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Saul Centers, Inc. Reports Second Quarter 2018 Earnings

BETHESDA, Md., Aug. 3, 2018 /PRNewswire/ -- Saul Centers, Inc. (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).

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.

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


 

Cision

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