BETHESDA, Md., Nov. 7, 2019 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended September 30, 2019 ("2019 Quarter").  Total revenue for the 2019 Quarter increased to $57.1 million from $56.9 million for the quarter ended September 30, 2018 ("2018 Quarter").  Net income decreased to $15.3 million for the 2019 Quarter from $16.7 million for the 2018 Quarter.  Net income available to common stockholders decreased to $9.0 million ($0.39 per diluted share) for the 2019 Quarter from $10.2 million ($0.45 per diluted share) for the 2018 Quarter.  Net income available to common stockholders decreased primarily due to (a) the impact of the operations of 7316 Wisconsin Avenue as the Company has completed the termination of leases to prepare for redevelopment ($1.1 million), (b) higher property operating expenses, exclusive of the impact of 7316 Wisconsin Avenue ($0.5 million) and (c) higher general and administrative expenses ($0.6 million) partially offset by (d) lower interest expense, net and amortization of deferred debt costs ($0.8 million), exclusive of the impact of 7316 Wisconsin Avenue.

Same property revenue increased $0.2 million (0.3%) and same property operating income decreased $0.5 million (1.2%) for the 2019 Quarter compared to the 2018 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 2019 Quarter totaled $32.3 million, a $0.2 million decrease from the 2018 Quarter.  Mixed-Use same property operating income totaled $10.2 million, a $0.3 million decrease from the 2018 Quarter.

As of September 30, 2019, 94.8% of the commercial portfolio was leased (not including the residential portfolio), compared to 95.0% at September 30, 2018.  On a same property basis, 94.8% of the commercial portfolio was leased as of September 30, 2019, compared to 95.2% at September 30, 2018.  As of September 30, 2019, the residential portfolio was 97.9% leased compared to 95.7% at September 30, 2018.

For the nine months ended September 30, 2019 ("2019 Period"), total revenue increased to $174.9 million from $169.1 million for the nine months ended September 30, 2018 ("2018 Period").  Net income increased to $49.2 million for the 2019 Period from $47.6 million for the 2018 Period.  Net income available to common stockholders increased to $29.8 million ($1.30 per diluted share) for the 2019 Period compared to $26.6 million ($1.19 per diluted share) for the 2018 Period.  The increase in net income available to common stockholders was primarily due to (a) higher lease termination fees, exclusive of the impact of 7316 Wisconsin Avenue ($2.5 million), (b) extinguishment in 2018 of issuance costs upon redemption of preferred shares ($2.3 million), (c) lower interest expense, net and amortization of deferred debt costs, exclusive of the impact of 7316 Wisconsin Avenue ($2.3 million), and (d) higher same property operating income, exclusive of lease termination fees ($0.5 million) partially offset by (e) the impact of the operations of 7316 Wisconsin Avenue as the Company has completed the termination of leases to prepare for redevelopment ($1.8 million), (f) higher general and administrative expenses ($1.5 million) and (g) higher income attributable to non-controlling interests ($1.0 million).

Same property revenue increased $4.8 million (2.8%) and same property operating income increased $3.0 million (2.3%) for the 2019 Period, compared to the 2018 Period.  Shopping Center same property operating income increased 2.8% and Mixed-Use same property operating income increased 1.0%.  Shopping Center same property operating income increased primarily due to (a) lease termination fees ($2.4 million) and (b) an increase in base rent ($0.8 million). Mixed-Use same property operating income increased primarily due to higher base rent ($0.5 million).

Funds from operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) was $24.1 million ($0.78 per diluted share) in the 2019 Quarter compared to $25.0 million ($0.83 per diluted share) in the 2018 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) higher general and administrative expenses ($0.6 million), (b) lower property operating income, exclusive of the impact of the operations of 7316 Wisconsin Avenue ($0.5 million), (c) the impact of the operations of 7316 Wisconsin Avenue as the Company has completed the termination of leases to prepare for redevelopment ($0.3 million), and (d) higher preferred stock dividends ($0.3 million), partially offset by (e) lower interest expense, net and amortization of deferred debt costs, exclusive of the impact of 7316 Wisconsin Avenue ($0.8 million).

FFO available to common stockholders and noncontrolling interests (after deducting preferred stock dividends and the impact of preferred stock redemptions) increased 8.5% to $75.2 million ($2.44 per diluted share) in the 2019 Period from $69.4 million ($2.31 per diluted share) in the 2018 Period.  FFO available to common stockholders and noncontrolling interests increased primarily due to (a) higher lease termination fees in the core portfolio ($2.5 million), (b) extinguishment in 2018 of issuance costs upon redemption of preferred shares ($2.3 million), (c) higher base rent in the core portfolio ($1.3 million) and (d) lower preferred stock dividends ($0.2 million) partially offset by (e) the impact of the operations of 7316 Wisconsin Avenue as the Company has completed the termination of leases to prepare for redevelopment ($0.5 million).

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) 49 community and neighborhood shopping centers and six mixed-use properties with approximately 9.2 million square feet of leasable area and (b) five 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 Form 10-K filed on February 26, 2019, 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, and (xii) unanticipated changes in the Company's intention or ability to prepay certain debt prior to maturity.  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 our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2019.

 

Saul Centers, Inc.

Consolidated Balance Sheets

(In thousands)



September 30,
 2019


December 31,
 2018


(Unaudited)

Assets




Real estate investments




Land

$

450,256



$

488,918


Buildings and equipment

1,284,315



1,273,275


Construction in progress

317,798



185,972



2,052,369



1,948,165


Accumulated depreciation

(553,829)



(525,518)



1,498,540



1,422,647


Cash and cash equivalents

52,269



14,578


Accounts receivable and accrued income, net

55,207



53,876


Deferred leasing costs, net

24,947



28,083


Prepaid expenses, net

9,357



5,175


Other assets

6,444



3,130


Total assets

$

1,646,764



$

1,527,489






Liabilities




Notes payable

$

846,525



$

880,271


Term loan facility payable

74,666



74,591


Revolving credit facility payable

—



45,329


Construction loan payable

93,537



21,655


Dividends and distributions payable

19,634



19,153


Accounts payable, accrued expenses and other liabilities

39,741



32,419


Deferred income

27,224



28,851


Total liabilities

1,101,327



1,102,269






Equity




Preferred stock, 1,000,000 shares authorized:




Series C Cumulative Redeemable, 42,000 shares issued and outstanding

105,000



105,000


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

75,000



75,000


Series E Cumulative Redeemable, 44,000 and 0 shares issued and outstanding,
respectively

110,000



—


Common stock, $0.01 par value, 40,000,000 shares authorized, 23,116,013 and 22,739,207
shares issued and outstanding, respectively

231



227


Additional paid-in capital

401,395



384,533


Distributions in excess of accumulated earnings

(215,334)



(208,593)


Accumulated other comprehensive loss

(343)



(255)


Total Saul Centers, Inc. equity

475,949



355,912


Noncontrolling interests

69,488



69,308


Total equity

545,437



425,220


Total liabilities and equity

$

1,646,764



$

1,527,489


 

 

Saul Centers, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)



Three Months Ended September 30,


Nine Months Ended September 30,


2019


2018


2019


2018

Revenue

(unaudited)


(unaudited)

Rental revenue

$

55,487



$

55,733



$

168,242



$

165,693


Other

1,565



1,177



6,701



3,407


Total revenue

57,052



56,910



174,943



169,100


Expenses








Property operating expenses

7,525



6,910



22,641



20,766


Real estate taxes

7,114



6,937



21,081



20,559


Interest expense, net and amortization of deferred debt
costs

10,325



10,974



32,185



33,568


Depreciation and amortization of deferred leasing costs

12,018



11,256



35,185



33,956


General and administrative

4,742



4,141



14,696



13,208


Total expenses

41,724



40,218



125,788



122,057


Change in fair value of derivatives

—



10



—



(2)


Gain on sale of property

—



—



—



509


Net Income

15,328



16,702



49,155



47,550


Noncontrolling interests








Income attributable to noncontrolling interests

(3,102)



(3,547)



(10,250)



(9,265)


Net income attributable to Saul Centers, Inc.

12,226



13,155



38,905



38,285


Extinguishment of issuance costs upon redemption of
preferred shares

—



—



—



(2,328)


Preferred stock dividends

(3,210)



(2,953)



(9,116)



(9,309)


Net income available to common
stockholders

$

9,016



$

10,202



$

29,789



$

26,648


Per share net income available to common stockholders








Basic and diluted

$

0.39



$

0.45



$

1.30



$

1.19


Dividends declared per common share outstanding

$

0.53



$

0.52



$

1.59



$

1.56


 

 


Reconciliation of net income to FFO available to common stockholders and

noncontrolling interests (1)

 


Three Months Ended September 30,


Nine Months Ended September 30,

(In thousands, except per share amounts)

2019


2018


2019


2018


(unaudited)


(unaudited)

Net income

$

15,328



$

16,702



$

49,155



$

47,550


Subtract:








Gain on sale of property

—



—



—



(509)


Add:








Real estate depreciation and amortization

12,018



11,256



35,185



33,956


FFO

27,346



27,958



84,340



80,997


Subtract:








Extinguishment of issuance costs upon redemption of
preferred shares

—



—



—



(2,328)


Preferred stock dividends

(3,210)



(2,953)



(9,116)



(9,309)


FFO available to common stockholders and
noncontrolling interests

$

24,136



$

25,005



$

75,224



$

69,360


Weighted average shares:








Diluted weighted average common stock

23,121



22,501



22,993



22,336


Convertible limited partnership units

7,869



7,808



7,852



7,700


Average shares and units used to compute FFO per share

30,990



30,309



30,845



30,036


FFO per share available to common stockholders and
noncontrolling interests

$

0.78



$

0.83



$

2.44



$

2.31




(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 September 30,


Nine months ended September 30,



2019


2018


2019


2018



(unaudited)


(unaudited)

Total revenue


$

57,052



$

56,910



$

174,943



$

169,100


Less: Acquisitions, dispositions and development properties


(72)



(82)



(1,155)



(82)


Total same property revenue


$

56,980



$

56,828



$

173,788



$

169,018











Shopping Centers


$

41,313



$

41,091



$

126,730



$

122,770


Mixed-Use properties


15,667



15,737



47,058



46,248


Total same property revenue


$

56,980



$

56,828



$

173,788



$

169,018











Total Shopping Center revenue


$

41,313



$

41,091



$

126,730



$

122,770


Less: Shopping Center acquisitions, dispositions and
development properties


—



—



—



—


Total same Shopping Center revenue


$

41,313



$

41,091



$

126,730



$

122,770











Total Mixed-Use property revenue


$

15,739



$

15,819



$

48,213



$

46,330


Less: Mixed-Use acquisitions, dispositions and development
properties


(72)



(82)



(1,155)



(82)


Total same Mixed-Use property revenue


$

15,667



$

15,737



$

47,058



$

46,248




(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 September 30,


Nine Months Ended September 30,

(In thousands)

2019


2018


2019


2018


(unaudited)


(unaudited)

Net income

$

15,328



$

16,702



$

49,155



$

47,550


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

10,325



10,974



32,185



33,568


Add: Depreciation and amortization of deferred leasing costs

12,018



11,256



35,185



33,956


Add: General and administrative

4,742



4,141



14,696



13,208


Add: Change in fair value of derivatives

—



(10)



—



2


Less: Gain on sale of property

—



—



—



(509)


Property operating income

42,413



43,063



131,221



127,775


Add (Less): Acquisitions, dispositions and development properties

97



(52)



(519)



(52)


Total same property operating income

$

42,510



$

43,011



$

130,702



$

127,723










Shopping Centers

$

32,339



$

32,517



$

99,516



$

96,839


Mixed-Use properties

10,171



10,494



31,186



30,884


Total same property operating income

$

42,510



$

43,011



$

130,702



$

127,723










Shopping Center operating income

$

32,339



$

32,517



$

99,516



$

96,839


Less: Shopping Center acquisitions, dispositions and development
properties

—



—



—



—


Total same Shopping Center operating income

$

32,339



$

32,517



$

99,516



$

96,839










Mixed-Use property operating income

$

10,074



$

10,546



$

31,705



$

30,936


Add (Less): Mixed-Use acquisitions, dispositions and development
properties

97



(52)



(519)



(52)


Total same Mixed-Use property operating income

$

10,171



$

10,494



$

31,186



$

30,884




(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.