Market Overview

Saul Centers, Inc. Reports Third Quarter 2012 Earnings

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BETHESDA, Md., Nov. 1, 2012 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust (REIT), announced its operating results for the quarter ended September 30, 2012 ("2012 Quarter").  Total revenue for the 2012 Quarter increased to $47.5 million from $42.9 million for the quarter ended September 30, 2011 ("2011 Quarter").  Operating income, which is net income available to common stockholders before income attributable to noncontrolling interests and preferred stock dividends, decreased to $8.1 million for the 2012 Quarter from $8.7 million for the 2011 Quarter.  Net income available to common stockholders was $4.2 million ($0.21 per diluted share) for the 2012 Quarter compared to $1.7 million ($0.09 per diluted share) for the 2011 Quarter.  Revenue increased primarily due to $3.0 million of rents generated by the shopping centers acquired in 2011 and $0.9 million of additional revenue generated by Clarendon Center.  Operating income declined primarily due to $1.9 million of predevelopment expenses, which was partially offset by $1.3 million of additional operating income generated by the core portfolio and $0.2 million generated by the shopping centers acquired in 2011.

Same property revenue increased 1.9% for the 2012 Quarter compared to the 2011 Quarter, and same property operating income increased 3.3%.  The same property comparisons exclude the results of properties not in operation for the entirety of the comparable reporting periods.  Shopping center portfolio same property operating income increased 3.7%, primarily due to lower provision for credit losses, and the mixed-use portfolio same property operating income increased 2.0%.

For the nine months ended September 30, 2012 ("2012 Period"), total revenue increased to $142.2 million from $127.4 million for the nine months ended September 30, 2011 ("2011 Period").  Operating income increased to $27.0 million for the 2012 Period from $25.2 million for the 2011 Period.  Net income available to common stockholders was $12.5 million ($0.64 per diluted share) for the 2012 Period compared to $7.9 million ($0.42 per diluted share) for the 2011 Period.  The primary sources of the revenue increase were additional revenue from the shopping centers acquired in 2011 ($9.7 million) and Clarendon Center ($4.3 million).  The primary sources of the increase in operating income were the core portfolio ($2.9 million) and the shopping centers acquired in 2011 ($1.3 million), partially offset by predevelopment expenses ($1.9 million).  Same property revenue increased 0.6% for the 2012 Period compared to the 2011 Period, and same property operating income increased 1.7%.  Shopping center portfolio same property operating income increased 1.2% and the mixed-use portfolio same property operating income increased 3.6% due to improved operating performance at Washington Square.

As of September 30, 2012, 91.6% of the commercial portfolio was leased (all properties except the apartments at Clarendon Center, which were 100% leased), compared to 90.4% at September 30, 2011.  On a same property basis, 91.1% of the portfolio was leased compared to the prior year level of 89.9%.  The 2012 leasing percentages were impacted by a net increase of approximately 105,000 square feet of leased space, primarily caused by the leasing of a portion of the space vacated by major shopping center tenants in 2011.

Funds from operations (FFO) available to common shareholders (after deducting preferred stock dividends) increased 36.2% to $14.6 million ($0.55 per diluted share) in the 2012 Quarter from $10.7 million ($0.44 per diluted share) in the 2011 Quarter.  FFO, a widely accepted non-GAAP financial measure of operating performance for REITs, is defined as net income plus real estate depreciation and amortization, and excluding gains and losses from property dispositions, impairment charges on depreciable real estate assets and extraordinary items.  The primary sources of increased FFO in the 2012 Quarter were (a) acquisition costs incurred in 2011 ($2.4 million), (b) additional FFO generated by the shopping center properties acquired in 2011 ($1.5 million), the core portfolio ($1.5 million), and Clarendon Center ($0.1 million) and (c) the change in fair value recognized on the Company's interest rate swaps ($0.2 million), partially offset by predevelopment expenses ($1.9 million or $0.07 per diluted share).

FFO available to common shareholders for the 2012 Period increased 29.1% to $45.5 million ($1.72 per diluted share) from $35.2 million ($1.45 per diluted share) during the 2011 Period.  The primary sources of increased FFO in the 2012 Period were (a) additional FFO generated by the shopping centers acquired in 2011 ($4.8 million), the core portfolio ($2.5 million), and Clarendon Center ($0.8 million), (b) acquisition costs incurred in the 2011 Period ($2.5 million), (c) a change in the fair value loss recognized on the Company's interest rate swaps ($1.4 million), partially offset by predevelopment expenses ($1.9 million).

Saul Centers is a self-managed, self-administered equity REIT headquartered in Bethesda, Maryland. Saul Centers currently operates and manages a real estate portfolio of 57 community and neighborhood shopping center and mixed-use properties totaling approximately 9.5 million square feet of leasable area.  Over 85% of the Company's property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area.   

 

Saul Centers, Inc.

Condensed Consolidated Balance Sheets

($ in thousands)
























September 30,


December 31,











2012


2011

Assets









(Unaudited)




Real estate investments











Land


$     323,723


$    324,183



Buildings and equipment


1,101,339


1,092,533



Construction in progress


1,422


1,129











1,426,484


1,417,845



Accumulated depreciation


(346,426)


(326,397)











1,080,058


1,091,448


Cash and cash equivalents


33,498


12,323


Accounts receivable and accrued income, net


41,916


39,094


Deferred leasing costs, net


25,396


25,876


Prepaid expenses, net


6,367


3,868


Deferred debt costs, net


8,106


7,090


Other assets


5,106


12,870



Total assets


$  1,200,447


$ 1,192,569














Liabilities












Mortgage notes payable


$     827,963


$    823,871


Revolving credit facility payable


-


8,000


Dividends and distributions payable


13,394


13,219


Accounts payable, accrued expenses and other liabilities


30,044


22,992


Deferred income


30,128


31,281



Total liabilities


901,529


899,363














Stockholders' equity











Preferred stock


179,328


179,328


Common stock


198


193


Additional paid-in capital


236,459


217,829


Accumulated deficit and other comprehensive loss


(157,085)


(147,522)



Total Saul Centers, Inc. stockholders' equity


258,900


249,828


Noncontrolling interest


40,018


43,378



Total stockholders' equity


298,918


293,206
















Total liabilities and stockholders' equity


$  1,200,447


$ 1,192,569














 

Saul Centers, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)




























Three Months Ended September 30,


Nine Months Ended September 30,











2012


2011


2012


2011

Revenue









(Unaudited)


(Unaudited)


Base rent


$       38,403


$       34,390


$    114,091


$   101,280


Expense recoveries


7,576


6,994


22,741


21,211


Percentage rent


259


209


1,118


1,037


Other


1,296


1,285


4,208


3,862



Total revenue


47,534


42,878


142,158


127,390


















Operating expenses













Property operating expenses


5,977


5,829


17,775


18,289


Provision for credit losses


168


595


761


1,628


Real estate taxes


5,546


4,743


16,928


13,881


Interest expense and amortization of deferred debt costs


12,322


11,250


37,660


32,714


Depreciation and amortization of deferred leasing costs


10,268


8,512


29,816


25,308


General and administrative

3,272


3,293


10,303


10,402


Predevelopment expenses


1,870


-


1,870


-



Total operating expenses


39,423


34,222


115,113


102,222

Operating income


8,111


8,656


27,045


25,168


Acquisition related costs


-


(2,439)


-


(2,513)


Change in fair value of derivatives


17


(217)


(2)


(1,374)


Gain on sale of property


1,057


-


1,057


-


Gain on casualty settlement


219


-


219


198

Net income


9,404


6,000


28,319


21,479


Income attributable to the noncontrolling interests


(1,456)


(496)


(4,428)


(2,268)

Net income attributable to Saul Centers, Inc.


7,948


5,504


23,891


19,211


Preferred dividends


(3,785)


(3,785)


(11,355)


(11,355)

Net income available to common stockholders


$         4,163


$         1,719


$      12,536


$       7,856


















Per share net income available to common stockholders :










Diluted


$           0.21


$           0.09


$          0.64


$         0.42


















Weighted average common stock :










Common stock


19,721


18,893


19,561


18,774


Effect of dilutive options


63


44


51


69


Diluted weighted average common stock


19,784


18,937


19,612


18,843

 

Saul Centers, Inc.

Supplemental Information

(In thousands, except per share amounts)




























Three Months Ended September 30,


Nine Months Ended September 30,











2012


2011


2012


2011

Reconciliation of net income to FFO available to common shareholders:

(1)

(Unaudited)


(Unaudited)


Net income


$         9,404


$         6,000


$      28,319


$     21,479


Less:

Gains on property dispositions


(1,276)


-


(1,276)


(198)


Add:

Real property depreciation and amortization


10,268


8,512


29,816


25,308




















FFO


18,396


14,512


56,859


46,589


Less:

Preferred dividends


(3,785)


(3,785)


(11,355)


(11,355)



FFO available to common shareholders


$       14,611


$       10,727


$      45,504


$     35,234


















Weighted average shares :










Diluted weighted average common stock


19,784


18,937


19,612


18,843


Convertible limited partnership units


6,914


5,416


6,914


5,416


Diluted & converted weighted average shares


26,698


24,353


26,526


24,259


















Per share amounts:










FFO available to common shareholders (diluted


$           0.55


$           0.44


$          1.72


$         1.45


















Reconciliation of net income to same property operating income:










Net income


$         9,404


$         6,000


$      28,319


$     21,479


Add:

Interest expense and amortization of deferred debt costs


12,322


11,250


37,660


32,714


Add:

Depreciation and amortization of deferred leasing costs


10,268


8,512


29,816


25,308


Add:

General and administrative


3,272


3,293


10,303


10,402


Add:

Predevelopment expenses


1,870


-


1,870


-


Add:

Acquisition related costs


-


2,439


-


2,513


Add:

Change in fair value of derivatives


(17)


217


2


1,374


Less:

Gains on property dispositions


(1,276)


-


(1,276)


(198)


Less:

Interest income


(59)


(18)


(108)


(65)




















Property operating income


35,784


31,693


106,586


93,527


Less:

Acquisitions & developments


(5,738)


(2,618)


(17,003)


(5,421)



Total same property operating income


$       30,046


$       29,075


$      89,583


$     88,106



















Shopping centers


$       24,169


$       23,311


$      71,838


$     70,984


Mixed-Use properties


5,877


5,764


17,745


17,122



Total same property operating income


$       30,046


$       29,075


$      89,583


$     88,106


















 (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  extraordinary items, impairment charges on depreciable real estate assets and gains or losses from property 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 we believe occurs with our 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.

SOURCE Saul Centers, Inc.

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