EX-99.1 2 bfs-06302018xex991.htm EXHIBIT 99.1 Exhibit
EXHIBIT INDEX
Exhibit        Description
No.
99.1         Press Release, dated August 3, 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 Second Quarter 2018 Earnings
August 3, 2018, Bethesda, MD.
Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended June 30, 2018 (“2018 Quarter”). Total revenue for the 2018 Quarter increased to $56.3 million from $55.9 million for the quarter ended June 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 $15.4 million for the 2018 Quarter from $14.4 million for the 2017 Quarter.
Net income available to common stockholders increased to $9.6 million ($0.43 per diluted share) for the 2018 Quarter from $8.4 million ($0.38 per diluted share) for the 2017 Quarter.
Same property revenue increased $0.7 million (1.2%) and same property operating income increased $0.1 million (0.3%) 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 $32.3 million, a $0.1 million increase from the 2017 Quarter. Mixed-Use same property operating income totaled $10.3 million, unchanged from the prior year.
As of June 30, 2018, 94.0% of the commercial portfolio was leased (not including the residential portfolio), compared to 94.3% at June 30, 2017. On a same property basis, 94.0% of the commercial portfolio was leased as of June 30, 2018, compared to 95.6% at June 30, 2017. As of June 30, 2018, the residential portfolio was 98.6% leased compared to 96.7% at June 30, 2017.
For the six months ended June 30, 2018 (“2018 Period”), total revenue decreased to $112.8 million from $114.4 million for the six months ended June 30, 2017 (“2017 Period”). Operating income decreased to $30.4 million for the 2018 Period from $31.8 million for the 2017 Period. The decrease in operating income was primarily due to (a) the net impact of terminating leases for the spaces previously occupied by Safeway at Broadlands and Kmart at Kentlands ($3.6 million), partially offset by (b) increased capitalized interest ($1.0 million), and (c) an increase in residential rent ($0.7 million).
Net income available to common stockholders decreased to $16.4 million ($0.74 per diluted share) for the 2018 Period compared to $19.0 million ($0.87 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).
Same property revenue decreased $1.2 million (1.1%) and same property operating income decreased $2.7 million (3.1%) for the 2018 Period, compared to the 2017 Period. Shopping Center same property operating income decreased 4.0% and mixed-use same property operating income decreased 0.3%. 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 ($3.6 million), partially offset by (b) an increase in base rent ($2.3 million).
Funds from operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) was $23.8 million ($0.79 per diluted share) in the 2018 Quarter compared to $23.0 million ($0.78 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 8.8% to $44.4 million ($1.48 per diluted share) in the 2018 Period from $48.6 million ($1.66 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 ($3.6 million) and (b) extinguishment of issuance costs upon redemption of preferred shares ($2.3 million), partially offset by (c) higher base rent ($1.9 million).


www.SaulCenters.com

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 59 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) 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.

Contact:    Scott Schneider
(301) 986-6220


www.SaulCenters.com

Saul Centers, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
 
June 30,
2018
 
December 31,
2017
 
(Unaudited)
Assets
 
 
 
Real estate investments
 
 
 
Land
$
450,256

 
$
450,256

Buildings and equipment
1,263,865

 
1,261,830

Construction in progress
139,285

 
91,114

 
1,853,406

 
1,803,200

Accumulated depreciation
(507,084
)
 
(488,166
)
 
1,346,322

 
1,315,034

Cash and cash equivalents
6,425

 
10,908

Accounts receivable and accrued income, net
50,634

 
54,057

Deferred leasing costs, net
27,139

 
27,255

Prepaid expenses, net
1,669

 
5,248

Other assets
14,293

 
9,950

Total assets
$
1,446,482

 
$
1,422,452

 
 
 
 
Liabilities
 
 
 
Notes payable
$
869,272

 
$
897,888

Revolving credit facility payable
23,065

 
60,734

Term loan facility payable
74,543

 
—

Dividends and distributions payable
18,599

 
18,520

Accounts payable, accrued expenses and other liabilities
29,078

 
23,123

Deferred income
25,594

 
29,084

Total liabilities
1,040,151

 
1,029,349

 
 
 
 
Equity
 
 
 
Preferred stock
180,000

 
180,000

Common stock
223

 
221

Additional paid-in capital
361,413

 
352,590

Distributions in excess of accumulated net income and accumulated
 other comprehensive loss
(204,689
)
 
(198,406
)
Total Saul Centers, Inc. equity
336,947

 
334,405

Noncontrolling interests
69,384

 
58,698

Total equity
406,331

 
393,103

Total liabilities and equity
$
1,446,482

 
$
1,422,452




Saul Centers, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Property revenue
(unaudited)
 
(unaudited)
Base rent
$
45,943

 
$
45,575

 
$
91,810

 
$
90,051

Expense recoveries
8,601

 
8,337

 
17,373

 
16,931

Percentage rent
249

 
519

 
667

 
901

Other property revenue
1,431

 
1,466

 
2,769

 
6,467

Total property revenue
56,224

 
55,897

 
112,619

 
114,350

Property expenses
 
 
 
 
 
 
 
Property operating expenses
6,732

 
6,473

 
13,856

 
13,125

Provision for credit losses
143

 
207

 
429

 
550

Real estate taxes
6,778

 
6,700

 
13,622

 
13,290

Total property expenses
13,653

 
13,380

 
27,907

 
26,965

Property operating income
42,571

 
42,517

 
84,712

 
87,385

 
 
 
 
 
 
 
 
Other revenue
69

 
10

 
170

 
23

Other expenses
 
 
 
 
 
 
 
Interest expense and amortization of deferred debt costs
11,237

 
11,900

 
22,764

 
23,764

Depreciation and amortization of deferred leasing costs
11,351

 
11,691

 
22,700

 
23,033

General and administrative
4,647

 
4,514

 
9,068

 
8,815

Total other expenses
27,235

 
28,105

 
54,532

 
55,612

Operating income
15,405

 
14,422

 
30,350

 
31,796

Change in fair value of derivatives
(12
)
 
(1
)
 
(12
)
 
(1
)
Gain on sale of property
509

 
—

 
509

 
—

Net income
15,902

 
14,421

 
30,847

 
31,795

Income attributable to noncontrolling interests
(3,359
)
 
(2,911
)
 
(5,718
)
 
(6,581
)
Net income attributable to Saul Centers, Inc.
12,543

 
11,510

 
25,129

 
25,214

Extinguishment of issuance costs upon redemption of preferred shares
—

 
—

 
(2,328
)
 
—

Preferred stock dividends
(2,953
)
 
(3,094
)
 
(6,356
)
 
(6,188
)
Net income available to common stockholders
$
9,590

 
$
8,416

 
$
16,445

 
$
19,026

Per share net income available to common stockholders
 
 
 
 
 
 
 
Basic and diluted
$
0.43

 
$
0.38

 
$
0.74

 
$
0.87

 
 
 
 
 
 
 
 
Weighted Average Common Stock:
 
 
 
 
 
 
 
Common stock
22,260

 
21,846

 
22,219

 
21,796

Effect of dilutive options
28

 
81

 
34

 
114

Diluted weighted average common stock
22,288

 
21,927

 
22,253

 
21,910

 
 
 
 
 
 
 
 





Reconciliation of net income to FFO available to common stockholders and
noncontrolling interests (1)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands, except per share amounts)
2018
 
2017
 
2018
 
2017
 
(unaudited)
 
(unaudited)
Net income
$
15,902

 
$
14,421

 
$
30,847

 
$
31,795

Subtract:
 
 
 
 
 
 
 
Gain on sale of property
(509
)
 
—

 
(509
)
 
—

Add:
 
 
 
 
 
 
 
Real estate depreciation and amortization
11,351

 
11,691

 
22,700

 
23,033

FFO
26,744

 
26,112

 
53,038

 
54,828

Subtract:
 
 
 
 
 
 
 
Extinguishment of issuance costs upon redemption of preferred shares
—

 
—

 
(2,328
)
 
—

Preferred stock dividends
(2,953
)
 
(3,094
)
 
(6,356
)
 
(6,188
)
FFO available to common stockholders and noncontrolling interests
$
23,791

 
$
23,018

 
$
44,354

 
$
48,640

Weighted average shares:
 
 
 
 
 
 
 
Diluted weighted average common stock
22,288

 
21,927

 
22,253

 
21,910

Convertible limited partnership units
7,726

 
7,497

 
7,646

 
7,476

Average shares and units used to compute FFO per share
30,014

 
29,424

 
29,899

 
29,386

FFO per share available to common stockholders and noncontrolling interests
$
0.79

 
$
0.78

 
$
1.48

 
$
1.66

 
 
 
 
 
 
 
 
(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 June 30,
 
Six months ended June 30,
 
 
2018
 
2017
 
2018
 
2017
Total property revenue
 
$
56,224

 
$
55,897

 
$
112,619

 
$
114,350

Less: Acquisitions, dispositions and development properties
 
—

 
(344
)
 
(2,421
)
 
(2,934
)
Total same property revenue
 
$
56,224

 
$
55,553

 
$
110,198

 
$
111,416

 
 
 
 
 
 
 
 
 
Shopping Centers
 
$
40,848

 
$
40,239

 
$
79,400

 
$
81,086

Mixed-Use properties
 
15,376

 
15,314

 
30,798

 
30,330

Total same property revenue
 
$
56,224

 
$
55,553

 
$
110,198

 
$
111,416

 
 
 
 
 
 
 
 
 
Total Shopping Center revenue
 
$
40,848

 
$
40,583

 
$
81,821

 
$
84,020

Less: Shopping Center acquisitions, dispositions and development properties
 
—

 
(344
)
 
(2,421
)
 
(2,934
)
Total same Shopping Center revenue
 
$
40,848

 
$
40,239

 
$
79,400

 
$
81,086

 
 
 
 
 
 
 
 
 
Total Mixed-Use property revenue
 
$
15,376

 
$
15,314

 
$
30,798

 
$
30,330

Less: Mixed-Use acquisitions, dispositions and development properties
 
—

 
—

 
—

 
—

Total same Mixed-Use property revenue
 
$
15,376

 
$
15,314

 
$
30,798

 
$
30,330



Reconciliation of property operating income to same property operating income
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
2018
 
2017
 
2018
 
2017
 
(unaudited)
 
(unaudited)
Property operating income
$
42,571

 
$
42,517

 
$
84,712

 
$
87,385

Less: Acquisitions, dispositions and development properties
—

 
(73
)
 
(2,024
)
 
(2,047
)
Total same property operating income
$
42,571

 
$
42,444

 
$
82,688

 
$
85,338

 
 
 
 
 
 
 
 
Shopping Centers
$
32,274

 
$
32,132

 
$
62,298

 
$
64,896

Mixed-Use properties
10,297

 
10,312

 
20,390

 
20,442

Total same property operating income
$
42,571

 
$
42,444

 
$
82,688

 
$
85,338

 
 
 
 
 
 
 
 
Shopping Center operating income
$
32,274

 
$
32,205

 
$
64,322

 
$
66,943

Less: Shopping Center acquisitions, dispositions and development properties
—

 
(73
)
 
(2,024
)
 
(2,047
)
Total same Shopping Center operating income
$
32,274

 
$
32,132

 
$
62,298

 
$
64,896

 
 
 
 
 
 
 
 
Mixed-Use operating income
$
10,297

 
$
10,312

 
$
20,390

 
$
20,442

Less: Mixed-Use Acquisitions, dispositions and development properties
—

 
—

 
—

 
—

Total same Mixed-Use property operating income
$
10,297

 
$
10,312

 
$
20,390

 
$
20,442