BETHESDA, Md., May 6, 2020 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended March 31, 2020 ("2020 Quarter").  Total revenue for the 2020 Quarter decreased to $56.9 million from $59.8 million for the quarter ended March 31, 2019 ("2019 Quarter").  Net income decreased to $16.8 million for the 2020 Quarter from $17.1 million for the 2019 Quarter.  Net income decreased due to (a) lower other revenue, primarily lease termination fees ($1.4 million), (b) lower base rent, primarily due to the lease expiration and re-leasing of the grocery anchors at Seven Corners, which opened in March 2020, and at Shops at Fairfax, projected to open in the third quarter of 2020 (collectively, $0.4 million) and (c) lower expense recoveries net of property expenses ($0.2 million), partially offset by (d) lower interest expense, net and amortization of deferred debt costs due to higher capitalized interest ($1.6 million). Net income available to common stockholders was $10.5 million ($0.45 per diluted share) for the 2020 Quarter, unchanged from the 2019 Quarter ($0.46 per diluted share).

Same property revenue decreased $2.0 million (3.5%) and same property operating income decreased $1.3 million (3.0%) for the 2020 Quarter compared to the 2019 Quarter.  We define same property revenue as total revenue minus the revenue of properties not in operation for the entirety of the comparable reporting periods.  We define same property operating income as net income plus (a) interest expense, net and amortization of deferred debt costs, (b) depreciation and amortization of deferred leasing costs, (c) general and administrative expenses and (d) change in fair value of derivatives minus (e) gains on sale of property and (f) the results of properties which were not in operation for the entirety of the comparable periods.  Shopping Center same property operating income for the 2020 Quarter totaled $32.5 million, a $0.9 million decrease from the 2019 Quarter.  Mixed-Use same property operating income totaled $10.1 million, a $0.4 million decrease from the 2019 Quarter. The decrease in Shopping Center same property operating income was primarily the result of lower termination fees ($0.9 million). The decrease in Mixed-Use same property operating income was primarily the result of (a) lower expense recoveries net of property expenses ($0.3 million) and (b) lower parking income ($0.1 million).

As of March 31, 2020, 95.3% of the commercial portfolio was leased (not including the residential portfolio), compared to 95.2% at March 31, 2019.  On a same property basis, 95.3% of the commercial portfolio was leased as of March 31, 2020, compared to 95.7% at March 31, 2019.  As of March 31, 2020, the residential portfolio was 96.7% leased compared to 99.0% at March 31, 2019.

Funds from operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) was $25.3 million ($0.81 per diluted share) in the 2020 Quarter compared to $25.8 million ($0.84 per diluted share) in the 2019 Quarter.  FFO is a non-GAAP supplemental earnings measure which the Company considers meaningful in measuring its operating performance.  A reconciliation of net income to FFO is attached to this press release.  The decrease in FFO available to common stockholders and noncontrolling interests was primarily due to (a) lower other revenue, primarily lease termination fees ($1.4 million), (b) lower base rent, primarily due to the lease expiration and re-leasing of the grocery anchors at Seven Corners, which opened in March 2020, and at Shops at Fairfax, projected to open in the third quarter of 2020 (collectively, $0.4 million) and (c) lower expense recoveries net of property expenses ($0.2 million), partially offset by (d) lower interest expense, net and amortization of deferred debt costs due to higher capitalized interest ($1.6 million).

A novel strain of coronavirus ("COVID-19") was reported to have surfaced in Wuhan, China in December 2019, and has since spread globally, including to every state in the United States.  On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.  As a result, the COVID-19 pandemic is negatively affecting almost every industry directly or indirectly.

The actions taken by federal, state and local governments to mitigate the spread of  the novel coronavirus ("COVID-19") by ordering closure of nonessential businesses and ordering residents to generally stay at home have resulted in many of our tenants announcing mandated or temporary closures of their operations and/or requesting adjustments to their lease terms.  Experts predict that the COVID-19 pandemic will trigger a period of global economic slowdown or a global recession.  COVID-19 could have a material and adverse effect on or cause disruption to our business or financial condition, results from operations, cash flows and the market value and trading price of our securities.

While the Company's grocery stores, pharmacies, banks and home improvement stores generally remain open, restaurants, if open, are operating with delivery and curb side pick-up only, and most health, beauty supply and services, fitness centers, and other non-essential businesses remain closed.  As of May 5, 2020, approximately 32% of the Company's contractual base rent and operating expense and real estate tax recoveries for April 2020 remains unpaid, excluding rent subject to executed deferral agreements totaling approximately $355,600 (2%).  The Company is generally not charging late fees or delinquent interest on these past due payments and, in many cases, additional rent deferral agreements are being negotiated to allow tenants temporary relief where needed. For additional discussion of how the COVID-19 pandemic has impacted the Company's business, please see Part 1, Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations) of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

Saul Centers, Inc. is a self-managed, self-administered equity REIT headquartered in Bethesda, Maryland, which currently operates and manages a real estate portfolio of 60 properties which includes (a) 50 community and neighborhood shopping centers and six mixed-use properties with approximately 9.4 million square feet of leasable area and (b) four land and development properties. Approximately 85% of the Saul Centers' property operating income is generated by properties in the metropolitan Washington, DC/Baltimore area.

Safe Harbor Statement

Certain matters discussed within this press release may be deemed to be forward-looking statements within the meaning of the federal securities laws.  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.  Although the Company believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.  These factors include, but are not limited to, the risk factors described in our Annual Report on (i) Form 10-K for the year ended December 31, 2019 and (ii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and include the following: (i) general adverse economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the Company, (iv) the Company's ability to raise capital by selling its assets, (v) changes in governmental laws and regulations and management's ability to estimate the impact of such changes, (vi) the level and volatility of interest rates and management's ability to estimate the impact thereof, (vii) the availability of suitable acquisition, disposition, development and redevelopment opportunities, and risks related to acquisitions not performing in accordance with our expectations, (viii) increases in operating costs, (ix) changes in the dividend policy for the Company's common and preferred stock and the Company's ability to pay dividends at current levels, (x) the reduction in the Company's income in the event of multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center, (xi) impairment charges, (xii) unanticipated changes in the Company's intention or ability to prepay certain debt prior to maturity and (xiii) an epidemic or pandemic (such as the outbreak and worldwide spread of the novel coronavirus ("COVID-19")), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may (as with COVID-19) precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period.  Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this press release.  Except as may be required by law, we make no promise to update any of the forward-looking statements as a result of new information, future events or otherwise.  You should carefully review the risks and risk factors included in (i) our Annual Report on Form 10-K for the year ended December 31, 2019 and (ii) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

 

Saul Centers, Inc.

Consolidated Balance Sheets

(In thousands)




March 31,
 2020


December 31,
 2019


(Unaudited)

Assets




Real estate investments




Land

$

453,322



$

453,322


Buildings and equipment

1,300,605



1,292,631


Construction in progress

345,880



335,644



2,099,807



2,081,597


Accumulated depreciation

(572,912)



(563,474)



1,526,895



1,518,123


Cash and cash equivalents

31,935



13,905


Accounts receivable and accrued income, net

49,994



52,311


Deferred leasing costs, net

27,546



24,083


Prepaid expenses, net

3,611



5,363


Other assets

4,859



4,555


Total assets

$

1,644,840



$

1,618,340






Liabilities




Notes payable

$

798,343



$

821,503


Term loan facility payable

74,716



74,691


Revolving credit facility payable

123,507



86,371


Construction loan payable

122,510



108,623


Dividends and distributions payable

19,350



19,291


Accounts payable, accrued expenses and other liabilities

35,122



35,199


Deferred income

24,686



29,306


Total liabilities

1,198,234



1,174,984






Equity




Preferred stock, 1,000,000 shares authorized:




Series D Cumulative Redeemable, 30,000 shares issued and outstanding

75,000



75,000


Series E Cumulative Redeemable, 44,000 shares issued and outstanding

110,000



110,000


Common stock, $0.01 par value, 40,000,000 shares authorized, 23,326,963 and 23,231,240 shares issued and outstanding, respectively

233



232


Additional paid-in capital

415,962



410,926


Distributions in excess of accumulated earnings

(223,075)



(221,177)


Total Saul Centers, Inc. equity

378,120



374,981


Noncontrolling interests

68,486



68,375


Total equity

446,606



443,356


Total liabilities and equity

$

1,644,840



$

1,618,340


 

 

Saul Centers, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)




Three Months Ended March 31,


2020


2019

Revenue

(unaudited)

Rental revenue

$

55,415



$

56,803


Other

1,528



2,947


Total revenue

56,943



59,750


Expenses




Property operating expenses

7,036



8,001


Real estate taxes

7,153



7,148


Interest expense, net and amortization of deferred debt costs

9,594



11,067


Depreciation and amortization of deferred leasing costs

11,281



11,643


General and administrative

5,050



4,814


Total expenses

40,114



42,673


Net Income

16,829



17,077


Noncontrolling interests




Income attributable to noncontrolling interests

(3,565)



(3,630)


Net income attributable to Saul Centers, Inc.

13,264



13,447


Preferred stock dividends

(2,798)



(2,953)


Net income available to common stockholders

$

10,466



$

10,494


Per share net income available to common stockholders




Basic and diluted

$

0.45



$

0.46


Dividends declared per common share outstanding

$

0.53



$

0.53


 

 

Reconciliation of net income to FFO available to common stockholders and

noncontrolling interests (1)



Three Months Ended March 31,

(In thousands, except per share amounts)

2020


2019


(unaudited)

Net income

$

16,829



$

17,077


Add:




Real estate depreciation and amortization

11,281



11,643


FFO

28,110



28,720


Subtract:




Preferred stock dividends

(2,798)



(2,953)


FFO available to common stockholders and noncontrolling interests

$

25,312



$

25,767


Weighted average shares:




Diluted weighted average common stock

23,299



22,863


Convertible limited partnership units

7,897



7,835


Average shares and units used to compute FFO per share

31,196



30,698


FFO per share available to common stockholders and noncontrolling interests

$

0.81



$

0.84




(1)

The National Association of Real Estate Investment Trusts (NAREIT) developed FFO as a relative non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. FFO is defined by NAREIT as net income, computed in accordance with GAAP, plus real estate depreciation and amortization, and excluding impairment charges on real estate assets and gains or losses from real estate dispositions. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs, which is disclosed in the Company's Consolidated Statements of Cash Flows for the applicable periods. There are no material legal or functional restrictions on the use of FFO. FFO should not be considered as an alternative to net income, its most directly comparable GAAP measure, as an indicator of the Company's operating performance, or as an alternative to cash flows as a measure of liquidity. Management considers FFO a meaningful supplemental measure of operating performance because it primarily excludes the assumption that the value of the real estate assets diminishes predictably over time (i.e. depreciation), which is contrary to what the Company believes occurs with its assets, and because industry analysts have accepted it as a performance measure. FFO may not be comparable to similarly titled measures employed by other REITs.

 

 

Reconciliation of revenue to same property revenue (2)


(in thousands)


Three months ended March 31,



2020


2019



(unaudited)

Total revenue


$

56,943



$

59,750


Less: Acquisitions, dispositions and development properties


(130)



(889)


Total same property revenue


$

56,813



$

58,861







Shopping Centers


$

41,441



$

43,159


Mixed-Use properties


15,372



15,702


Total same property revenue


$

56,813



$

58,861







Total Shopping Center revenue


$

41,571



$

43,159


Less: Shopping Center acquisitions, dispositions and development properties


(130)



—


Total same Shopping Center revenue


$

41,441



$

43,159







Total Mixed-Use property revenue


$

15,372



$

16,591


Less: Mixed-Use acquisitions, dispositions and development properties


—



(889)


Total same Mixed-Use property revenue


$

15,372



$

15,702




(2)

Same property revenue is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the results of properties that were not in operation for the entirety of the comparable reporting periods.  Same property revenue adjusts property revenue by subtracting the revenue of properties not in operation for the entirety of the comparable reporting periods.  Same property revenue is a measure of the operating performance of the Company's properties but does not measure the Company's performance as a whole.  Same property revenue should not be considered as an alternative to total revenue, its most directly comparable GAAP measure, as an indicator of the Company's operating performance.  Management considers same property revenue a meaningful supplemental measure of operating performance because it is not affected by the cost of the Company's funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to ownership of the Company's properties.  Management believes the exclusion of these items from same property revenue is useful because the resulting measure captures the actual revenue generated and actual expenses incurred by operating the Company's properties.  Other REITs may use different methodologies for calculating same property revenue.  Accordingly, the Company's same property revenue may not be comparable to those of other REITs.

 

 


Reconciliation of net income to same property operating income (3)



Three Months Ended March 31,

(In thousands)

2020


2019


(unaudited)

Net income

$

16,829



$

17,077


Add: Interest expense, net and amortization of deferred debt costs

9,594



11,067


Add: Depreciation and amortization of deferred leasing costs

11,281



11,643


Add: General and administrative

5,050



4,814


Property operating income

42,754



44,601


Less: Acquisitions, dispositions and development properties

(104)



(628)


Total same property operating income

$

42,650



$

43,973






Shopping Centers

$

32,545



$

33,471


Mixed-Use properties

10,105



10,502


Total same property operating income

$

42,650



$

43,973






Shopping Center operating income

$

32,649



$

33,471


Less: Shopping Center acquisitions, dispositions and development properties

(104)



—


Total same Shopping Center operating income

$

32,545



$

33,471






Mixed-Use property operating income

$

10,105



$

11,130


Less: Mixed-Use acquisitions, dispositions and development properties

—



(628)


Total same Mixed-Use property operating income

$

10,105



$

10,502




(3)

Same property operating income is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the results of properties that were not in operation for the entirety of the comparable reporting periods.  Same property operating income adjusts property operating income by subtracting the results of properties that were not in operation for the entirety of the comparable periods.  Same property operating income is a measure of the operating performance of the Company's properties but does not measure the Company's performance as a whole.  Same property operating income should not be considered as an alternative to property operating income, its most directly comparable GAAP measure, as an indicator of the Company's operating performance.  Management considers same property operating income a meaningful supplemental measure of operating performance because it is not affected by the cost of the Company's funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to ownership of the Company's properties.  Management believes the exclusion of these items from property operating income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred by operating the Company's properties.  Other REITs may use different methodologies for calculating same property operating income.  Accordingly, same property operating income may not be comparable to those of other REITs.

 

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SOURCE Saul Centers, Inc.