Saul Centers, Inc. Reports Third Quarter 2018 Earnings

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Saul Centers, Inc. Reports Third Quarter 2018 Earnings

PR Newswire

BETHESDA, Md., Nov. 1, 2018 /PRNewswire/ -- Saul Centers, Inc. BFS, an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended September 30, 2018 ("2018 Quarter").  Total revenue for the 2018 Quarter increased to $57.1 million from $56.2 million for the quarter ended September 30, 2017 ("2017 Quarter").  Operating income, which is net income before the impact of change in fair value of derivatives, loss on early extinguishment of debt and gains on sales of property and casualty settlements, if any, increased to $16.7 million for the 2018 Quarter from $14.4 million for the 2017 Quarter.

Net income available to common stockholders increased to $10.2 million ($0.45 per diluted share) for the 2018 Quarter from $8.4 million ($0.38 per diluted share) for the 2017 Quarter.

Same property revenue increased $0.9 million (1.6%) and same property operating income increased $1.2 million (2.9%) for the 2018 Quarter compared to the 2017 Quarter.  We define same property revenue as property revenue minus the revenue of properties not in operation for the entirety of the comparable reporting periods.  We define same property operating income as property operating income minus the results of properties which were not in operation for the entirety of the comparable periods.  Shopping Center same property operating income for the 2018 Quarter totaled $32.5 million, a $0.6 million increase from the 2017 Quarter.  Mixed-Use same property operating income totaled $10.5 million, a $0.6 million increase from the prior year.

As of September 30, 2018, 95.0% of the commercial portfolio was leased (not including the residential portfolio), compared to 95.5% at September 30, 2017.  On a same property basis, 95.2% of the commercial portfolio was leased as of September 30, 2018, compared to 95.5% at September 30, 2017.  As of September 30, 2018, the residential portfolio was 95.7% leased compared to 95.0% at September 30, 2017.

For the nine months ended September 30, 2018 ("2018 Period"), total revenue decreased to $169.8 million from $170.6 million for the nine months ended September 30, 2017 ("2017 Period").  Operating income increased to $47.0 million for the 2018 Period from $46.2 million for the 2017 Period.  The increase in operating income was primarily due to (a) increased capitalized interest ($1.8 million), (b) higher commercial base rent due primarily to increased rental rates ($1.8 million), (c) higher residential rent ($0.8 million), and (d) lower depreciation and amortization ($0.4 million) partially offset by (e) the net impact of terminating leases for the spaces previously occupied by Safeway at Broadlands and Kmart at Kentlands ($3.5 million).

Net income available to common stockholders decreased to $26.6 million ($1.19 per diluted share) for the 2018 Period compared to $27.4 million ($1.25 per diluted share) for the 2017 Period.  The decrease in net income available to common stockholders was primarily due to extinguishment of issuance costs upon redemption of preferred shares ($2.3 million) partially offset by increased net income ($1.4 million).

Same property revenue decreased $0.4 million (0.2%) and same property operating income decreased $1.5 million (1.2%) for the 2018 Period, compared to the 2017 Period.  Shopping Center same property operating income decreased 2.2% and mixed-use same property operating income increased 1.8%.  Shopping Center same property operating income decreased primarily due to (a) the net impact of terminating leases for the spaces previously occupied by Safeway at Broadlands and Kmart at Kentlands ($3.5 million) partially offset by (b) an increase in base rent ($2.4 million).

Funds from operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) was $25.0 million ($0.83 per diluted share) in the 2018 Quarter compared to $22.7 million ($0.77 per diluted share) in the 2017 Quarter.  FFO for the 2018 Quarter increased primarily due to lower interest and amortization of debt expense.  FFO, a widely accepted non-GAAP financial measure of operating performance for REITs, is defined as net income plus real estate depreciation and amortization, excluding gains and losses from property dispositions and impairment charges on real estate assets.

FFO available to common stockholders and noncontrolling interests (after deducting preferred stock dividends and the impact of preferred stock redemptions) decreased 2.7% to $69.4 million ($2.31 per diluted share) in the 2018 Period from $71.3 million ($2.42 per diluted share) in the 2017 Period.  FFO available to common stockholders and noncontrolling interests decreased primarily due to (a) the net impact of terminating leases for the spaces previously occupied by Safeway at Broadlands and Kmart at Kentlands ($3.5 million) and (b) extinguishment of issuance costs upon redemption of preferred shares ($2.3 million), partially offset by (c) higher base rent ($2.6 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 seven mixed-use properties with approximately 9.3 million square feet of leasable area and (b) four land and development properties. Over 85% of the Saul Centers' property operating income is generated by properties in the metropolitan Washington, DC/Baltimore area.

 

Saul Centers, Inc.

Condensed Consolidated Balance Sheets

(In thousands)





September 30,

 2018



December 31,

 2017



(Unaudited)

Assets







Real estate investments







Land

$

484,428





$

450,256



Buildings and equipment

1,268,120





1,261,830



Construction in progress

161,625





91,114





1,914,173





1,803,200



Accumulated depreciation

(516,568)





(488,166)





1,397,605





1,315,034



Cash and cash equivalents

9,771





10,908



Accounts receivable and accrued income, net

55,541





54,057



Deferred leasing costs, net

28,057





27,255



Prepaid expenses, net

9,015





5,248



Other assets

6,149





9,950



Total assets

$

1,506,138





$

1,422,452











Liabilities







Notes payable

$

861,897





$

897,888



Revolving credit facility payable

75,200





60,734



Term loan facility payable

74,568







Construction loan payable

1,247







Dividends and distributions payable

18,722





18,520



Accounts payable, accrued expenses and other liabilities

31,958





23,123



Deferred income

25,747





29,084



Total liabilities

1,089,339





1,029,349











Equity







Preferred stock

180,000





180,000



Common stock

225





221



Additional paid-in capital

373,036





352,590



Distributions in excess of accumulated net income and accumulated

 other comprehensive loss

(206,028)





(198,406)



Total Saul Centers, Inc. equity

347,233





334,405



Noncontrolling interests

69,566





58,698



Total equity

416,799





393,103



Total liabilities and equity

$

1,506,138





$

1,422,452



 

 

Saul Centers, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)





Three Months Ended September 30,



Nine Months Ended September 30,



2018



2017



2018



2017

Property revenue

(unaudited)



(unaudited)

Base rent

$

46,189





$

45,385





$

137,999





$

135,436



Expense recoveries

9,209





9,447





26,582





26,378



Percentage rent

119





67





786





968



Other property revenue

1,494





1,329





4,263





7,797



Total property revenue

57,011





56,228





169,630





170,579



Property expenses















Property operating expenses

6,910





7,418





20,766





20,543



Provision for credit losses

101





52





530





602



Real estate taxes

6,937





6,834





20,559





20,124



Total property expenses

13,948





14,304





41,855





41,269



Property operating income

43,063





41,924





127,775





129,310



















Other revenue

48





9





218





31



Other expenses















Interest expense and amortization of deferred debt costs

11,022





11,821





33,786





35,585



Depreciation and amortization of deferred leasing costs

11,256





11,363





33,956





34,396



General and administrative

4,141





4,363





13,208





13,178



Total other expenses

26,419





27,547





80,950





83,159



Operating income

16,692





14,386





47,043





46,182



Change in fair value of derivatives

10





(1)





(2)





(2)



Gain on sale of property









509







Net income

16,702





14,385





47,550





46,180



Income attributable to noncontrolling interests

(3,547)





(2,902)





(9,265)





(9,483)



Net income attributable to Saul Centers, Inc.

13,155





11,483





38,285





36,697



Extinguishment of issuance costs upon redemption of preferred shares









(2,328)







Preferred stock dividends

(2,953)





(3,093)





(9,309)





(9,281)



Net income available to common stockholders

$

10,202





$

8,390





$

26,648





$

27,416



Per share net income available to common stockholders















Basic and diluted

$

0.45





$

0.38





$

1.19





$

1.25



















Weighted Average Common Stock:















Common stock

22,432





21,942





22,290





21,844



Effect of dilutive options

69





86





46





105



Diluted weighted average common stock

22,501





22,028





22,336





21,949



















 

 



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)

2018



2017



2018



2017



(unaudited)



(unaudited)

Net income

$

16,702





$

14,385





$

47,550





$

46,180



Subtract:















Gain on sale of property









(509)







Add:















Real estate depreciation and amortization

11,256





11,363





33,956





34,396



FFO

27,958





25,748





80,997





80,576



Subtract:















Extinguishment of issuance costs upon redemption of preferred shares









(2,328)







Preferred stock dividends

(2,953)





(3,093)





(9,309)





(9,281)



FFO available to common stockholders and noncontrolling interests

$

25,005





$

22,655





$

69,360





$

71,295



Weighted average shares:















Diluted weighted average common stock

22,501





22,028





22,336





21,949



Convertible limited partnership units

7,808





7,521





7,700





7,491



Average shares and units used to compute FFO per share

30,309





29,549





30,036





29,440



FFO per share available to common stockholders and noncontrolling interests

$

0.83





$

0.77





$

2.31





$

2.42























(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 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 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 property revenue to same property revenue



(in thousands)



Three months ended

September 30,



Nine months ended

September 30,





2018



2017



2018



2017

Total property revenue



$

57,011





$

56,228





$

169,630





$

170,579



Less: Acquisitions, dispositions and development properties



(82)





(199)





(3,712)





(4,285)



Total same property revenue



$

56,929





$

56,029





$

165,918





$

166,294





















Shopping Centers



$

41,161





$

40,635





$

119,352





$

120,569



Mixed-Use properties



15,768





15,394





46,566





45,725



Total same property revenue



$

56,929





$

56,029





$

165,918





$

166,294





















Total Shopping Center revenue



$

41,161





$

40,834





$

122,982





$

124,854



Less: Shopping Center acquisitions, dispositions and development properties







(199)





(3,630)





(4,285)



Total same Shopping Center revenue



$

41,161





$

40,635





$

119,352





$

120,569





















Total Mixed-Use property revenue



$

15,850





$

15,394





$

46,648





$

45,725



Less: Mixed-Use acquisitions, dispositions and development properties



(82)









(82)







Total same Mixed-Use property revenue



$

15,768





$

15,394





$

46,566





$

45,725





 

 

Reconciliation of property operating income to same property operating income





Three Months Ended

September 30,



Nine Months Ended

September 30,

(In thousands)

2018



2017



2018



2017



(unaudited)



(unaudited)

Property operating income

$

43,063





$

41,924





$

127,775





$

129,310



Less: Acquisitions, dispositions and development properties

(51)





(107)





(3,088)





(3,111)



Total same property operating income

$

43,012





$

41,817





$

124,687





$

126,199



















Shopping Centers

$

32,517





$

31,928





$

93,802





$

95,867



Mixed-Use properties

10,495





9,889





30,885





30,332



Total same property operating income

$

43,012





$

41,817





$

124,687





$

126,199



















Shopping Center operating income

$

32,517





$

32,035





$

96,839





$

98,978



Less: Shopping Center acquisitions, dispositions and development properties





(107)





(3,037)





(3,111)



Total same Shopping Center operating income

$

32,517





$

31,928





$

93,802





$

95,867



















Mixed-Use operating income

$

10,546





$

9,889





$

30,936





$

30,332



Less: Mixed-Use Acquisitions, dispositions and development properties

(51)









(51)







Total same Mixed-Use property operating income

$

10,495





$

9,889





$

30,885





$

30,332



 

 

Cision View original content:http://www.prnewswire.com/news-releases/saul-centers-inc-reports-third-quarter-2018-earnings-300742671.html

SOURCE Saul Centers, Inc.

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