Market Overview

Saul Centers, Inc. Reports Third Quarter 2019 Earnings

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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






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