EX-99.1 2 bfs-09302018xex991.htm EXHIBIT 99.1 Exhibit
EXHIBIT INDEX
Exhibit        Description
No.
99.1         Press Release, dated November 1, 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 Third Quarter 2018 Earnings
November 1, 2018, Bethesda, MD.
Saul Centers, Inc. (NYSE: 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


www.SaulCenters.com

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.

Contact:    Scott Schneider
(301) 986-6220


www.SaulCenters.com

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