Being Bloomberg’s Landlord Pays Dividends, Literally

In case you didn’t know, there was a Democratic debate the other night: one that pitted the following individuals against each other:

• Former Vice President, current Senator, and current millionaire Joe Biden
• Former New York City Mayor and current billionaire Michael Bloomberg
• Former mayor of South Bend, Indiana, Pete Buttigieg
• Current Senator and current millionaire Amy Klobuchar
• Current Senator and current millionaire Bernie Sanders
• Environmentalist and current billionaire Tom Steyer
• Current Senator and current millionaire Elizabeth Warren.

I mention the millionaire and billionaire status for two reasons:

1. It’s only fair to note who has a lot of money if they’re talking about taking it from others.
2. Bloomberg’s very rich status applies directly to this article. And it didn’t seem fair to mention it without also mentioning his fellow debaters in the same light.

Speaking of fair, each of the potential presidential nominees on stage on February 25 got their turns to speak. Somewhat.

As popular liberal news and opinion blog Mediaite wrote afterward:

“One of the clearest takeaways on social media throughout the South Carolina Democratic debate is CBS didn’t deliver the best show.

“The network received criticism for its handling of the debate, the messiness of the exchanges, and the type of questions asked. Critics included the campaign of Bernie Sanders.

“The general consensus was equally harsh. CNN’s Brian Stelter noted some called the debate a ‘disaster.’”

Whether the channel will ever get the opportunity to host such an event again is up in the air. By all accounts though, it was the decided loser last night.

And by all appearances, Bernie Sanders will be the decided winner of the Democratic primaries. In which case, come November, we’ll have a raging socialist against a raging capitalist.

May the best man (or woman) win.

Bloomberg Is Alexander’s Inc.’s Best Friend

All of this is to say that – unless a flat-out campaign miracle occurs – Michael Bloomberg won’t be the Democratic presidential nominee, much less the actual president.

Unlike Bernie, he just doesn’t have the numbers his millions of dollars in campaign advertisements have been trying to buy.

Yet that doesn’t mean he’s not still a good bet. He’s just a good bet in a different way on a different stage.

To explain how and why, you have to know something about Alexander’s Inc. (ALX).

As I wrote two or three years ago, Alexander’s was a thriving retail chain for decades after opening in 1928. Begun in the Bronx, it was something between a full-service department store and a discount store.

And it worked. It worked really well. Well enough to expand into two stores and then three, then four – all the way up to 16 by 1980. Sales, meanwhile, came in at $505.9 million, which wasn’t bad.

What was bad, however, was the mere $1.05 million it made in earnings that year.

According to Funding Universe, the company had made a big mistake two years prior when it bought La Mode Inc. That 70-store women’s apparel chain was a weight around Alexander’s neck – so much so that it sold the whole kit and caboodle in 1981 for a company-wide loss.

As of late 1980, Vornado Realty (VNO) CEO Steven Roth was Alexander’s biggest individual stockholder. He owned about 23.4% of shares outstanding at the time. And he went on to raise that amount to 27.2% to counter then real estate mogul Donald Trump’s equally interested attempts to take over the troubled company.

There was definite money to be made then and there – just not by Alexander’s.

Not Over Yet

Sure enough, Alexander’s was forced into Chapter 11 bankruptcy, losing most of its real estate assets and business in the process.

However, it did, technically, survive the experience. And it was still worth something to Vornado, which snapped its holdings up for $54.8 million in 1995.

VNO also provided the company with a $75 million secured three-year term loan – to turn it from a C-corp into a REIT.

Alexander’s largest asset today is 731 Lexington Avenue, a 30-floor, multi-use building in Manhattan. Of its 1.3 million square feet, 885,000 has been converted into office space and 174,000 is taken up by retailers – with room to spare for 105 condo units.

And taking up every bit of that office space is none other than Bloomberg, L.P. The self-described “global leader in business and financial data, news, and insight” is owned by none other than current presidential candidate Michael Bloomberg.

His company accounts for about 45% of the REIT’s revenue, paying $98.38 per square foot. Moreover, the primary lease on that space doesn’t expire until the end of the decade.

So it will no doubt be signing ALX’s paychecks for years to come, especially considering what a bargain that is. The average retail rent in that massive building is $174.95 per square foot.

In all, Alexander’s owns seven buildings in and around New York and New Jersey, most of them at least retail-oriented, if not retail-centric.

This does mean it’s had exposure to failures such as Toys’R’Us.

An Expensive Stock With a Stellar Dividend

If you’re the high-rolling type, it could be a good buy based in large part on Bloomberg. He might not be promoting himself very well on the political stage, but he runs a phenomenally sustainable company.

Bloomberg L.P. isn’t going away anytime soon and I consider the rent checks highly sustainable. Althing ALX is externally-managed by VNO, the Bloomberg-anchored REIT generates earnings (or FFO per share) of around $19.47 that support a dividend payout (in 2019) of $18.00 per share.

Shares in ALX now traded at 15.8x P/FFO, compared to the 5-year average P/FFO of 18.5x. For hungry income investors, consider the fact that ALX’s dividend yield is an enticing 5.9%.

But not too fast, shares are trading at $306.51 each, so this REIT is definitely not a sticking stuffer. But as a shareholder, you can be assured that there is a very strong tenant paying the rent, thus being Bloomberg’s landlord definitely pays dividends!

Brad Thomas is on the 2020 Donald J. Trump campaign advisory board and also the author of The Trump Factor: Unlocking The Secrets Behind The Trump Empire.

I do not own shares in VNO or ALX.

This post first appeared on Forbes.com. To see the original, click here.