Saul Centers, Inc. Reports Second Quarter 2019 Earnings

June 30, 2019

December 31, 2018

(Unaudited)

Assets

Real estate investments

Land

$

488,942

$

488,918

Buildings and equipment

1,280,397

1,273,275

Construction in progress

249,719

185,972

2,019,058

1,948,165

Accumulated depreciation

(544,811)

(525,518)

1,474,247

1,422,647

Cash and cash equivalents

9,262

14,578

Accounts receivable and accrued income, net

51,602

53,876

Deferred leasing costs, net

25,525

28,083

Prepaid expenses, net

1,806

5,175

Other assets

6,720

3,130

Total assets

$

1,569,162

$

1,527,489

Liabilities

Notes payable

$

853,627

$

880,271

Term loan facility payable

74,641

74,591

Revolving credit facility payable

46,600

45,329

Construction loan payable

70,436

21,655

Dividends and distributions payable

19,313

19,153

Accounts payable, accrued expenses and other liabilities

42,287

32,419

Deferred income

25,649

28,851

Total liabilities

1,132,553

1,102,269

Equity

Preferred stock, 1,000,000 shares authorized:

Series C Cumulative Redeemable, 42,000 shares issued and outstanding

105,000

105,000

Series D Cumulative Redeemable, 30,000 shares issued and outstanding

75,000

75,000

Common stock, $0.01 par value, 40,000,000 shares authorized, 23,008,615 and 22,739,207 shares issued and outstanding, respectively

230

227

Additional paid-in capital

399,047

384,533

Distributions in excess of accumulated net income and accumulated

 other comprehensive loss

(212,109)

(208,593)

Accumulated other comprehensive loss

(384)

(255)

Total Saul Centers, Inc. equity

366,784

355,912

Noncontrolling interests

69,825

69,308

Total equity

436,609

425,220

Total liabilities and equity

$

1,569,162

$

1,527,489

Saul Centers, Inc.Consolidated Statements of Operations(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Revenue

(unaudited)

(unaudited)

Rental revenue

$

55,953

$

54,970

$

112,756

$

109,960

Other

2,188

1,111

5,135

2,230

Total revenue

58,141

56,081

117,891

112,190

Expenses

Property operating expenses

7,115

6,732

15,116

13,856

Real estate taxes

6,819

6,778

13,967

13,622

Interest expense, net and amortization of deferred debt costs

10,793

11,168

21,860

22,594

Depreciation and amortization of deferred leasing costs

11,524

11,351

23,167

22,700

General and administrative

5,140

4,647

9,954

9,068

Total expenses

41,391

40,676

84,064

81,840

Change in fair value of derivatives

—

(12)

—

(12)

Gain on sale of property

—

509

—

509

Net Income

16,750

15,902

33,827

30,847

Noncontrolling interests

Income attributable to noncontrolling interests

(3,518)

(3,359)

(7,148)

(5,718)

Net income attributable to Saul Centers, Inc.

13,232

12,543

26,679

25,129

Extinguishment of issuance costs upon redemption of preferred shares

—

—

—

(2,328)

Preferred stock dividends

(2,953)

(2,953)

(5,906)

(6,356)

Net income available to common stockholders

$

10,279

$

9,590

$

20,773

$

16,445

Per share net income available to common stockholders

Basic and diluted

$

0.45

$

0.43

$

0.91

$

0.74

Dividends declared per common share outstanding

$

0.53

$

0.52

$

1.06

$

1.04

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)

2019

2018

2019

2018

(unaudited)

(unaudited)

Net income

$

16,750

$

15,902

$

33,827

$

30,847

Subtract:

Gain on sale of property

—

(509)

—

(509)

Add:

Real estate depreciation and amortization

11,524

11,351

23,167

22,700

FFO

28,274

26,744

56,994

53,038

Subtract:

Extinguishment of issuance costs upon redemption of preferred shares

—

—

—

(2,328)

Preferred stock dividends

(2,953)

(2,953)

(5,906)

(6,356)

FFO available to common stockholders and noncontrolling interests

$

25,321

$

23,791

$

51,088

$

44,354

Weighted average shares:

Diluted weighted average common stock

22,994

22,288

22,929

22,253

Convertible limited partnership units

7,853

7,726

7,844

7,646

Average shares and units used to compute FFO per share

30,847

30,014

30,773

29,899

FFO per share available to common stockholders and noncontrolling interests

$

0.82

$

0.79

$

1.66

$

1.48

(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 real estate 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 (2)

(in thousands)

Three months ended June 30,

Six months ended June 30,

2019

2018

2019

2018

(unaudited)

Total revenue

$

58,141

$

56,081

$

117,891

$

112,190

Less: Acquisitions, dispositions and development properties

(194)

—

(1,083)

—

Total same property revenue

$

57,947

$

56,081

$

116,808

$

112,190

Shopping Centers

$

42,259

$

40,755

$

85,417

$

81,679

Mixed-Use properties

15,688

15,326

31,391

30,511

Total same property revenue

$

57,947

$

56,081

$

116,808

$

112,190

Total Shopping Center revenue

$

42,259

$

40,755

$

85,417

$

81,679

Less: Shopping Center acquisitions, dispositions and development properties

—

—

—

—

Total same Shopping Center revenue

$

42,259

$

40,755

$

85,417

$

81,679

Total Mixed-Use property revenue

$

15,882

$

15,326

$

32,474

$

30,511

Less: Mixed-Use acquisitions, dispositions and development properties

(194)

—

(1,083)

—

Total same Mixed-Use property revenue

$

15,688

$

15,326

$

31,391

$

30,511

Same property revenue is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the results of properties that were not in operation for the entirety of the comparable reporting periods.  Same property revenue adjusts property revenue by subtracting the revenue of properties not in operation for the entirety of the comparable reporting periods.  Same property revenue is a measure of the operating performance of the Company's properties but does not measure the Company's performance as a whole.  Same property revenue should not be considered as an alternative to total revenue, its most directly comparable GAAP measure, as an indicator of the Company's operating performance.  Management considers same property revenue a meaningful supplemental measure of operating performance because it is not affected by the cost of the Company's funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to ownership of the Company's properties.  Management believes the exclusion of these items from same property revenue is useful because the resulting measure captures the actual revenue generated and actual expenses incurred by operating the Company's properties.  Other REITs may use different methodologies for calculating same property revenue.  Accordingly, the Company's same property revenue may not be comparable to those of other REITs.

Reconciliation of net income to same property operating income (3)

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

2019

2018

2019

2018

(unaudited)

(unaudited)

Net income

$

16,750

$

15,902

$

33,827

$

30,847

Add: Interest expense, net and amortization of deferred debt costs

10,793

11,168

21,860

22,594

Add: Depreciation and amortization of deferred leasing costs

11,524

11,351

23,167

22,700

Add: General and administrative

5,140

4,647

9,954

9,068

Add: Change in fair value of derivatives

—

12

—

12

Less: Gain on sale of property

—

(509)

—

(509)

Property operating income

44,207

42,571

88,808

84,712

Add (Less): Acquisitions, dispositions and development properties

12

—

(617)

—

Total same property operating income

$

44,219

$

42,571

$

88,191

$

84,712

Shopping Centers

$

33,707

$

32,274

$

67,177

$

64,322

Mixed-Use properties

10,512

10,297

21,014

20,390

Total same property operating income

$

44,219

$

42,571

$

88,191

$

84,712

Shopping Center operating income

$

33,707

$

32,274

$

67,177

$

64,322

Less: Shopping Center acquisitions, dispositions and development properties

—

—

—

—

Total same Shopping Center operating income

$

33,707

$

32,274

$

67,177

$

64,322

Mixed-Use property operating income

$

10,500

$

10,297

$

21,631

$

20,390

Add (Less): Mixed-Use acquisitions, dispositions and development properties

12

—

(617)

—

Total same Mixed-Use property operating income

$

10,512

$

10,297

$

21,014

$

20,390

(3)

Same property operating income is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the results of properties that were not in operation for the entirety of the comparable reporting periods.  Same property operating income adjusts property operating income by subtracting the results of properties that were not in operation for the entirety of the comparable periods.  Same property operating income is a measure of the operating performance of the Company's properties but does not measure the Company's performance as a whole.  Same property operating income should not be considered as an alternative to property operating income, its most directly comparable GAAP measure, as an indicator of the Company's operating performance.  Management considers same property operating income a meaningful supplemental measure of operating performance because it is not affected by the cost of the Company's funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to ownership of the Company's properties.  Management believes the exclusion of these items from property operating income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred by operating the Company's properties.  Other REITs may use different methodologies for calculating same property operating income.  Accordingly, same property operating income may not be comparable to those of other REITs.