Saul Centers, Inc. Reports Third Quarter 2018 Earnings
PR Newswire
BETHESDA, Md., Nov. 1, 2018
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, | December 31, | ||||||
(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 | Nine Months Ended | ||||||||||||||
(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 | Nine months ended | ||||||||||||||
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 | Nine Months Ended | ||||||||||||||
(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 | |||||||
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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