Saul Centers, Inc. Reports Fourth Quarter 2017 Earnings

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February 27, 2018 4:44 PM EST

BETHESDA, Md., Feb. 27, 2018 /PRNewswire/ -- 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).

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.

 

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

 

 

 

Cision View original content:http://www.prnewswire.com/news-releases/saul-centers-inc-reports-fourth-quarter-2017-earnings-300605317.html

SOURCE Saul Centers, Inc.


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