily due to higher reimbursable operating expenses and real estate taxes and services provided to tenants. This was primarily attributable to the Rego Park II property whose space was placed into service subsequent to the second half of 2009 and during 2010. Operating Expenses Operating expenses were $78,652,000 in the year ended December 31, 2010, compared to $73,340,000 in the year ended December 31, 2009, a increase of $5,312,000. This resulted from a $6,115,000 increase in reimbursable operating expenses and real estate taxes, primarily attributable to the Rego Park II property whose space was placed into service subsequent to the second half of 2009 and during 2010, partially offset by an $803,000 decrease in non-reimbursable operating expenses. Depreciation and Amortization Depreciation and amortization was $31,343,000 in the year ended December 31, 2010, compared to $27,284,000 in the year ended December 31, 2009, an increase of $4,059,000. This increase resulted primarily from depreciation on the portion of Rego Park II placed into service subsequent to the second half of 2009 and during 2010. General and Administrative Expenses Excluding $3,135,000 for a litigation loss accrual related to our Flushing property in 2010, and $34,275,000 for the reversal of SARs compensation expense and $1,407,000 for the write-off of previously capitalized costs at our Flushing property in 2009, general and administrative expenses increased by $35,000 from the prior year. Interest and Other Income, net Interest and other income, net was $851,000 in the year ended December 31, 2010, compared to $2,847,000 in the prior year, a decrease of $1,996,000. This decrease was primarily due to lower average yields on investments (0.13% in the current year as compared to 0.48% in the prior year). Interest and Debt Expense Interest and debt expense was $58,372,000 in the year ended December 31, 2010, compared to $57,473,000 in the prior year, an increase of $899,000. This increase was primarily due to (i) $2,183,000 of lower capitalized interest as a result of placing a portion of our Rego Park II property into service, (ii) $1,784,000 of interest related to our income tax liability, resulting primarily from a lower reversal of previously recognized interest expense in the current year as compared to the prior year, partially offset by (iii) interest savings of $2,433,000 from the partial repayment of our Kings Plaza debt in March 2010 and (iv) $351,000 of lower interest on the leasing commissions owed to Vornado. 27 Results of Operations – Year Ended December 31, 2010 Compared to December 31, 2009 - continued Net loss on Early Extinguishment of Debt Net loss on early extinguishment of debt was $1,238,000 in the year ended December 31, 2010, compared to $519,000 in the prior year and resulted from the open market purchases of our Kings Plaza debt of $27,500,000 and $11,948,000 in 2010 and 2009, respectively, for $28,738,000 and $12,467,000 in cash, respectively. Income Tax Benefit Income tax benefit was $2,641,000 in the year ended December 31, 2010, compared to $36,935,000 in the prior year, a decrease of $34,294,000. This decrease resulted primarily from a lower reversal of our income tax liability in the current year as compared to the prior year. These liabilities were reversed as a result of the expiration of the applicable statute of limitations. Net Income Attributable to the Noncontrolling Interest Net income attributable to the noncontrolling interest was $1,016,000 in the year ended December 31, 2010, compared to $751,000 in the prior year, and represents our venture partner’s 75% pro rata share of net income from our consolidated partially owned entity, the Kings Plaza energy plant joint venture. 28 Results of Operations – Year Ended December 31, 2009 Compared to December 31, 2008 Property Rentals Property rentals were $155,275,000 in the year ended December 31, 2009, compared to $143,004,000 in the year ended December 31, 2008, an increase of $12,271,000. This increase was primarily attributable to anchor tenants at the Rego Park II property whose space was placed into service during 2009. Expense Reimbursements Tenant expense reimbursements were $68,254,000 in the year ended December 31, 2009, compared to $68,093,000 in the year ended December 31, 2008, an increase of $161,000. Operating Expenses Operating expenses were $73,340,000 in the year ended December 31, 2009, compared to $77,110,000 in the year ended December 31, 2008, a decrease of $3,770,000. This decrease resulted primarily from a $3,707,000 write-off in 2008 of Circuit City’s receivable arising from the straight-lining of rent in connection with its lease termination at Rego Park I. Depreciation and Amortization Depreciation and amortization was $27,284,000 in the year ended December 31, 2009, compared to $24,066,000 in the year ended December 31, 2008, an increase of $3,218,000. This increase resulted primarily from depreciation on the portion of Rego Park II placed into service during 2009, partially offset by a $1,430,000 write-off of in 2008 of Circuit City’s tenant improvements in connection with its lease termination at Rego Park I. General and Administrative Expenses Excluding (i) $34,275,000 and $20,254,000 for the reversal of a portion of previously recognized SARs compensation expense in 2009 and 2008, respectively, and (ii) $1,407,000 for the write-off of previously capitalized costs at our Flushing property in 2009, general and administrative expenses decreased by $1,065,000 from 2008. This decrease resulted primarily from lower professional fees. Interest and Other Income, net Interest and other income, net was $2,847,000 in the year ended December 31, 2009, compared to $15,222,000 in the prior year, a decrease of $12,375,000. This decrease was primarily comprised of (i) $8,448,000 from lower average yields on investments (0.48% in the year ended December 31, 2009 as compared to 2.29% in the year ended December 2008), (ii) $2,164,000 from lower average cash balances in 2009 and (iii) $1,872,000 from the net gain on the sale of real estate tax abatement certificates in 2008. Interest and Debt Expense Interest and debt expense was $57,473,000 in the year ended December 31, 2009, compared to $62,474,000 in the prior year, a decrease of $5,001,000. This decrease was primarily comprised of (i) a $5,165,000 reversal of a portion of the liability for income taxes in the current year (which was previously recognized as interest expense) due to the expiration of the applicable statute of limitations, (ii) a $4,237,000 decrease in interest from the refinancing of the Rego Park I mortgage loan in March 2009, (iii) a $1,021,000 decrease in interest on the Rego Park II construction loan, primarily due to a lower average interest rate (1.58% in the year ended December 31, 2009 as compared to 3.81% in the prior year), (iv) a $569,000 decrease in interest on the income tax liability due to the reversal of a portion of the liability in 2009 and (v) a $507,000 decrease in interest on the leasing commissions due to Vornado, mainly due to a lower rate in 2009, partially offset by (vi) $7,132,000 of lower capitalized interest as a result of placing a portion of the Rego Park II property into service during 2009. 29 Results of Operations – Year Ended December 31, 2009 Compared to December 31, 2008 - continued Net Loss on Early Extinguishment of Debt Net loss on early extinguishment of debt was $519,000 in the year ended December 31, 2009 and resulted from the open market purchases of our Kings Plaza debt of $11,948,000 for $12,467,000 in cash. Income Tax Benefit (Expense) In the year ended December 31, 2009, we had an income tax benefit of $36,935,000, compared to an expense of $941,000 in the year ended December 31, 2008. The tax benefit in 2009 was due to the reversal of a portion of the liability for income taxes due to the expiration of the applicable statute of limitations. The tax expense in 2008 relates primarily to the interest income of our taxable REIT subsidiary which was liquidated in 2008. Net Income Attributable to the Noncontrolling Interest Net income attributable to the noncontrolling interest was $751,000 in the year ended December 31, 2009, compared to $7,000 in the year ended December 31, 2008, and represents our venture partner’s 75% pro rata share of net income from our consolidated partially owned entity, the Kings Plaza energy plant joint venture. 30 Related Party Transactions Vornado At December 31, 2010, Vornado owned 32.4% of our outstanding common stock. We are managed by, and our properties are leased and developed by, Vornado, pursuant to the agreements described below, which expire in March of each year and are automatically renewable. Steven Roth is the Chairman of our Board of Directors and Chief Executive Officer, the Managing General Partner of Interstate Properties (“Interstate”), a New Jersey general partnership, and the Chairman of the Board of Trustees of Vornado. At December 31, 2010, 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, 27.2% of our outstanding common stock, in addition to the 2.3% they indirectly own through Vornado. Michael D. Fascitelli, President and Chief Executive Officer of Vornado, is our President and a member of our Board of Directors. Joseph Macnow, our Executive Vice President and Chief Financial Officer, holds the same position with Vornado. Management and Development Agreements We pay 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) $0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue, and (iv) $248,000, escalating at 3% per annum, for managing the common area of 731 Lexington Avenue. In addition, Vornado is entitled to a development fee of 6% of development costs, as defined, with a minimum guaranteed fee of $750,000 per annum. Leasing Agreements Vornado also provides us with leasing services for a fee of 3% of rent for the first ten years of a lease term, 2% of rent for the eleventh through the twentieth year of a lease term, and 1% of rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by tenants. In the event third-party real estate brokers are used, the fees to Vornado increase by 1% and Vornado is responsible for the fees to the third-party real estate brokers. Vornado is also entitled to a commission upon the sale of any of our assets equal to 3% of gross proceeds, as defined, for asset sales less than $50,000,000 and 1% of gross proceeds, as defined, for asset sales of $50,000,000 or more. The total of these amounts is payable in annual installments in an amount not to exceed $4,000,000, with interest on the unpaid balance at LIBOR plus 1% (1.99% at December 31, 2010). Other Agreements We have agreements with Building Maintenance Services, a wholly owned subsidiary of Vornado, to supervise cleaning, engineering and security services at our Lexington Avenue and Kings Plaza properties for an annual fee of the cost for such services plus 6%. The following is a summary of fees to Vornado under the agreements discussed above. (Amounts in thousands) Company management fees Development fees Leasing fees Property management fees and payments for cleaning, Year Ended December 31, 2010 2009 2008 $ $ 3,000 727 4,267 $ 3,000 3,215 15,975 3,000 6,520 2,946 engineering and security services 4,342 4,108 4,146 $ 12,336 $ 26,298 $ 16,612 As a result of the substantial completion of the Rego Park II construction, we paid Vornado the unpaid balance of the development fee of $13,934,000 in the fourth quarter of 2010. At December 31, 2010, we owed Vornado $41,888,000 for leasing fees and $1,897,000 for management, property management and cleaning fees. 31     LIQUIDITY AND CAPITAL RESOURCES We anticipate that cash flows from continuing operations over the next twelve months, together with existing cash balances, will be adequate to fund our business operations, cash dividends to stockholders, debt amortization and recurring capital expenditures. Development Projects The Rego Park II property, a newly developed 615,000 square foot shopping center, is located adjacent to our Rego Park I property in Queens, New York. As of December 31, 2010, 89% of the center is in service. In December 2010, we repaid a portion of the construction loan and extended its maturity date to December 2011. The loan has a balance of $277,200,000 at December 31, 2010 and bears interest at LIBOR plus 1.20% (1.46% at December 31, 2010). Insurance We maintain general liability insurance with limits of $300,000,000 per occurrence and all-risk property and rental value insurance coverage with limits of $1.7 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as floods and earthquakes on each of our properties. There can be no assurance that we will be able to maintain similar levels of insurance coverage in the future in amounts and on terms that are commercially reasonable. We are responsible for deductibles and losses in excess of our insurance coverage, which could be material. Our mortgage loans are non-recourse to us, except for $75,000,000 of the $320,000,000 mortgage on our 731 Lexington Avenue property, in the event of a substantial casualty, as defined. Our mortgage loans contain customary covenants requiring us to maintain insurance. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance our properties. Dividends On January 12, 2011, we increased our regular quarterly dividend to $3.00 per share (an indicated annual rate of $12.00 per share). This dividend policy, if continued for all of 2011, would require us to pay out approximately $61,300,000. 32 LIQUIDITY AND CAPITAL RESOURCES – continued Debt and Contractual Obligations Below is a summary of our outstanding debt at December 31, 2010. (Amounts in thousands) Balance Interest Rate Maturity Kings Plaza Paramus Rego Park II(1) Rego Park I(2) Lexington Office Lexington Retail(3) $ $ 151,214 68,000 277,200 78,246 351,751 320,000 1,246,411 7.46% 5.92% 1.46% 0.75% 5.33% 4.93% Jun. 2011 Oct. 2011 Dec. 2011 Mar. 2012 Feb. 2014 Jul. 2015 __________________________ (1) This loan bears interest at LIBOR plus 1.20%. (2) This loan is 100% cash collateralized. (3) In the event of a substantial casualty, up to $75,000 of this loan may become recourse to us. Below is a summary of our contractual obligations and commitments as of December 31, 2010. (Amounts in thousands) Contractual obligations: Long-term debt obligations Operating lease obligations Purchase obligations (primarily constuction commitments) Other obligations (primarily due to Vornado) Total Less than One Year One to More than Three Years Five Years Five Years Three to $ 1,389,800 $ 13,018 557,961 $ 802 171,067 $ 1,605 660,772 $ 1,605 - 9,006 359 359 - - - 51,043 1,454,220 $ $ 7,135 566,257 $ 8,000 180,672 $ 8,000 670,377 $ 27,908 36,914 Commitments: Standby letters of credit $ 7,998,000 $ 7,998,000 $ - $ - $ - The table above excludes $3,041,000 of liabilities for income taxes for which the timing of future cash flows is uncertain. 33 LIQUIDITY AND CAPITAL RESOURCES – Continued Cash Flows Property rental income is our primary source of cash flow and is dependent on a number of factors including the occupancy level and rental rates of our properties, as well as our tenants’ ability to pay their rents. Our properties provide us with a relatively consistent stream of cash flow that enables us to pay our operating expenses, interest expense, recurring capital expenditures and cash dividends to stockholders. Other sources of liquidity to fund cash requirements include our existing cash, proceeds from financings, including mortgage or construction loans secured by our properties and proceeds from asset sales. Cash and cash equivalents were $397,220,000 at December 31, 2010, compared to $412,734,000 at December 31, 2009, a decrease of $15,514,000. This decrease resulted from $72,143,000 of net cash used in financing activities and $19,393,000 of net cash used in investing activities, partially offset by $76,022,000 of net cash provided by operating activities. Our consolidated outstanding debt was $1,246,411,000 at December 31, 2010, a $32,553,000 decrease from the balance at December 31, 2009. $496,414,000 of our outstanding debt matures during 2011. We may refinance our maturing debt as it comes due or choose to repay it. Year Ended December 31, 2010 Net cash provided by operating activities of $76,022,000 was comprised of net income of $67,445,000, and $15,792,000 of adjustments for non-cash items, partially offset by $7,215,000 for the net change in operating assets and liabilities. The adjustments for non-cash items were primarily comprised of (i) depreciation and amortization of $34,849,000, partially offset by (ii) straight-lining of rental income of $15,182,000 and (iii) a $5,113,000 reversal of a portion of the liability for income taxes. Net cash used in investing activities of $19,393,000 was primarily comprised of $42,310,000 of real estate additions, primarily related to the development of our Rego Park II property, and purchases of short-term investments of $23,000,000, partially offset by $40,000,000 of proceeds from maturing short-term investments. Net cash used in financing activities of $72,143,000 was primarily comprised of (i) dividends paid on common stock of $38,295,000, (ii) $27,500,000 for the purchase of a portion of our Kings Plaza debt, (iii) $24,039,000 for the repayment of a portion of Rego Park II construction loan upon exercise of the one-year extension option and (iv) $17,080,000 for the repayment of borrowings, partially offset by (v) $34,828,000 of borrowings under our Rego Park II construction loan. Year Ended December 31, 2009 Cash and cash equivalents were $412,734,000 at December 31, 2009, compared to $515,940,000 at December 31, 2008, a decrease of $103,206,000. This decrease resulted from $201,282,000 of net cash used in investing activities, partially offset by $58,497,000 of net cash provided by financing activities and $39,579,000 of net cash provided by operating activities. Net cash provided by operating activities of $39,579,000 was comprised of net income of $132,941,000, partially offset by adjustments for non-cash items of $67,799,000 and the net change in operating assets and liabilities of $25,563,000. The adjustments for non-cash items were comprised of (i) a $42,472,000 reversal of a portion of the liability for income taxes, (ii) a reversal of the liability for SARs compensation expense of $34,275,000 and (iii) straight-lining of rental income of $23,381,000, partially offset by (iv) depreciation and amortization of $30,445,000 and (v) other non-cash adjustments of $1,884,000. The net change in operating assets and liabilities of $25,563,000 included a $22,838,000 payment for SARs compensation expense. Net cash used in investing activities of $201,282,000 was primarily comprised of restricted cash of $86,427,000, primarily related to the fully cash-collateralized mortgage at Rego Park I, capital expenditures of $74,855,000, primarily related to the development of our Rego Park II project, and short-term investments of $55,000,000, partially offset by $15,000,000 of proceeds from maturing short-term investments. Net cash provided by financing activities of $58,497,000 was primarily comprised of $162,961,000 of proceeds from a construction loan to fund expenditures for our Rego Park II project, partially offset by repayments of borrowings of $105,252,000. 34 LIQUIDITY AND CAPITAL RESOURCES – Continued Year Ended December 31, 2008 Cash and cash equivalents were $515,940,000 at December 31, 2008, compared to $560,231,000 at December 31, 2007, a decrease of $44,291,000. This decrease resulted from $131,638,000 of net cash used in investing activities, primarily related to capital expenditures at our Rego Park II project, partially offset by $78,088,000 of net cash provided by financing activities and $9,259,000 of net cash provided by operating activities. Net cash provided by operating activities of $9,259,000 was primarily comprised of (i) net income of $76,295,000, partially offset by, (ii) the net change in operating assets and liabilities of $64,467,000 and (iii) adjustments for non-cash items of $2,569,000. The net change in operating assets and liabilities was primarily comprised of a $62,808,000 payment for a portion of the liability for SARs compensation expense. The adjustments for non-cash items were primarily comprised of (a) a reversal of a portion of the liability for SARs compensation expense of $20,254,000 and (b) straight-lining of rental income of $10,113,000, partially offset by (c) depreciation and amortization of $26,719,000. Net cash used in investing activities of $131,638,000 was primarily comprised of capital expenditures of $134,554,000, primarily related to the development of our Rego Park II project. Net cash provided by financing activities of $78,088,000 was primarily comprised of $125,909,000 of proceeds from a construction loan to fund expenditures for our Rego Park II project, partially offset by the payment of a special dividend of $35,571,000 and repayments of borrowings of $14,851,000. 35 Funds from Operations (“FFO”) FFO is computed in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciated real estate assets, depreciation and amortization expense from real estate assets, extraordinary items and other specified non-cash items, including the pro rata share of such adjustments of unconsolidated subsidiaries. FFO and FFO per diluted share are used by management, investors and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures employed by other companies. A reconciliation of our net income to FFO is provided below. FFO attributable to common stockholders for the year ended December 31, 2010 was $97,271,000, or $19.05 per diluted share, compared to $158,960,000, or $31.14 per diluted share, for the year ended December 31, 2009. FFO attributable to common stockholders for the years ended December 31, 2010 and 2009 include income of $5,113,000 and $42,472,000, or $1.00 and $8.32 per diluted share, respectively, from the reversal of a portion of the liability for income taxes due to the expiration of the applicable statute of limitations. The year ended December 31, 2010 also includes $3,135,000, or $0.61 per diluted share, for a litigation loss accrual related to our Flushing property and the year ended December 31, 2009 includes $34,275,000, or $6.71 per diluted share, for the reversal of a portion of previously recognized stock appreciation rights compensation expense. FFO attributable to common stockholders for the quarter ended December 31, 2010 was $25,982,000, or $5.09 per diluted share, compared to $22,372,000, or $4.38 per diluted share, for the year ended December 31, 2009. The following table reconciles our net income to FFO: (Amounts in thousands, except share and per share amounts) Net income attributable to Alexander’s Depreciation and amortization of real property FFO attributable to common stockholders FFO attributable to common stockholders per diluted share For the Year Ended December 31, For the Quarter Ended December 31, 2010 2009 2010 2009 66,429 $ 30,842 97,271 $ 132,190 $ 26,770 158,960 $ 17,891 $ 8,091 25,982 $ 15,102 7,270 22,372 19.05 $ 31.14 $ 5.09 $ 4.38 $ $ $ Weighted average shares used in computing diluted FFO per share 5,105,936 5,105,370 5,105,936 5,105,936 36 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. Our exposure to a change in interest rates is summarized in the table below. (Amounts in thousands, except per share amounts) Variable (including $41,888 due to Vornado) Fixed Rate Total effect on diluted earnings per share Balance as of December 31, 2010 Weighted-Average Interest Rate Effect of 1% Change in Base Rates $ $ 319,088 969,211 1,288,299 1.53% 5.24% $ $ $ 3,191 - 3,191 0.62 The fair value of our consolidated debt is calculated by discounting the future contractual cash flows of our existing debt using the current rates available to borrowers with similar credit ratings for the remaining terms of such debt. As of December 31, 2010 and 2009, the estimated fair value of our consolidated debt was $1,291,048,000 and $1,215,501,000, respectively. Our fair value estimates, which are made at the end of the reporting period, may be different from the amounts that may ultimately be realized upon disposition of our financial instruments. 37 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at December 31, 2010 and 2009 Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008 Consolidated Statements of Changes in Equity for the Years Ended December 31, 2010, 2009 and 2008 Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008 Notes to Consolidated Financial Statements Page Number 39 40 41 42 43 44 38 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Alexander’s, Inc. Paramus, New Jersey We have audited the accompanying consolidated balance sheets of Alexander’s, Inc. and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Alexander’s, Inc. and subsidiaries at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting. /s/ DELOITTE & TOUCHE LLP Parsippany, New Jersey February 22, 2011 39 ALEXANDER’S, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share amounts) ASSETS Real estate, at cost: Land Buildings and leasehold improvements Development and construction in progress Total Accumulated depreciation and amortization Real estate, net Cash and cash equivalents Short-term investments Restricted cash Accounts receivable, net of allowance for doubtful accounts of $1,047 and $1,736, respectively Receivable arising from the straight-lining of rents Deferred lease and other property costs, net (including unamortized leasing fees to Vornado of $48,949 and $49,638, respectively) Deferred debt issuance costs, net of accumulated amortization of $18,855, and $15,349, respectively Other assets LIABILITIES AND EQUITY Notes and mortgages payable Amounts due to Vornado Accounts payable and accrued expenses Liability for income taxes and other Total liabilities Commitments and contingencies Preferred stock: $1.00 par value per share; authorized, 3,000,000 shares; issued and outstanding, none Common stock: $1.00 par value per share; authorized, 10,000,000 shares; issued 5,173,450 shares; outstanding, 5,105,936 shares Additional capital Retained earnings Treasury stock: 67,514 shares, at cost Total Alexander’s equity Noncontrolling interest in consolidated subsidiary Total equity See notes to consolidated financial statements. $ $ $ December 31, 2010 2009 74,974 $ 934,782 40,535 1,050,291 (157,232) 893,059 397,220 23,000 85,567 4,224 175,680 74,974 832,761 117,499 1,025,234 (132,386) 892,848 412,734 40,000 91,484 2,159 160,498 68,835 8,167 23,548 1,679,300 $ 71,285 11,616 21,145 1,703,769 1,246,411 $ 43,785 41,610 3,718 1,335,524 1,278,964 56,666 45,208 8,305 1,389,143 - - 5,173 31,501 304,055 340,729 (375) 340,354 3,422 343,776 1,679,300 $ 5,173 31,501 275,921 312,595 (375) 312,220 2,406 314,626 1,703,769 $ 40 ALEXANDER’S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share amounts) Year Ended December 31, 2009 2010 2008 REVENUES Property rentals Expense reimbursements Total revenues $ 166,403 $ 74,947 241,350 155,275 $ 68,254 223,529 143,004 68,093 211,097 EXPENSES Operating (including fees to Vornado of $5,182, $4,948 and $4,986, respectively) Depreciation and amortization General and administrative (including a reversal of stock appreciation rights (“SARs”) compensation expense of $34,275 and $20,254, in 2009 and 2008, respectively, and management fees to Vornado of $2,160 in each year) Total expenses OPERATING INCOME Interest and other income, net Interest and debt expense Net loss on early extinguishment of debt Income before income taxes Income tax benefit (expense) Net income Net income attributable to the noncontrolling interest Net income attributable to Alexander’s Net income per common share - basic Weighted average shares - basic Net income per common share - diluted Weighted average shares - diluted Dividends per common share (including a special dividend in 2008) $ $ $ $ 78,652 31,343 73,340 27,284 77,110 24,066 7,792 117,787 (28,246) 72,378 (14,567) 86,609 123,563 151,151 124,488 851 (58,372) (1,238) 64,804 2,641 67,445 (1,016) 66,429 $ 2,847 (57,473) (519) 96,006 36,935 132,941 (751) 132,190 $ 15,222 (62,474) - 77,236 (941) 76,295 (7) 76,288 13.01 $ 25.90 $ 15.05 5,105,936 5,103,790 5,067,426 13.01 $ 25.89 $ 14.96 5,105,936 5,105,370 5,098,529 7.50 $ - $ 7.00 See notes to consolidated financial statements. 41 ALEXANDER’S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in thousands) (Amounts in thousands) Common Stock Shares Amount Additional Capital Retained Earnings Treasury Stock Alexander’s controlling Equity Interest Total Equity Non- Balance, December 31, 2007 Net income Special cash dividend ($7.00 per share) Distributions Common stock issued under option plan Balance, December 31, 2008 Net income Common stock issued under option plan Balance, December 31, 2009 Net income Dividends paid on common stock 5,173 $ - 5,173 $ - - - - 5,173 - - 5,173 - - - - 5,173 - - 5,173 - 27,636 $ - - - 3,011 30,647 - 854 31,501 - 103,014 $ 76,288 (720) $ - 135,103 $ 76,288 2,323 $ 7 137,426 76,295 (35,571) - - 143,731 132,190 - 275,921 66,429 - - 265 (455) - 80 (375) - (35,571) - 3,276 179,096 132,190 934 312,220 66,429 - (675) - 1,655 751 - 2,406 1,016 (35,571) (675) 3,276 180,751 132,941 934 314,626 67,445 - - - (38,295) - (38,295) - (38,295) Balance, December 31, 2010 5,173 $ 5,173 $ 31,501 $ 304,055 $ (375) $ 340,354 $ 3,422 $ 343,776 See notes to consolidated financial statements. 42 ALEXANDER’S, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Year Ended December 31, 2009 2010 2008 CASH FLOWS FROM OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization (including amortization of debt issuance costs) Straight-lining of rental income Reversal of income tax liability Liability for stock appreciation rights Other non-cash adjustments Change in operating assets and liabilities: Accounts receivable, net Other assets Payment for stock appreciation rights Accounts payable and accrued expenses Income tax liability of taxable REIT subsidiary Amounts due to Vornado Other liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Construction in progress and real estate additions Purchases of short-term investments Proceeds from maturing short-term investments Restricted cash Proceeds from the sale of real estate tax abatement certificates Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Debt repayments Dividends paid (including a special dividend in 2008) Proceeds from borrowings Debt issuance costs Exercise of stock options Distributions to the noncontrolling interest Net cash (used in) provided by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for interest (of which $1,269, $3,452 and $10,584 have been capitalized) Non-cash additions to real estate included in accounts payable and accrued expenses $ 67,445 $ 132,941 $ 76,295 34,849 (15,182) (5,113) - 1,238 (2,065) (6,068) - 13,273 704 (12,881) (178) 76,022 30,445 (23,381) (42,472) (34,275) 1,884 4,421 (12,421) (22,838) 4,668 2,054 (1,344) (103) 39,579 26,719 (10,113) (800) (20,254) 1,879 (635) (3,947) (62,808) (4,467) 2,549 4,898 (57) 9,259 (42,310) (23,000) 40,000 5,917 - (19,393) (74,855) (55,000) 15,000 (86,427) - (201,282) (134,554) - - (70) 2,986 (131,638) (68,619) (38,295) 34,828 (57) - - (72,143) (105,252) - 162,961 (146) 934 - 58,497 (14,851) (35,571) 125,909 - 3,276 (675) 78,088 (15,514) 412,734 397,220 $ (103,206) 515,940 412,734 $ (44,291) 560,231 515,940 52,889 $ 57,906 $ 68,097 - $ 22,409 $ 33,406 $ $ $ See notes to consolidated financial statements. 43 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION Alexander’s, Inc. (NYSE: ALX) 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,” “Company” and “Alexander’s” refer to Alexander’s, Inc. and its consolidated subsidiaries. We are managed by, and our properties are leased and developed by, Vornado Realty Trust (“Vornado”) (NYSE: VNO). We have seven properties in the greater New York City metropolitan area consisting of: Operating properties (i) the 731 Lexington Avenue property, a 1,307,000 square foot multi-use building, comprising the entire square block bounded by Lexington Avenue, East 59th Street, Third Avenue and East 58th Street in Manhattan. The building contains 885,000 and 174,000 of net rentable square feet of office and retail space, respectively, which we own, and 248,000 square feet of residential space consisting of 105 condominium units, which we sold. Bloomberg L.P. (“Bloomberg”) occupies all of the office space. The Home Depot (83,000 square feet), The Container Store (34,000 square feet) and Hennes & Mauritz (27,000 square feet) are the principal retail tenants; (ii) the Kings Plaza Regional Shopping Center contains 1,210,000 square feet and is located on Flatbush Avenue in Brooklyn. The center is anchored by a 339,000 square foot Macy’s (owned by Macy’s, Inc.), a 289,000 square foot Sears department store and a 114,000 square foot Lowe’s; (iii) the Rego Park I Shopping Center contains 343,000 square feet and is located on Queens Boulevard and 63rd Road in Queens. The center is anchored by a 195,000 square foot Sears department store, a 46,000 square foot Bed Bath & Beyond and a 36,000 square foot Marshalls. In January 2011, we leased 50,000 square feet to Burlington Coat Factory; (iv) the Rego Park II property, a newly developed 615,000 square foot shopping center, is located adjacent to our Rego Park I property in Queens. As of December 31, 2010, 89% of the center is in service and such portion is 100% leased, primarily to three anchor tenants: a 145,000 square foot Costco, a 135,000 square foot Century 21 and a 133,000 square foot Kohl’s. In addition 47,000 square feet is leased to Toys “R” Us/Babies “R” Us, a one- third owned affiliate of Vornado; (v) the Paramus property, located at the intersection of Routes 4 and 17 in Paramus, New Jersey, consists of 30.3 acres of land leased to IKEA Property, Inc.; (vi) the Flushing property, a 167,000 square foot building, is located at Roosevelt Avenue and Main Street in Queens and is sub-leased to New World Mall LLC for the remainder of our ground lease term; and Property to be developed (vii) the Rego Park III property is a 3.4 acre land parcel adjacent to our Rego Park II property in Queens at the intersection of Junction Boulevard and the Horace Harding Service Road. We have determined that our properties have similar economic characteristics and meet the criteria which permit the properties to be aggregated into one reportable segment (the leasing, management, development and redeveloping of properties in the greater New York City metropolitan area). Our chief operating decision-maker assesses and measures segment operating results based on a performance measure referred to as net operating income at the individual operating segment. Net operating income for each property represents net rental revenues less operating expenses. 44 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation – The accompanying consolidated financial statements include our accounts and those of our consolidated subsidiaries. All significant intercompany amounts have been eliminated. Our financial statements are prepared in conformity with the accounting principles generally accepted in the United States of America (“GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Real Estate – Real estate is carried at cost, net of accumulated depreciation and amortization. Maintenance and repairs are charged to operations as incurred. Depreciation requires an estimate by management of the useful life of each property and improvement as well as an allocation of the costs associated with a property to its various components. If we do not allocate these costs appropriately or incorrectly estimate the useful lives of our real estate, depreciation expense may be misstated. As real estate is undergoing development activities, all property operating expenses, including interest expense, are capitalized to the cost of the real property to the extent that we believe such costs are recoverable through the value of the property. Our properties and related intangible assets, including properties to be developed in the future, currently under development and those that are substantially completed and are to be held and used, are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Estimates of future cash flows are based on our current plans, intended holding periods and available market information at the time the analyses are prepared. For our development properties, estimates of future cash flows also include all future expenditures necessary to develop the asset, including interest payments that will be capitalized as part of the cost of the asset. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and is measured based on the excess of the property’s carrying amount over its estimated fair value. If our estimates of future cash flows, anticipated holding periods, or fair values change, based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses. Cash and Cash Equivalents – Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. The majority of our cash and cash equivalents are held at major commercial banks which may at times exceed the Federal Deposit Insurance Corporation limit. To date we have not experienced any losses on our invested cash. Short-term Investments – Short-term investments consist of certificates of deposit placed through an account registry service (“CDARS”) with original maturities of 91 to 180 days. These investments are FDIC insured and classified as available-for-sale. Restricted Cash – Restricted cash consists of cash held in a non-interest bearing escrow account in connection with our Rego Park I 100% cash collateralized mortgage, as well as security deposits and other cash escrowed under loan agreements for debt service, real estate taxes, property insurance and capital improvements. 45 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Allowance for Doubtful Accounts – We periodically evaluate the collectibility of amounts due from tenants, including the receivable arising from the straight-lining of rents, and maintain an allowance for doubtful accounts ($1,047,000 and $1,736,000 as of December 31, 2010 and 2009, respectively) for estimated losses resulting from the inability of tenants to make required payments under the lease agreements. We exercise judgment in establishing these allowances and consider payment history and current credit status in developing these estimates. Deferred Charges – Direct financing costs are deferred and amortized over the terms of the related agreements as a component of interest and debt expense. Direct costs related to leasing activities are capitalized and amortized on a straight- line basis over the lives of the related leases. All other deferred charges are amortized on a straight-line basis, which approximates the effective interest rate method, in accordance with the terms of the agreements to which they relate. Fair Value of Financial Instruments – The fair value of our consolidated debt is calculated by discounting the future contractual cash flows of our existing debt using the current rates available to borrowers with similar credit ratings for the remaining terms of such debt. As of December 31, 2010 and 2009, the estimated fair value of our consolidated debt was $1,291,048,000 and $1,215,501,000, respectively. Our fair value estimates, which are made at the end of the reporting period, may be different from the amounts that may ultimately be realized upon disposition of our financial instruments. Revenue Recognition – We have the following revenue sources and revenue recognition policies: Base Rent (revenue arising from tenant leases) – These rents are recognized over the non-cancelable term of the related leases on a straight-line basis, which includes the effects of rent steps and free rent abatements under the leases. We commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease. Percentage Rent (revenue arising from retail tenant leases that is contingent upon the sales of tenants exceeding defined thresholds) – These rents are recognized only after the contingency has been removed (i.e., when tenant sales thresholds have been achieved). Expense Reimbursements (revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective properties) – This revenue is accrued in the same periods as the expenses are incurred. Parking Income (revenue arising from the rental of parking space at our properties) – This income is recognized as cash is received. Income Taxes – We operate in a manner intended to enable us to continue to qualify as a Real Estate Investment Trust (“REIT”) under Sections 856 – 860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to maintain our qualification as a REIT under the Code, we must distribute at least 90% of our taxable income to stockholders each year. To the extent we do not distribute all of our taxable income, we would be subject to corporate level income taxes. Because the balance of our net operating loss carryover (“NOL”) has exceeded taxable income in the past, there was no distribution requirement. In 2010, our estimated taxable income exceeded the remaining balance of our NOL and we began paying a regular quarterly dividend which approximated our taxable income. All of the dividends distributed in 2010 were characterized as ordinary income for federal income tax purposes. In 2008, we declared and paid a special dividend which was attributable to the liquidation of the wholly owned 731 Lexington Avenue taxable REIT subsidiary into Alexander’s. 46 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued The following table reconciles our net income to estimated taxable income (loss) for the years ended December 31, 2010, 2009 and 2008. (Unaudited and in thousands) $ Net income attributable to Alexander’s Straight-line rent adjustments Depreciation and amortization timing differences Reversal of liability for income taxes Interest expense Stock appreciation rights compensation expense Net income of the TRS Other Taxable income (loss) before NOL NOL carried forward 2010 Years Ended December 31, 2009 132,190 $ (23,381) 1,385 (37,307) (107) (57,113) - (3,395) 12,272 (29,211) 66,429 $ (15,182) 602 (3,162) - - - 6,245 54,932 (16,939) 2008 76,288 (6,634) 16 (625) - (83,973) (3,165) (9,521) (27,614) (1,597) Taxable income/(NOL) $ 37,993 $ (16,939) $ (29,211) At December 31, 2010, the net basis of our assets and liabilities for tax purposes is approximately $197,991,000 lower than the amount reported for financial statement purposes. Under ASC 740, Income Taxes, deferred income taxes would be recognized for temporary differences between the financial reporting basis of assets and liabilities and their respective tax basis and for operating loss and tax credit carry- forwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including tax planning strategies and other factors. As of December 31, 2010 and 2009 there were no deferred tax assets or liabilities on our consolidated balance sheets. Income Per Share Basic income per share is computed based on weighted average shares of common stock outstanding during the period. Diluted income per share is computed based on the weighted average shares of common stock outstanding during the period and assumes all potentially dilutive securities were converted into common stock at the earliest date possible. Recently Issued Accounting Literature On January 21, 2010, the Financial Accounting Standards Board (“FASB”) issued an update to Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, adding new requirements for disclosures about transfers into and out of Levels 1 and 2 fair value measurements and additional disclosures about the activity within Level 3 fair value measurements. The adoption of this guidance on January 1, 2010 did not have any effect on our consolidated financial statements. On June 12, 2009, the FASB issued an update to ASC 810, Consolidation, which modifies the existing quantitative guidance used in determining the primary beneficiary of a variable interest entity (“VIE”) by requiring entities to qualitatively assess whether an enterprise is a primary beneficiary, based on whether the entity has (i) power over the significant activities of the VIE, and (ii) an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The adoption of this guidance on January 1, 2010 did not have any effect on our consolidated financial statements. 47 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. RELATED PARTY TRANSACTIONS Vornado At December 31, 2010, Vornado owned 32.4% of our outstanding common stock. We are managed by, and our properties are leased and developed by, Vornado, pursuant to the agreements described below, which expire in March of each year and are automatically renewable. Steven Roth is the Chairman of our Board of Directors and our Chief Executive Officer, the Managing General Partner of Interstate Properties (“Interstate”), a New Jersey general partnership, and the Chairman of the Board of Trustees of Vornado. At December 31, 2010, 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, 27.2% of our outstanding common stock, in addition to the 2.3% they indirectly own through Vornado. Michael D. Fascitelli, President and Chief Executive Officer of Vornado, is our President and a member of our Board of Directors. Joseph Macnow, our Executive Vice President and Chief Financial Officer, holds the same position with Vornado. Management and Development Agreements We pay 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) $0.50 per square foot of the tenant-occupied office and retail space at 731 Lexington Avenue, and (iv) $248,000, escalating at 3% per annum, for managing the common area of 731 Lexington Avenue. In addition, Vornado is entitled to a development fee of 6% of development costs, as defined, with a minimum guaranteed fee of $750,000 per annum. Leasing Agreements Vornado also provides us with leasing services for a fee of 3% of rent for the first ten years of a lease term, 2% of rent for the eleventh through the twentieth year of a lease term, and 1% of rent for the twenty-first through thirtieth year of a lease term, subject to the payment of rents by tenants. In the event third-party real estate brokers are used, the fees to Vornado increase by 1% and Vornado is responsible for the fees to the third-party real estate brokers. Vornado is also entitled to a commission upon the sale of any of our assets equal to 3% of gross proceeds, as defined, for asset sales less than $50,000,000 and 1% of gross proceeds, as defined, for asset sales of $50,000,000 or more. The total of these amounts is payable in annual installments in an amount not to exceed $4,000,000, with interest on the unpaid balance at LIBOR plus 1% (1.99% at December 31, 2010). Other Agreements We have agreements with Building Maintenance Services, a wholly owned subsidiary of Vornado, to supervise cleaning, engineering and security services at our Lexington Avenue and Kings Plaza properties for an annual fee of the cost for such services plus 6%. 48 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. RELATED PARTY TRANSACTIONS - continued The following is a summary of fees to Vornado under the agreements discussed above. (Amounts in thousands) Company management fees Development fees Leasing fees Property management fees and payments for cleaning, engineering and security services Year Ended December 31, 2009 2008 2010 3,000 $ 727 4,267 3,000 $ 3,215 15,975 3,000 6,520 2,946 4,342 12,336 $ 4,108 26,298 $ 4,146 16,612 $ $ As a result of the substantial completion of the Rego Park II construction, we paid Vornado the unpaid balance of the development fee of $13,934,000 in the fourth quarter of 2010. At December 31, 2010, we owed Vornado $41,888,000 for leasing fees, and $1,897,000 for management, property management and cleaning fees. 4. FAIR VALUE MEASUREMENTS ASC 820, Fair Value Measurement and Disclosures defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 – observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 – unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Financial assets recorded at fair value in our consolidated financial statements at December 31, 2010 and 2009 consist solely of short-term investments (CDARS classified as available-for-sale) and are presented in the table below based on their level in the fair value hierarchy. There were no financial liabilities recorded at fair value at December 31, 2010 and 2009. (Amounts in thousands) Short-term investments (Amounts in thousands) Short-term investments As of December 31, 2010 Total Level 1 Level 2 Level 3 23,000 $ 23,000 $ - $ As of December 31, 2009 Total Level 1 Level 2 Level 3 40,000 $ 40,000 $ - $ - - $ $ 49 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. REGO PARK II PROJECT The Rego Park II property, a newly developed 615,000 square foot shopping center, is located adjacent to our Rego Park I property in Queens, New York. As of December 31, 2010, 89% of the center is in service and such portion is 100% leased, primarily to three anchor tenants: a 145,000 square foot Costco, a 135,000 square foot Century 21 and a 133,000 square foot Kohl’s. In addition, 47,000 square feet is leased to Toys “R” Us/Babies “R” Us, a one-third owned affiliate of Vornado. The center contains a parking deck (1,315 spaces) that provides paid parking. In December 2010, we repaid a portion of the construction loan and extended its maturity date to December 2011. The loan has a balance of $277,200,000 at December 31, 2010 and bears interest at LIBOR plus 1.20% (1.46% at December 31, 2010). 6. NOTES AND MORTGAGES PAYABLE The following is a summary of our outstanding notes and mortgages payable. Maturity Interest Rate at December 31, 2010 Balance at December 31 2009 2010 (Amounts in thousands) First mortgage, secured by the Kings Plaza Regional Shopping Center First mortgage, secured by the Paramus property Construction loan, secured by the Rego Park II Shopping Center(2) First mortgage, secured by the Rego Park I Jun. 2011 Oct. 2011 Dec. 2011 Shopping Center (100% cash collateralized) Mar. 2012 First mortgage, secured by the office space at the Lexington Avenue property First mortgage, secured by the retail space at the Lexington Avenue property(3) Feb. 2014 Jul. 2015 7.46 % 5.92 % 1.46 % 0.75 % 5.33 % 4.93 % $ 151,214 (1) $ 68,000 183,318 68,000 277,200 266,411 78,246 78,246 351,751 362,989 320,000 1,246,411 $ 320,000 1,278,964 $ ___________________ (1) On March 3, 2010, we acquired $27,500 of this debt for $28,738 in cash, resulting in a $1,238 net loss on early extinguishment of debt. (2) This loan bears interest at LIBOR plus 1.20%. (3) In the event of a substantial casualty, as defined, up to $75,000 of this loan may become recourse to us. All of our debt is secured by mortgages and/or pledges of the stock of the subsidiaries holding the properties. The net carrying value of real estate collateralizing the debt amounted to $890,289,000 at December 31, 2010. Our existing financing documents contain covenants that limit our ability to incur additional indebtedness on these properties, provide for lender approval of tenants’ leases in certain circumstances, and provide for yield maintenance to prepay them. As of December 31, 2010, the principal repayments for the next five years and thereafter are as follows: (Amounts in thousands) Year Ending December 31, 2011 2012 2013 2014 2015 Thereafter $ Amount 508,275 90,711 13,208 314,217 320,000 - We may refinance our maturing debt as it comes due or choose to repay it. 50 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. LIABILITY FOR INCOME TAXES In accordance with the provisions of ASC 740, Income Taxes, we have an income tax liability of $3,041,000 and $7,450,000 as of December 31, 2010 and 2009, respectively. This ASC 740 liability, which includes $2,466,000 and $4,041,000 of accrued interest as of December 31, 2010 and 2009, respectively, is included as a component of “liability for income taxes and other,” on our consolidated balance sheets. If this liability were reversed, it would result in non-cash income and reduce our effective tax rate. Of this liability, $2,455,000 is expected to reverse in the third quarter of 2011 as a result of the expiration of the applicable statute of limitations. Interest expense related to the ASC 740 liability is included as a component of “interest and debt expense” on our consolidated statements of income. In the years ended December 31, 2010, 2009 and 2008, we recognized interest of $376,000, $1,807,000 and $2,549,000, respectively. (Amounts in thousands) Balance at January 1, 2009 Amount $ 47,868 Additions based on tax positions related to the current year Additions for tax positions of prior years Reduction for tax positions of prior years Settlements Balance at December 31, 2009 Additions based on tax positions related to the current year Additions for tax positions of prior years Reduction for tax positions of prior years Settlements Balance at December 31, 2010 $ 247 1,807 (42,472) - 7,450 328 376 (5,113) - 3,041 In 2010 and 2009, we reversed $5,113,000 and $42,472,000, respectively, of liabilities related to income taxes as a result of the expiration of the applicable statute of limitations. Accordingly, we recognized income in 2010 and 2009, of which $3,162,000 and $37,307,000, respectively, were included as a component of “income tax benefit” (portion previously recognized as income tax expense) and $1,951,000 and $5,165,000, respectively, were included as a reduction of “interest and debt expense” (portion previously recognized as interest expense) on our consolidated statements of income. As of December 31, 2010, Taxable REIT Subsidiary (“TRS”) tax returns for the years 2004 through 2009 and REIT tax returns for the years 2007 through 2009 remain open to examination by the major taxing jurisdictions to which we are subject. 8. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARY Prior to 2005, we owned and operated an energy plant that generated all of the electrical power at our Kings Plaza Regional Shopping Center. In April 2005, we contributed the 35 year old plant and $750,000 in cash, for a 25% interest in a joint venture. In addition, we provided the joint venture with a $15,350,000 loan (eliminated in consolidation). The joint venture rebuilt the plant at a total cost of approximately $18,350,000 and began operations in March 2007. Pursuant to ASC Topic 805, Business Combinations, we control the joint venture and accordingly, consolidate its accounts into our consolidated financial statements. 51 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. LEASES As Lessor We lease space to tenants in retail centers and an office building. The rental terms range from approximately 5 to 25 years. The leases provide for the payment of fixed base rents payable monthly in advance as well as reimbursements of real estate taxes, insurance and maintenance costs. Retail leases also provide for the payment by the lessee of additional rents based on a percentage of their sales. Future base rental revenue under these non-cancelable operating leases is as follows: (Amounts in thousands) Year Ending December 31, 2011 2012 2013 2014 2015 Thereafter $ Amount 150,019 154,098 148,945 146,158 145,877 1,506,739 These future minimum amounts do not include additional rents based on a percentage of tenants’ sales. For the years ended December 31, 2010, 2009, and 2008, these rents were $665,000, $633,000, and $784,000, respectively. Bloomberg L.P. (“Bloomberg”) accounted for $83,137,000, $77,988,000 and $66,333,000, or 34%, 35% and 31% of our consolidated revenues in the years ended December 31, 2010, 2009 and 2008, respectively. No other tenant accounted for more than 10% of consolidated revenues in any of the last three years. If we were to lose Bloomberg as a tenant, or if Bloomberg were to fail or become unable to perform its obligations under its lease, it would adversely affect our results of operations and financial condition. We receive and evaluate certain confidential financial information and metrics from Bloomberg on a semi-annual basis. In addition, we access and evaluate financial information regarding Bloomberg from private sources, as well as publicly available data. As Lessee We are a tenant under long-term ground leases that range from approximately 8 to 17 years. Future minimum lease payments under these operating leases are as follows: (Amounts in thousands) Year Ending December 31, 2011 2012 2013 2014 2015 Thereafter $ Amount 802 802 803 802 803 9,006 Rent expense is primarily for our Flushing ground lease and was $848,000, $848,000, and $841,000 for the years ended December 31, 2010, 2009 and 2008, respectively. 52 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. COMMITMENTS AND CONTINGENCIES Insurance We maintain general liability insurance with limits of $300,000,000 per occurrence and all-risk property and rental value insurance coverage with limits of $1.7 billion per occurrence, including coverage for terrorist acts, with sub-limits for certain perils such as floods and earthquakes on each of our properties. There can be no assurance that we will be able to maintain similar levels of insurance coverage in the future in amounts and on terms that are commercially reasonable. We are responsible for deductibles and losses in excess of our insurance coverage, which could be material. Our mortgage loans are non-recourse to us, except for $75,000,000 of the $320,000,000 mortgage on our 731 Lexington Avenue property, in the event of a substantial casualty, as defined. Our mortgage loans contain customary covenants requiring us to maintain insurance. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance our properties. Environmental Remediation In July 2006, we discovered an oil spill at our Kings Plaza Regional Shopping Center. We have notified the New York State Department of Environmental Conservation (“NYSDEC”) about the spill and have developed a remediation plan. The NYSDEC has approved a portion of the remediation plan and clean up is ongoing. The estimated costs associated with the clean up will aggregate approximately $2,500,000. We have paid $500,000 of such amount and the remainder is covered under our insurance policy. Flushing Property In 2003, we recognized $1,289,000 of income representing a non-refundable purchase deposit of $1,875,000, net of $586,000 of costs associated with the transaction, from a party that agreed to purchase this property, as such party had not met its obligations under a May 30, 2002 purchase contract. On September 10, 2002, November 7, 2002, and July 8, 2004, we received letters from the party demanding return of the deposit. On December 28, 2005, the party filed a complaint against us in the New York State Court alleging that we failed to honor the terms and conditions of the agreement. The complaint sought specific performance and, if specific performance was denied, it sought a return of the deposit plus interest and $50,000 in costs. In August 2010, the New York State Court entered judgment denying specific performance and ordered us to return the deposit together with accrued interest and fees. We have filed a notice of appeal and this judgment is stayed pending the appeal. As a result of the judgment, included as a component of “general and administrative” expenses on our consolidated statement of income for the year ended December 31, 2010 is a $3,135,000 litigation loss accrual, representing the amount of the deposit, accrued interest and fees. Paramus In 2001 we leased 30.3 acres of land located in Paramus, New Jersey to IKEA Property, Inc. The lease has a 40-year term with a purchase option in 2021 for $75,000,000. We have a $68,000,000 interest only, non-recourse mortgage loan on the property from a third party lender. The fixed interest rate on the debt is 5.92% with interest payable monthly until maturity in October 2011. The annual triple-net rent is the sum of $700,000 plus the amount of debt service on the mortgage loan. If the purchase option is exercised, we will receive net cash proceeds of approximately $7,000,000 and recognize a gain on sale of land of approximately $62,000,000. If the purchase option is not exercised, the triple-net rent for the last 20 years must include the debt service sufficient to fully amortize $68,000,000 over the remaining 20-year lease term. Letters of Credit Approximately $7,998,000 of standby letters of credit were issued and outstanding as of December 31, 2010. Other There are various other legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters will not have a material effect on our financial condition, results of operations or cash flows. 53 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. STOCK-BASED COMPENSATION Our Omnibus Stock Plan (the “Plan”), which was approved by our stockholders on May 18, 2006, provides for grants of incentive and non-qualified stock options, restricted stock, SARs and performance shares, as defined, to the directors, officers and employees of the Company and Vornado, and any other person or entity as designated by the Omnibus Stock Plan Committee of our Board of Directors (the “Committee”). At December 31, 2010, there were 895,000 shares available for future grant under the Plan. We account for all stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. Stock Options There have been no stock option grants since 1999; accordingly, no compensation expense was recognized during the years ended December 31, 2010, 2009 and 2008. There were 14,346 and 47,640 options exercised during the years ended December 31, 2009 and 2008, respectively. Cash received from option exercises in each of the years ended December 31, 2009 and 2008 was $934,000 and $3,276,000, respectively. As of December 31, 2010, there are no stock options outstanding. Stock Appreciation Rights (“SARs”) On September 15 and October 14, 2008, Steven Roth, the Chairman of our Board of Directors and Chief Executive Officer, exercised an aggregate of 200,000 SARs which were scheduled to expire on March 4, 2009 and received gross proceeds of $62,808,000. On March 2, 2009, Mr. Roth and Mr. Fascitelli each exercised 150,000 SARs, which were scheduled to expire on March 4, 2009 and each received gross proceeds of $11,419,000. These SARs were granted at 100% of the market price of our company’s stock on the date of grant. As of December 31, 2010, there are no SARs outstanding. 12. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted income per share, including a reconciliation of net income and the number of shares used in computing basic and diluted income per share. Basic income per share is determined using the weighted average shares of common stock outstanding during the period. Diluted income per share is determined using the weighted average shares of common stock outstanding during the period and assumes all potentially dilutive securities were converted into common shares at the earliest date possible. For the Year Ended December 31, 2009 2008 2010 $ 66,429 $ 132,190 $ 76,288 5,105,936 - 5,105,936 5,103,790 1,580 5,105,370 5,067,426 31,103 5,098,529 $ $ 13.01 $ 25.90 $ 15.05 13.01 $ 25.89 $ 14.96 (Amounts in thousands, except share and per share amounts) Net income attributable to common shareholders – basic and diluted Weighted average shares outstanding – basic Dilutive effect of stock options Weighted average shares outstanding – diluted Net income per common share – basic Net income per common share – diluted 54 ALEXANDER’S, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) (Amounts in thousands, except per share amounts) 2010 December 31 September 30 June 30 March 31 2009 December 31 September 30 June 30 March 31 Net Income Attributable to Common Shareholders Revenues Income Per Common Share(1) Basic Diluted $ $ 62,250 $ 61,390 59,166 58,544 57,154 $ 58,410 54,875 53,090 17,891 $ 17,875 15,549 15,114 15,102 $ 58,029 13,005 46,054 3.50 $ 3.50 3.05 2.96 2.96 $ 11.37 2.55 9.04 3.50 3.50 3.05 2.96 2.96 11.37 2.55 9.03 _______________________ (1) The total for the year may differ from the sum of the quarters as a result of weighting. 55 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures – Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective. 56 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The management of Alexander’s, Inc., together with its consolidated subsidiaries (the “Company”), is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. As of December 31, 2010, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2010 is effective. The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2010 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing on page 58 of this Annual Report on Form 10-K, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. 57 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders Alexander’s, Inc. Paramus, New Jersey We have audited the internal control over financial reporting of Alexander’s, Inc. and subsidiaries (the “Company”) as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2010 of the Company and our report dated February 22, 2011 expressed an unqualified opinion on those financial statements and financial statement schedules. /s/ DELOITTE & TOUCHE LLP Parsippany, New Jersey February 22, 2011 58 ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information relating to our directors will be contained in a definitive Proxy Statement involving the election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. We will file the Proxy Statement with the Securities and Exchange Commission no later than 120 days after December 31, 2010. Such information is incorporated by reference herein. Also incorporated herein by reference is the information under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement. The following is a list of the names, ages, principal occupations and positions with us of our executive officers and the positions held by such officers during the past five years. Name Steven Roth Age 69 Michael D. Fascitelli 54 Joseph Macnow 65 PRINCIPAL OCCUPATION, POSITION AND OFFICE (Current and during past five years with the Company unless otherwise stated) Chairman of the Board of Directors since May 2004 and Chief Executive Officer since March 1995; Chairman of the Board of Vornado Realty Trust since May 1989; Chief Executive Officer of Vornado Realty Trust from May 1989 through May 2009; a Trustee of Vornado Realty Trust since 1979; and Managing General Partner of Interstate Properties. President since August 2000; Director of the Company since December 1996; Chief Executive Officer of Vornado Realty Trust since May 2009 and President and Trustee since December 1996; Partner at Goldman Sachs & Co., in charge of its real estate practice, from December 1992 to December 1996; and, prior thereto, Vice President at Goldman Sachs & Co. Executive Vice President and Chief Financial Officer since June 2002; Executive Vice President – Finance and Administration from March 2001 to June 2002; Vice President and Chief Financial Officer from August 1995 to March 2001; Executive Vice President – Finance and Administration of Vornado Realty Trust since January 1998 and Chief Financial Officer of Vornado Realty Trust since March 2001; and Vice President and Chief Financial Officer of Vornado Realty Trust from 1985 to January 1998. We have a code of business conduct and ethics that applies to our Chief Executive Officer and Executive Vice President and Chief Financial Officer, among others. The code is posted on our website at www.alx-inc.com. We intend to satisfy our disclosure obligation regarding amendments and waivers of this code applicable to our Chief Executive Officer and Executive Vice President and Chief Financial Officer by posting such information on our website. 59 ITEM 11. EXECUTIVE COMPENSATION Information relating to executive compensation will be contained in the Proxy Statement referred to in “Item 10. Directors, Executive Officers and Corporate Governance” of this Annual Report on Form 10-K. Such information is incorporated by reference herein. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information relating to security ownership of certain beneficial owners and management and related stockholder matters, except as set forth below, will be contained in the Proxy Statement referred to in “Item 10. Directors, Executive Officers and Corporate Governance” of this Annual Report on Form 10-K. Such information is incorporated by reference herein. Equity Compensation Plan Information The following table provides information as of December 31, 2010, regarding our equity compensation. (a) Number of securities to be issued upon exercise of outstanding options, Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Plan Category warrants and rights Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total N/A $ N/A N/A $ N/A N/A N/A 895,000 N/A 895,000 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information relating to certain relationships and related transactions and director independence will be contained in the Proxy Statement referred to in “Item 10. Directors, Executive Officers and Corporate Governance” of this Annual Report on Form 10-K. Such information is incorporated by reference herein. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information relating to principal accounting fees and services will be contained in the Proxy Statement referred to in “Item 10. Directors, Executive Officers and Corporate Governance” of this Annual Report on Form 10-K. Such information is incorporated by reference herein. 60 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES PART IV (a) The following documents are filed as part of this Annual Report on Form 10-K. 1. The consolidated financial statements are set forth in Item 8 of this Annual Report on Form 10-K. 2. The following financial statement schedules should be read in conjunction with the financial statements included in Item 8 of this Annual Report on Form 10-K. Schedule II – Valuation and Qualifying Accounts – years ended December 31, 2010, 2009 and 2008 Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2010, 2009 and 2008 Pages in this Annual Report on Form 10-K 63 64 All other financial statement schedules are omitted because they are not applicable, not required, or the information is included elsewhere in the consolidated financial statements or the notes thereto. 3. The following exhibits listed on the Exhibit Index are filed with this Annual Report on Form 10-K. Exhibit No. 21 23 31.1 31.2 32.1 32.2 Subsidiaries of Registrant Consent of Independent Registered Public Accounting Firm Rule 13a-14(a) Certification of the Chief Executive Officer Rule 13a-14(a) Certification of the Chief Financial Officer Section 1350 Certification of the Chief Executive Officer Section 1350 Certification of the Chief Financial Officer 61 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALEXANDER’S, INC. (Registrant) Date: February 22, 2011 By: /s/ Joseph Macnow Joseph Macnow, Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title By: /s/Steven Roth (Steven Roth) Chairman of the Board of Directors (Principal Executive Officer) Date February 22, 2011 By: /s/Michael D. Fascitelli (Michael D. Fascitelli) By: /s/Joseph Macnow (Joseph Macnow) By: /s/Thomas R. DiBenedetto (Thomas R. DiBenedetto) By: /s/David Mandelbaum (David Mandelbaum) By: /s/Arthur Sonnenblick (Arthur Sonnenblick) By: /s/Neil Underberg (Neil Underberg) By: /s/Richard R. West (Richard R. West) By: /s/Russell B. Wight Jr. (Russell B. Wight Jr) President and Director February 22, 2011 February 22, 2011 February 22, 2011 February 22, 2011 February 22, 2011 February 22, 2011 February 22, 2011 February 22, 2011 Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Director Director Director Director Director Director 62 ALEXANDER’S, INC. AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (Amounts in thousands) Column A Description Column B Column C Column D Column E Additions: Deductions: Uncollectible Accounts Operations Written Off Balance at Charged Beginning Against of Year Balance at End of Year Allowance for doubtful accounts: Year Ended December 31, 2010 Year Ended December 31, 2009 Year Ended December 31, 2008 $ $ $ 1,736 $ (22) $ (667) $ 1,047 1,357 $ 540 $ (161) $ 1,736 667 $ 910 $ (220) $ 1,357 63 n o i t a i c e r p e D t s e t a L n i e m o c n I t n e m e t a t S e t a D f o e t a D d n a n o i t c u r t s n o C d l o h e s a e L d n a d e t a l u m u c c A n o i t a i c e r p e D , g n d i l i u B s d l o h e s a e L s t s o C d e z i l a t i p a C t n e u q e s b u S , g n d i l i u B s d l o h e s a e L d l o h e s a e L d n a h c i h W t a t n u o m A s s o r G d o i r e P f o e s o l C t a d e i r r a C ) 1 ( y n a p m o C o t t s o C l a i t i n I S E I R A I D I S B U S D N A . C N I , S ’ R E D N A X E L A N O I T A I C E R P E D D E T A L U M U C C A D N A E T A T S E L A E R - I I I E L U D E H C S 0 1 0 2 , 1 3 R E B M E C E D ) s d n a s u o h t n i s t n u o m A ( I N M U L O C H N M U L O C N M U L O C G F N M U L O C E N M U L O C D N M U L O C C N M U L O C B N M U L O C A N M U L O C d e t u p m o C s i ) 1 ( d e r i u q c A o i t c u r t s n o C n o i t a z i t r o m A ) 2 ( l a t o T s s e r g o r P n I s t n e m e v o r p m I d n a L ) 2 ( n o i t i s i u q c A o t s t n e m e v o r p m I d n a L s e c n a r b m u c n E n o i t p i r c s e D 5 2 8 - 4 3 - - - s r a e y 9 3 - 5 s r a e y 0 4 - 5 s r a e y 6 2 A N / s r a e y 9 3 - 5 2 9 9 1 2 9 9 1 2 9 9 1 2 9 9 1 2 9 9 1 n 9 5 9 1 9 0 0 2 A N / ) 3 ( 5 7 9 1 - 4 5 5 8 3 4 , 1 2 0 1 5 , 1 1 3 0 0 2 4 6 2 , 9 7 6 6 5 , 1 5 4 4 0 6 , 1 3 5 5 , 1 $ 0 4 0 , 8 5 $ 2 1 $ 1 8 3 , 6 5 $ 7 4 6 , 1 $ 0 4 4 , 7 4 $ 3 5 9 , 8 $ 7 4 6 , 1 $ 6 4 2 , 8 7 8 2 6 , 2 7 3 4 6 6 , 9 3 7 3 8 , 9 2 3 - 3 5 5 , 1 4 3 0 , 4 2 4 - 9 7 7 7 2 1 , 3 6 2 8 ) 7 0 1 ( 4 3 0 , 8 6 3 8 9 4 , 7 2 9 7 7 , 4 2 4 - 7 6 4 , 1 0 6 6 , 1 5 5 3 , 2 1 - 9 7 7 7 2 1 , 3 - 0 0 2 , 7 7 2 2 3 4 , 4 1 1 5 7 , 1 7 6 s r a e y 0 5 - 8 2 9 9 1 0 7 9 1 6 6 4 , 4 4 9 7 9 , 2 5 1 A N / 2 9 9 1 A N / 2 9 9 1 A N / A N / - - 7 6 1 4 5 7 , 1 1 7 7 9 , 2 2 1 2 0 0 , 0 3 0 4 9 , 2 4 1 2 4 5 , 9 7 9 4 4 1 2 , 1 5 1 - - 7 6 1 ) 4 0 8 , 1 ( 4 0 8 , 1 7 6 1 - 4 5 7 , 1 1 3 1 3 , 0 1 - 1 4 4 , 1 0 0 0 , 8 6 $ l a n o i g e R a z a l P s g n i K e u n e v A n o t g n i x e L r e t n e C g n i p p o h S I k r a P o g e R I I k r a P o g e R I I I k r a P o g e R g n i h s u l F : y t r e p o r P l a i c r e m m o C Y N , k r o Y w e N s e i t r e p o r P r e h t O J N , s u m a r a P 64 2 3 2 , 7 5 1 $ 1 9 2 , 0 5 0 , 1 $ 5 3 5 , 0 4 $ 2 8 7 , 4 3 9 $ 4 7 9 , 4 7 $ 1 2 4 , 2 9 9 $ 1 8 7 , 5 3 $ 0 9 0 , 2 2 $ 1 1 4 , 6 4 2 , 1 $ L A T O T . s e s o p r u p t n e m e t a t s l a i c n a n i f r o f d e t r o p e r t n u o m a e h t n a h t r e w o l 0 0 0 , 1 9 9 , 7 9 1 $ y l e t a m i x o r p p a s i s e s o p r u p x a t r o f s e i t i l i b a i l d n a s t e s s a s ’ y n a p m o C e h t f o s i s a b t e n e h T . e t a d n o i t i s i u q c a e s a e l e h t s t n e s e r p e r e t a d s i h T . ) s n o i t a r e p o e t a t s e l a e r s t i d e c n e m m o c y n a p m o C e h t h c i h w n o e t a d e h t ( 2 9 9 1 , 5 1 y a M f o s a s i t s o c l a i t i n I _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ) 1 ( ) 2 ( ) 3 ( ALEXANDER’S, INC. AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION (Amounts in thousands) REAL ESTATE: Balance at beginning of period Additions (deletions) during the period: Land Buildings and leasehold improvements Development and construction in progress Less: Fully depreciated assets Balance at end of period ACCUMULATED DEPRECIATION: Balance at beginning of period Additions charged to operating expenses Less: Fully depreciated assets Balance at end of period 2010 December 31, 2009 2008 $ 1,025,234 $ 967,975 $ 835,081 - 102,402 (76,964) 1,050,672 (381) 1,050,291 $ - 238,119 (177,389) 1,028,705 (3,471) 1,025,234 $ 5,519 5,043 123,079 968,722 (747) 967,975 132,386 $ 25,227 157,613 (381) 157,232 $ 114,235 $ 21,622 135,857 (3,471) 132,386 $ 96,183 18,799 114,982 (747) 114,235 $ $ $ 65 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 June 30, 2000 10.1 10.2 10.3 10.4 10.5 10.6 - Real Estate Retention Agreement dated as of July 20, 1992, between Vornado Realty Trust and Keen Realty Consultants, Inc., each as special real estate consultants, and the Company. Incorporated herein by reference from Exhibit 10(i)(O) to the registrant’s Annual Report on Form 10-K for the fiscal year ended July 25, 1992 - Extension Agreement to the Real Estate Retention Agreement, dated as of February 6, 1995, between the Company and Vornado Realty Trust. Incorporated herein by reference from Exhibit 10(i)(G)(2) to the registrant’s Annual Report Form 10-K for the year ended December 31, 1994 - Agreement of Lease dated as of April 30, 2001 between Seven Thirty One Limited Partnership, landlord, and Bloomberg L.P., tenant. Incorporated herein by reference from Exhibit 10(v) B to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, filed on August 2, 2001 - Amended and Restated Consolidated Mortgage and Security Agreement dated as of May 31, 2001 among Alexander’s Kings Plaza LLC as mortgagor, Alexander’s of King LLC as mortgagor and Kings Parking LLC as mortgagor, collectively borrower, to Morgan Guaranty Trust Company of New York, as mortgagee. Incorporated herein by reference from Exhibit 10(v) A1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, filed on August 2, 2001 - Amended, Restated and Consolidated Promissory Note, dated as of May 31, 2001 by and between Alexander’s Kings Plaza LLC, Alexander’s of Kings LLC, and Kings Parking LLC collectively borrower, and Morgan Guaranty Trust Company of New York, lender. Incorporated herein by reference from Exhibit 10(v) A2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, filed on August 2, 2001 - Cash Management Agreement dated as of May 31, 2001 by and between Alexander’s Kings Plaza LLC, Alexander’s of Kings LLC, and Kings Parking LLC collectively borrower, and Morgan Guaranty Trust Company of New York, lender. Incorporated herein by reference from Exhibit 10(v) A3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, filed on August 2, 2001 ___________________ * Incorporated by reference. * * * * * * * * 66 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 - Note modification and Severance Agreement dated as of November 26, 2001, between Alexander’s Kings Plaza LLC, Alexander’s of Kings LLC, and Kings Parking LLC collectively borrower and JP Morgan Chase Bank of New York, lender. Incorporated herein by reference from Exhibit 10(v)(A)(4) to the registrant’s Annual Report on Form 10 K for the year ended December 31, 2001, filed on March 13, 2002 * - Loan Agreement dated as of October 2, 2001 by and between ALX of Paramus LLC as borrower, and SVENSKA HANDELSBANKEN AB (publ), as lender. Incorporated herein by reference from Exhibit 10(v)(C)(1) to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, filed on March 13, 2002 - Mortgage, Security Agreement and Fixture Financing Statement dated as of October 2, 2001 by and between ALX of Paramus LLC as borrower, and SVENSKA HANDELSBANKEN AB (publ), as lender. Incorporated herein by reference from Exhibit 10(v)(C)(2) to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, filed on March 13, 2002 - Environmental undertaking letter dated as of October 2, 2001 by and between ALX of Paramus LLC, as borrower, and SVENSKA HANDELSBANKEN AB (publ), as lender. Incorporated herein by reference from Exhibit 10(v)(C)(3) to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed on March 13, 2002 - Lease dated as of October 2, 2001 by and between ALX of Paramus LLC, as Landlord, and IKEA Property, Inc. as Tenant. Incorporated herein by reference from Exhibit 10(v)(C)(4) to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, filed on March 13, 2002 - First Amendment to Real Estate Retention Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc. and Vornado Realty, L.P. Incorporated herein by reference from Exhibit 10(i)(E)(3) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed on August 7, 2002 - 59th Street Real Estate Retention Agreement, dated as of July 3, 2002, by and between Vornado Realty, L.P., 731 Residential LLC and 731 Commercial LLC. Incorporated herein by reference from Exhibit 10(i)(E)(4) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed on August 7, 2002 - Amended and Restated Management and Development Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado Management Corp. Incorporated herein by reference from Exhibit 10(i)(F)(1) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed on August 7, 2002 - Kings Plaza Management Agreement, dated as of May 31, 2001, by and between Alexander’s Kings Plaza LLC and Vornado Management Corp. Incorporated herein by the quarter ended June 30, 2002, filed on August 7, 2002 - Limited Liability Company Operating Agreement of 731 Residential LLC, dated as of July 3, 2002, among 731 Residential Holding LLC, as the sole member, Domenic A. Borriello, as an Independent Manager and Kim Lutthang, as an Independent Manager. Incorporated herein by reference from Exhibit 10(i)(A)(1) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed on August 7, 2002 * * * * * * * * * ___________________ * Incorporated by reference. 67 10.17 10.18 10.19 10.20 10.21 10.22 10.23 10.24 10.25 10.26 - Limited Liability Company Operating Agreement of 731 Commercial LLC, dated as of July 3, 2002, among 731 Commercial Holding LLC, as the sole member, Domenic A. Borriello, as an Independent Manager and Kim Lutthang, as an Independent Manager. Incorporated herein by reference from Exhibit 10(i)(A)(2) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed on August 7, 2002 - Reimbursement Agreement, dated as of July 3, 2002, by and between Alexander’s, Inc., 731 Commercial LLC, 731 Residential LLC and Vornado Realty, L.P. Incorporated herein by reference from Exhibit 10(i)(C)(8) to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed on August 7, 2002 - First Amendment of Lease, dated as of April 19, 2002, between Seven Thirty One Limited Partnership, landlord and Bloomberg L.P., tenant. Incorporated herein by reference from Exhibit 10(v)(B)(2) to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2002, filed on August 7, 2002 - Loan and Security Agreement, dated as of February 13, 2004, between 731 Office One LLC, as Borrower and German American Capital Corporation, as Lender. Incorporated herein by reference from Exhibit 10.20 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Amended, Restated and Consolidated Mortgage, Security Agreement, Financing Statement and Assignment of Leases, Rent and Security Deposits by and between 731 Office One LLC as Borrower and German American Capital Corporation as Lender, dated as of February 13, 2004. Incorporated herein by reference from Exhibit 10.21 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Amended, Restated and Consolidated Note, dated as of February 13, 2004, by 731 Office One LLC in favor of German American Capital Corporation. Incorporated herein by reference from Exhibit 10.22 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Assignment of Leases, Rents and Security Deposits from 731 Office One LLC to German American Capital Corporation, dated as of February 13, 2004. Incorporated herein by reference from Exhibit 10.23 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Account and Control Agreement, dated as of February 13, 2004, by and among German American Capital Corporation as Lender, and 731 Office One LLC as Borrower, and JP Morgan Chase as Cash Management Bank. Incorporated herein by reference from Exhibit 10.24 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Manager’s Consent and Subordination of Management Agreement dated February 13, 2004 by 731 Office One LLC and Alexander’s Management LLC and German American Capital Corporation. Incorporated herein by reference from Exhibit 10.25 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Note Exchange Agreement dated as of February 13, 2004 by and between 731 Office One LLC and German American Capital Corporation. Incorporated herein by reference from Exhibit 10.26 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 * * * * * * * * * * ___________________ * Incorporated by reference. 68 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 - Promissory Note A-1 dated as of February 13, 2004 by 731 Office One LLC in favor of German American Capital Corporation. Incorporated herein by reference from Exhibit 10.27 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Promissory Note A-2 dated as of February 13, 2004 by 731 Office One LLC in favor of German American Capital Corporation. Incorporated herein by reference from Exhibit 10.28 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Promissory Note A-3 dated as of February 13, 2004 by 731 Office One LLC in favor of German American Capital Corporation. Incorporated herein by reference from Exhibit 10.29 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Promissory Note A-4 dated as of February 13, 2004, by 731 Office One LLC in favor of German American Capital Corporation. Incorporated herein by reference from Exhibit 10.30 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Promissory Note A-X dated as of February 13, 2004, by 731 Office One LLC in favor of German American Capital Corporation. Incorporated herein by reference from Exhibit 10.31 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Promissory Note B dated as of February 13, 2004, by 731 Office One LLC in favor of German American Capital Corporation. Incorporated herein by reference from Exhibit 10.32 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Guaranty of Recourse Obligations dated as of February 13, 2004, by Alexander’s, Inc. to and for the benefit of German American Capital Corporation. Incorporated herein by reference from Exhibit 10.33 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Environmental Indemnity dated as of February 13, 2004, by Alexander’s, Inc. and 731 Office One LLC for the benefit of German American Capital Corporation. Incorporated herein by reference from Exhibit 10.34 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 2, 2004 - Loan Agreement dated as of July 6, 2005, between 731 Retail One LLC, as Borrower and Archon Financial, as Lender. Incorporated herein by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed on July 12, 2005 10.36 ** - Form of Stock Option Agreement between the Company and certain employees. Incorporated herein by reference from Exhibit 10.61 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on October 27, 2005 10.37 ** - Form of Restricted Stock Option Agreement between the Company and certain employees. Incorporated herein by reference from Exhibit 10.62 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on October 27, 2005 ___________________ * ** Incorporated by reference. Management contract or compensatory agreement. * * * * * * * * * * * 69 10.38 ** - Registrant’s 2006 Omnibus Stock Plan dated April 4, 2006. Incorporated herein by reference from Annex B to Schedule 14A, filed by the registrant on April 28, 2006 10.39 10.40 10.41 10.42 10.43 10.44 10.45 10.46 - Second Amendment to Real Estate Retention Agreement, dated as of January 1, 2007, by and between Alexander’s, Inc. and Vornado Realty L.P. Incorporated herein by reference from Exhibit 10.64 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on February 26, 2007 - Amendment to 59th Street Real Estate Retention agreement, dated as of January 1, 2007, by and among Vornado Realty L.P., 731 Retail One LLC, 731 Restaurant LLC, 731 Office One LLC and 731 Office Two LLC. Incorporated herein by reference from Exhibit 10.65 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on February 26, 2007 - Building Loan Agreement, dated as of December 21, 2007, among Alexander’s of Rego Park II, Inc., as Borrower, PB Capital Corporation, as Lender, Norddeutsche Landesbank Girozentrale, New York Branch, as Lender, Wells Fargo Bank, National Association, as Lender, Landesbank Baden-Wurttemberg, New York Branch, as Lender, Bank of Ireland, Connecticut Branch, as Lender, PB Capital Corporation, as Administrative Agent, PB Capital Corporation and Norddeutsche Landesbank Girozentrale, New York Branch, as Co-Arrangers. Incorporated herein by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed on December 28, 2007 - Project Loan Agreement, dated as of December 21, 2007, among Alexander’s of Rego Park II, Inc., as Borrower, PB Capital Corporation, as Lender, Norddeutsche Landesbank Girozentrale, New York Branch, as Lender, Wells Fargo Bank, National Association, as Lender, Landesbank Baden-Wurttemberg, New York Branch, as Lender, Bank of Ireland, Connecticut Branch, as Lender, PB Capital Corporation, as Administrative Agent, PB Capital Corporation and Norddeutsche Landesbank Girozentrale, New York Branch, as Co-Arrangers. Incorporated herein by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K, filed on December 28, 2007 - Series I Building Loan Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of December 21, 2007, from Alexander’s of Rego Park II, Inc., as Mortgagor, to PB Capital Corporation, as Administrative Agent for the Lenders. Incorporated herein by reference from Exhibit 10.3 to the registrant’s Current Report on Form 8-K, filed on December 28, 2007 - Series II Building Loan Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of December 21, 2007, from Alexander’s of Rego Park II, Inc., as Mortgagor, to PB Capital Corporation, as Administrative Agent for the Lenders. Incorporated herein by reference from Exhibit 10.4 to the registrant’s Current Report on Form 8-K, filed on December 28, 2007 - Series I Project Loan Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of December 21, 2007, from Alexander’s of Rego Park II, Inc., as Mortgagor, to PB Capital Corporation, as Administrative Agent for the Lenders. Incorporated herein by reference from Exhibit 10.5 to the registrants Current Report on Form 8-K, filed on December 31, 2007 - Series II Project Loan Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of December 21, 2007, from Alexander’s of Rego Park II, Inc., as Mortgagor, to PB Capital Corporation, as Administrative Agent for the Lenders. Incorporated herein by reference from Exhibit 10.6 to the registrant’s Current Report on Form 8-K, filed on December 28, 2007 * * * * * * * * * ___________________ Incorporated by reference. Management contract or compensatory agreement. * ** 70 10.47 10.48 10.49 10.50 10.51 10.52 10.53 10.54 10.55 10.56 10.57 - Guaranty of Completion, dated as of December 21, 2007, executed by Alexander’s, Inc. for the benefit of PB Capital Corporation, as Administrative Agent for itself and the other Lenders Incorporated herein by reference from Exhibit 10.7 to the registrant’s Current Report on Form 8-K, filed on December 28, 2007 - Guaranty of Payment, dated as of December 21, 2007, executed by Alexander’s, Inc. for the benefit of PB Capital Corporation, as Administrative Agent for itself and the other Lenders. Incorporated herein by reference from Exhibit 10.8 to the registrant’s Current Report on Form 8-K, filed on December 28, 2007 - First Amendment to Amended and Restated Management and Development Agreement, dated as of July 6, 2005, by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado Management Corp. Incorporated herein by reference from Exhibit 10.52 to the registrant’s Annual Report on Form 10-K, for the year ended December 31, 2007, filed on February 25, 2008 - Second Amendment to Amended and Restated Management and Development Agreement, dated as of December 20, 2007, by and between Alexander’s, Inc., the subsidiaries party thereto and Vornado Management Corp. Incorporated herein by reference from Exhibit 10.53 to the registrant’s Annual Report on Form 10-K, for the year ended December 31, 2007, filed on February 25, 2008 - Rego II Management and Development Agreement, dated as of December 20, 2007, by and between Alexander’s of Rego Park II, Inc., and Vornado Realty L.P. Incorporated herein by reference from Exhibit 10.54 to the registrant’s Annual Report on Form 10-K, for the year ended December 31, 2007, filed on February 25, 2008 - Third Amendment to Real Estate Retention Agreement, dated as of December 20, 2007, by and between Alexander’s, Inc., and Vornado Realty L.P. Incorporated herein by reference from Exhibit 10.55 to the registrant’s Annual Report on Form 10-K, for the year ended December 31, 2007, filed on February 25, 2008 - Rego II Real Estate Retention Agreement, dated as of December 20, 2007, by and between Alexander’s, Inc., and Vornado Realty L.P. Incorporated herein by reference from Exhibit 10.56 to the registrant’s Annual Report on Form 10-K, for the year ended December 31, 2007 filed on February 25, 2008 - Loan Agreement dated as of March 10, 2009 between Alexander’s Rego Park Shopping Center Inc., as Borrower and U.S. Bank National Association, as Lender. Incorporated herein by reference from Exhibit 10.55 to the registrant’s Quarterly Report on for 10-Q for the quarter ended March 31, 2009, filed on May 4, 2009 - Amended and Restated Mortgage, Security Agreement, Fixture Filing and Assignment of Leases and Rentals by and between Alexander’s Rego Shopping Center, Inc. as Borrower and U.S. Bank National Association as Lender, dated as of March 10, 2009. Incorporated herein by reference from Exhibit 10.56 to the registrant’s Quarterly Report on for 10-Q for the quarter ended March 31, 2009, filed on May 4, 2009 - Amended and Restated Promissory Note dated as of March 10, 2009, by Alexander’s Rego Shopping Center Inc., in favor of U.S. Bank National Association. Incorporated herein by reference from Exhibit 10.57 to the registrant’s Quarterly Report on for 10-Q for the quarter ended March 31, 2009, filed on May 4, 2009 - Cash Pledge Agreement dated as of March 10, 2009, executed by Alexander’s Rego Shopping Center Inc. to and for the benefit of U.S. Bank National Association. Incorporated herein by reference from Exhibit 10.58 to the registrant’s Quarterly Report on for 10-Q for the quarter ended March 31, 2009, filed on May 4, 2009 * * * * * * * * * * * ___________________ * Incorporated by reference. 71 10.58 10.59 21 23 - Lease dated as of February 7, 2005, by and between 731 Office One LLC, as Landlord, and Citibank, N.A., as Tenant. Incorporated herein by reference from Exhibit 10.59 to the registrant’s Quarterly Report on for 10-Q for the quarter ended March 31, 2009, filed on May 4, 2009 - Assignment and Assumption and Consent Agreement, dated as of March 25, 2009, by and between 731 Office One LLC, as Landlord, Citicorp North America, Inc., as Assignor, and Bloomberg L.P., as Assignee. Incorporated herein by reference from Exhibit 10.60 to the registrant’s Quarterly Report on for 10-Q for the quarter ended March 31, 2009, filed on May 4, 2009 * * - Subsidiaries of Registrant - Consent of Independent Registered Public Accounting Firm 31.1 - Rule 13a-14 (a) Certification of the Chief Executive Officer 31.2 - Rule 13a-14 (a) Certification of the Chief Financial Officer 32.1 - Section 1350 Certification of the Chief Executive Officer 32.2 - Section 1350 Certification of the Chief Financial Officer ___________________ * Incorporated by reference. 72 Board of Directors Officers CORPORATE INFORMATION Steven Roth Chairman of the Board of Trustees, Vornado Realty Trust; Partner, Interstate Properties Thomas R. DiBenedetto* President, Boston International Group, Inc. and Junction Investors Ltd. Michael D. Fascitelli President, Chief Executive Officer and Trustee, Vornado Realty Trust David Mandelbaum A member of the law firm of Mandelbaum & Mandelbaum, P.C.; Partner, Interstate Properties; Trustee, Vornado Realty Trust Arthur I. Sonnenblick* Senior Managing Director of Cushman & Wakefield Sonnenblick Goldman Neil Underberg Partner in Winston & Strawn LLP, Attorneys Dr. Richard R. West* Dean Emeritus, Leonard N. Stern School of Business, New York University; Trustee, Vornado Realty Trust Russell B. Wight, Jr. Partner, Interstate Properties; Trustee, Vornado Realty Trust Annual Meeting The annual meeting of stockholders of Alexander’s, Inc., will be held at 10:00 A.M. on Thursday, May 26, 2011 at the Saddle Brook Marriott, Interstate 80 and the Garden State Parkway, Saddle Brook, New Jersey, 07663. *Member of the Audit Committee Steven Roth Chairman of the Board and Chief Executive Officer Michael D. Fascitelli President Joseph Macnow Executive Vice President and Chief Financial Officer Company Data Executive Offices 210 Route 4 East Paramus, New Jersey 07652 Independent Registered Public Accounting Firm Deloitte & Touche LLP Parsippany, New Jersey General Counsel Shearman & Sterling LLP New York, New York Transfer Agent and Registrar American Stock Transfer & Trust Co. New York, New York Management Certifications The Company’s Chief Executive Officer and Chief Financial Officer provided certifications to the Securities and Exchange Commission as required by Section 302 of the Sarbanes-Oxley Act of 2002 and these certifications are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. In addition, as required by Section 303A.12(a) of the New York Stock Exchange (NYSE) Listed Company Manual, on June 23, 2010, the Company’s Chief Executive Officer submitted to the NYSE the annual CEO certification regarding the Company’s compliance with the NYSE’s corporate governance listing standards. Report on Form 10-K Stockholders may obtain a copy of the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission free of charge (except for exhibits) by writing to the Secretary, Alexander’s, Inc., 888 Seventh Avenue, New York, New York, 10019 or by visiting the Company’s website at www.alx-inc.com. Stockholders may obtain a copy of any exhibit not contained herein for a fee not to exceed the Company’s reasonable expenses in furnishing such exhibit. Stock Listing New York Stock Exchange – ALX

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