EX-99.1 2 bfs-12312017x8kxexhibit991.htm EXHIBIT 99.1 Exhibit


EXHIBIT INDEX
Exhibit        Description
No.
99.1         Press Release, dated February 27, 2018, of Saul Centers, Inc.

Section 2: EX-99.1 (EX-99.1)
Exhibit 99.1
SAUL CENTERS, INC.
7501 Wisconsin Avenue, Suite 1500, Bethesda, Maryland 20814-6522
(301) 986-6200
Saul Centers, Inc. Reports Fourth Quarter 2017 Earnings
February 27, 2018, Bethesda, MD.
Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended December 31, 2017 (“2017 Quarter”). Total revenue for the 2017 Quarter increased to $56.7 million from $54.2 million for the quarter ended December 31, 2016 (“2016 Quarter”). Operating income, which is net income before the impact of the change in fair value of derivatives, loss on early extinguishment of debt, gains on sales of property and gains on casualty settlements, increased to $14.4 million for the 2017 Quarter from $13.4 million for the 2016 Quarter.
Net income available to common stockholders was $8.5 million ($0.38 per diluted share) for the 2017 Quarter compared to $8.4 million ($0.38 per diluted share) for the 2016 Quarter. The increase in net income available to common stockholders was primarily due to (a) higher property operating income ($1.6 million), partially offset by (b) lower gain on sale of properties ($1.0 million) and (c) higher depreciation and amortization ($0.4 million).
Same property revenue increased 3.5% and same property operating income increased 2.2% for the 2017 Quarter compared to the 2016 Quarter. Same property operating income equals property revenue minus the sum of (a) property operating expenses, (b) provision for credit losses and (c) real estate taxes. The comparison excludes the results of properties not in operation for the entirety of the comparable reporting periods. Shopping Center same property operating income increased 1.6% and Mixed-Use same property operating income increased 4.1%. The increase in Shopping Center same property operating income was primarily the result of higher base rent. The increase in Mixed-Use same property operating income was the result of (a) higher base rent ($0.8 million), partially offset by (b) lower other income ($0.2 million) and (c) higher provision for credit losses ($0.2 million).
For the year ended December 31, 2017 (“2017 Period”), total revenue increased to $227.3 million from $217.1 million for the year ended December 31, 2016 (“2016 Period”). Operating income was $60.6 million for the 2017 Period compared to $55.7 million for the 2016 Period. Operating income for the 2017 Period increased primarily due to (a) $8.3 million of increased property operating income, partially offset by (b) $1.5 million of higher interest expense and amortization of deferred debt costs, (c) $1.3 million of higher depreciation expense and (d) $0.7 million of higher general and administrative expenses.
Net income available to common stockholders was $35.9 million ($1.63 per diluted share) for the 2017 Period compared to $32.9 million ($1.52 per diluted share) for the 2016 Period. Net income available to common stockholders for the 2017 Period increased primarily due to (a) $8.3 million of increased property operating income, partially offset by (b)  $1.5 million of higher interest expense and amortization of deferred debt costs, (c) $1.3 million of higher depreciation expense, (d) lower gain on sale of property ($1.0 million), (e) higher noncontrolling interest ($1.0 million) and (f) $0.7 million of higher general and administrative expenses.
Same property revenue increased 0.9% and same property operating income increased 0.7% for the 2017 Period compared to the 2016 Period. Shopping Center same property operating income increased 2.1% and Mixed-Use same property operating income decreased 4.2%. Shopping Center same property operating income increased $2.6 million primarily due to
(a) higher base rent ($1.5 million), exclusive of the net impact of a 2017 lease termination at Broadlands and a 2016 lease termination at 11503 Rockville Pike, (b) the net impact of a 2017 lease termination at Broadlands and a 2016 lease termination at 11503 Rockville Pike ($0.1 million), (c) higher operating expense recoveries, net of expenses ($0.4 million), (d) lower provision for credit losses ($0.3 million) and (e) higher termination fees throughout the portfolio ($0.3 million). Mixed-Use same property operating income decreased $1.5 million primarily due to (a) lower termination fee income ($0.9 million) and (b) lower parking revenue as a result of a garage refurbishment ($0.3 million).

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www.SaulCenters.com



As of December 31, 2017, 94.3% of the commercial portfolio was leased (all properties except the apartments at Clarendon Center and Park Van Ness), compared to 95.4% at December 31, 2016. On a same property basis, 94.2% of the portfolio was leased at December 31, 2017, compared to 95.5% at December 31, 2016. As of December 31, 2017, the apartments at Clarendon Center were 96.7% leased compared to 97.1% leased at December 31, 2016, and the apartments at Park Van Ness were 95.9% leased compared to 72.7% leased at December 31, 2016.
Funds From Operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends and preferred stock redemption charges) increased to $22.7 million ($0.76 per diluted share) in the 2017 Quarter from $21.2 million ($0.73 per diluted share) in the 2016 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 increase in FFO available to common stockholders and noncontrolling interests for the 2017 Quarter was primarily due to higher property operating income ($1.6 million).
FFO available to common stockholders and noncontrolling interests (after deducting preferred stock dividends and preferred stock redemptions) increased 7.1% to $94.0 million ($3.18 per diluted share) in the 2017 Period from $87.7 million ($3.03 per diluted share) in the 2016 Period. FFO available to common stockholders and noncontrolling interests for the 2017 Period increased primarily due to (a) higher overall property operating income ($8.3 million), partially offset by (b) higher interest expense and amortization of debt expense ($1.5 million) and (c) higher general and administrative expenses ($0.7 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 comprised of 58 properties which includes (a) 55 community and neighborhood shopping centers and mixed-use properties with approximately 9.2 million square feet of leasable area and (b) three land and development properties. Over 85% of the Company’s property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area.

 
 
 
Contact:
 
Scott V. Schneider
 
 
(301) 986-6220
 
 
 


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www.SaulCenters.com



Saul Centers, Inc.
Condensed Consolidated Balance Sheets
(In thousands)

 
December 31,
2017
 
December 31,
2016
 
 
 
 
Assets
 
 
 
Real estate investments
 
 
 
Land
$
450,256

 
$
422,546

Buildings and equipment
1,261,830

 
1,214,697

Construction in progress
91,114

 
63,570

 
1,803,200

 
1,700,813

Accumulated depreciation
(488,166
)
 
(458,279
)
 
1,315,034

 
1,242,534

Cash and cash equivalents
10,908

 
8,322

Accounts receivable and accrued income, net
54,057

 
52,774

Deferred leasing costs, net
27,255

 
25,983

Prepaid expenses, net
5,248

 
5,057

Other assets
9,950

 
8,355

Total assets
$
1,422,452

 
$
1,343,025

 
 
 
 
Liabilities
 
 
 
Mortgage notes payable
$
897,888

 
$
783,400

Revolving credit facility payable
60,734

 
48,217

Construction loan payable
—

 
68,672

Dividends and distributions payable
18,520

 
17,953

Accounts payable, accrued expenses and other liabilities
23,123

 
20,838

Deferred income
29,084

 
30,696

Total liabilities
1,029,349

 
969,776

 
 
 
 
Equity
 
 
 
Preferred stock
180,000

 
180,000

Common stock
221

 
217

Additional paid-in capital
352,590

 
328,171

Accumulated deficit and other comprehensive loss
(198,406
)
 
(189,883
)
Total Saul Centers, Inc. equity
334,405

 
318,505

Noncontrolling interests
58,698

 
54,744

Total equity
393,103

 
373,249

Total liabilities and equity
$
1,422,452

 
$
1,343,025






Saul Centers, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
 
Three Months Ended 
 December 31,
 
Year Ended December 31,
 
2017
 
2016
 
2017
 
2016
 
(unaudited)
 
 
Revenue
 
 
 
 
 
Base rent
$
45,705

 
$
44,043

 
$
181,141

 
$
172,381

Expense recoveries
8,969

 
8,258

 
35,347

 
34,269

Percentage rent
490

 
363

 
1,458

 
1,379

Other
1,511

 
1,537

 
9,339

 
9,041

Total revenue
56,675

 
54,201

 
227,285

 
217,070

Operating expenses
 
 
 
 
 
 
 
Property operating expenses
7,146

 
6,787

 
27,689

 
27,527

Provision for credit losses
304

 
287

 
906

 
1,494

Real estate taxes
6,873

 
6,414

 
26,997

 
24,680

Interest expense and amortization of deferred debt costs
11,640

 
11,415

 
47,225

 
45,683

Depreciation and amortization of deferred leasing costs
11,298

 
10,939

 
45,694

 
44,417

General and administrative
4,998

 
4,996

 
18,176

 
17,496

Acquisition related costs
—

 
3

 
—

 
60

Total operating expenses
42,259

 
40,841

 
166,687

 
161,357

Operating income
14,416

 
13,360

 
60,598

 
55,713

Change in fair value of derivatives
72

 
3

 
70

 
(6
)
Gain on sale of property
—

 
1,013

 
—

 
1,013

Net Income
14,488

 
14,376

 
60,668

 
56,720

Income attributable to noncontrolling interests
(2,928
)
 
(2,911
)
 
(12,411
)
 
(11,441
)
Net income attributable to Saul Centers, Inc.
11,560

 
11,465

 
48,257

 
45,279

Preferred stock dividends
(3,094
)
 
(3,094
)
 
(12,375
)
 
(12,375
)
Net income available to common stockholders
$
8,466

 
$
8,371

 
$
35,882

 
$
32,904

Per share net income available to common stockholders
 
 
 
 
 
 
 
Diluted
$
0.38

 
$
0.38

 
$
1.63

 
$
1.52

 
 
 
 
 
 
 
 
Weighted Average Common Stock:
 
 
 
 
 
 
 
Common stock
22,072

 
21,674

 
21,901

 
21,505

Effect of dilutive options
114

 
154

 
107

 
110

Diluted weighted average common stock
22,186

 
21,828

 
22,008

 
21,615






Reconciliation of net income to FFO available to common stockholders and noncontrolling interests (1)
 
 
Three Months Ended 
 December 31,
 
Year Ended December 31,
 
(In thousands, except per share amounts)
2017
 
2016
 
2017
 
2016
 
Net income
$
14,488

 
$
14,376

 
$
60,668

 
$
56,720

 
Subtract:
 
 
 
 
 
 
 
 
Gain on sale of property
—

 
(1,013
)
 
—

 
(1,013
)
 
Add:
 
 
 
 
 
 
 
 
Real estate depreciation and amortization
11,298

 
10,939

 
45,694

 
44,417

 
FFO
25,786

 
24,302

 
106,362

 
100,124

 
Subtract:
 
 
 
 
 
 
 
 
Preferred stock dividends
(3,094
)
 
(3,094
)
 
(12,375
)
 
(12,375
)
 
FFO available to common stockholders and noncontrolling interests
$
22,692

 
$
21,208

 
$
93,987

 
$
87,749

 
Weighted average shares:
 
 
 
 
 
 
 
 
Diluted weighted average common stock
22,186

 
21,828

 
22,008

 
21,615

 
Convertible limited partnership units
7,536

 
7,420

 
7,503

 
7,375

 
Average shares and units used to compute FFO per share
29,722

 
29,248

 
29,511

 
28,990

 
FFO per share available to common stockholders and noncontrolling interests
$
0.76

 
$
0.73

 
$
3.18

 
$
3.03

 
 
 
 
 
 
 
 
 
(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 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
(in thousands)
 
Three Months Ended December 31,
 
Year Ended December 31,
 
 
2017
 
2016
 
2017
 
2016
Total revenue
 
$
56,675

 
$
54,201

 
$
227,285

 
$
217,070

Less: Interest income
 
(49
)
 
(15
)
 
(80
)
 
(52
)
Less: Acquisitions, dispositions and development properties
 
(1,175
)
 
(605
)
 
(13,746
)
 
(5,364
)
Total same property revenue
 
$
55,451

 
$
53,581

 
$
213,459

 
$
211,654

Shopping Centers
 
$
39,824

 
$
38,883

 
$
160,393

 
$
158,044

Mixed-Use properties
 
15,627

 
14,698

 
53,066

 
53,610

Total same property revenue
 
$
55,451

 
$
53,581

 
$
213,459

 
$
211,654






 
Reconciliation of net income to same property operating income
 
Three Months Ended December 31,
 
Year Ended December 31,
 
(In thousands)
2017
 
2016
 
2017
 
2016
 
Net income
$
14,488

 
$
14,376

 
$
60,668

 
$
56,720

 
Add: Interest expense and amortization of deferred debt costs
11,640

 
11,415

 
47,225

 
45,683

 
Add: Depreciation and amortization of deferred leasing costs
11,298

 
10,939

 
45,694

 
44,417

 
Add: General and administrative
4,998

 
4,996

 
18,176

 
17,496

 
Add: Acquisition related costs
—

 
3

 
—

 
60

 
Add: Change in fair value of derivatives
(72
)
 
(3
)
 
(70
)
 
6

 
Less: Gains on property dispositions
—

 
(1,013
)
 
—

 
(1,013
)
 
Less: Interest income
(49
)
 
(15
)
 
(80
)
 
(52
)
 
Property operating income
42,303

 
40,698

 
171,613

 
163,317

 
Less: Acquisitions, dispositions & development property
(948
)
 
(238
)
 
(8,978
)
 
(1,760
)
 
Total same property operating income
$
41,355

 
$
40,460

 
$
162,635

 
$
161,557

 
 
 
 
 
 
 
 
 
 
Shopping centers
$
31,230

 
$
30,737

 
$
127,096

 
$
124,470

 
Mixed-Use properties
10,125

 
9,723

 
35,539

 
37,087

 
Total same property operating income
$
41,355

 
$
40,460

 
$
162,635

 
$
161,557