Saul Centers, Inc. Reports Fourth Quarter 2018 Earnings

BETHESDA, Md., Feb. 26, 2019 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended December 31, 2018 ("2018 Quarter"). Total revenue for the 2018 Quarter increased to $58.3 million from $56.7 million for the quarter ended December 31, 2017 ("2017 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 $15.5 million for the 2018 Quarter from $14.4 million for the 2017 Quarter.

Net income available to common stockholders was $9.3 million ($0.41 per diluted share) for the 2018 Quarter compared to $8.5 million ($0.38 per diluted share) for the 2017 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) higher depreciation and amortization ($0.6 million).

Same property revenue increased 1.3% and same property operating income increased 2.1% 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 increased 2.1% and Mixed-Use same property operating income increased 2.2%.  The increase in Shopping Center same property operating income was primarily the result of (a) higher other revenue, primarily lease termination fees ($0.5 million) and (b) higher base rent ($0.4 million) partially offset by (c) lower percentage rent ($0.1 million).  The increase in Mixed-Use same property operating income was the result of (a) lower provision for credit losses ($0.2 million) and (b) higher base rent ($0.1 million) partially offset by (c) lower percentage rent ($0.1 million).  Same property revenue and same property operating income are non-GAAP supplemental performance measures that the Company considers meaningful in measuring its operating performance.  Reconciliations of same property revenue and same property operating income to property revenue and property operating income are attached to this press release.

For the year ended December 31, 2018 ("2018 Period"), total revenue increased to $228.2 million from $227.3 million for the year ended December 31, 2017 ("2017 Period").  Operating income was $62.6 million for the 2018 Period compared to $60.6 million for the 2017 Period.  Operating income for the 2018 Period increased primarily due to lower interest expense and amortization of deferred debt costs ($2.2 million).

Net income available to common stockholders was $36.0 million ($1.60 per diluted share) for the 2018 Period compared to $35.9 million ($1.63 per diluted share) for the 2017 Period.  Net income available to common stockholders for the 2018 Period increased primarily due to (a) lower interest expense and amortization of deferred debt costs ($2.2 million) and (b) gain on sale of property ($0.5 million) partially offset by (c) extinguishment of issuance costs upon redemption of preferred shares ($2.3 million) and (d) higher general and administrative expense ($0.3 million).

Same property revenue increased 0.1% and same property operating income decreased 0.4% for the 2018 Period compared to the 2017 Period.  Shopping Center same property operating income decreased 1.1% and Mixed-Use same property operating income increased 1.9%.  Shopping Center same property operating income decreased $1.5 million primarily due to (a) the net impact of 2017 lease terminations at Broadlands and Kentlands Square II ($3.5 million) and (b) higher property operating expenses and real estate taxes, net of recoveries ($0.6 million) partially offset by (c) higher base rent ($2.8 million).  Mixed-Use same property operating income increased $0.8 million primarily due to (a) higher base rent ($0.8 million) and (b) a rebound in parking revenue as a result of the completion of a garage refurbishment in 2017 ($0.3 million) partially offset by (c) lower percentage rent ($0.3 million).

As of December 31, 2018, 95.5% of the commercial portfolio was leased (all properties except the residential portfolio), compared to 94.3% at December 31, 2017.  On a same property basis, 95.7% of the portfolio was leased at December 31, 2018, compared to 94.3% at December 31, 2017.  As of December 31, 2018, the residential portfolio was 98.3% leased compared to 96.3% as of December 31, 2017.

Funds From Operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends and preferred stock redemption charges) increased to $24.5 million ($0.80 per diluted share) in the 2018 Quarter from $22.7 million ($0.76 per diluted share) in the 2017 Quarter.  FFO is a non-GAAP supplemental earnings measure which the Company considers meaningful in measuring its operating performance.  A reconciliation of FFO to net income is attached to this press release.  The increase in FFO available to common stockholders and noncontrolling interests for the 2018 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) decreased 0.2% to $93.8 million ($3.11 per diluted share) in the 2018 Period from $94.0 million ($3.18 per diluted share) in the 2017 Period.  FFO available to common stockholders and noncontrolling interests for the 2018 Period decreased primarily due to (a) the net impact of 2017 lease terminations at Broadlands and Kentlands Square II ($3.5 million) and (b) extinguishment of issuance costs upon redemption of preferred shares ($2.3 million) partially offset by (c) higher base rent ($3.6 million) and (d) lower interest expense and amortization of debt expense ($2.2 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 60 properties which includes (a) 56 community and neighborhood shopping centers and mixed-use properties with approximately 9.3 million square feet of leasable area and (b) four land and development properties.  Over 85% of the Company's property operating income is generated from 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.

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SOURCE Saul Centers, Inc.