Saul Centers, Inc. Reports Fourth Quarter 2019 Earnings

Saul Centers, Inc.

Consolidated Balance Sheets

(In thousands)

December 31,

(Dollars in thousands, except per share amounts)

2019

2018

Assets

Real estate investments

Land

$

453,322

$

488,918

Buildings and equipment

1,292,631

1,273,275

Construction in progress

335,644

185,972

2,081,597

1,948,165

Accumulated depreciation

(563,474)

(525,518)

1,518,123

1,422,647

Cash and cash equivalents

13,905

14,578

Accounts receivable and accrued income, net

52,311

53,876

Deferred leasing costs, net

24,083

28,083

Prepaid expenses, net

5,363

5,175

Other assets

4,555

3,130

Total assets

$

1,618,340

$

1,527,489

Liabilities

Mortgage notes payable

$

821,503

$

880,271

Term loan facility payable

74,691

74,591

Revolving credit facility payable

86,371

45,329

Construction loan payable

108,623

21,655

Dividends and distributions payable

19,291

19,153

Accounts payable, accrued expenses and other liabilities

35,199

32,419

Deferred income

29,306

28,851

Total liabilities

1,174,984

1,102,269

Equity

   Preferred stock, 1,000,000 shares authorized:

Series C Cumulative Redeemable, 0 and 42,000 shares issued and outstanding, respectively

—

105,000

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

75,000

75,000

Series E Cumulative Redeemable, 44,000 and 0 shares issued and outstanding, respectively

110,000

—

Common stock, $0.01 par value, 40,000,000 shares authorized, 23,231,240 and 22,739,207 shares issued and outstanding, respectively

232

227

Additional paid-in capital

410,926

384,533

Distributions in excess of accumulated earnings

(221,177)

(208,593)

Accumulated other comprehensive loss

—

(255)

Total Saul Centers, Inc. equity

374,981

355,912

Noncontrolling interests

68,375

69,308

Total equity

443,356

425,220

$

1,618,340

$

1,527,489

Saul Centers, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended December 31,

Year Ended December 31,

2019

2018

2019

2018

(unaudited)

Revenue

Rental revenue

$

55,110

$

56,041

$

223,352

$

221,734

Other

1,472

2,078

8,173

5,485

Total revenue

56,582

58,119

231,525

227,219

Expenses

Property operating expenses

7,305

7,436

29,946

28,202

Real estate taxes

6,906

6,817

27,987

27,376

Interest expense, net and amortization of deferred debt costs

9,649

11,200

41,834

44,768

Depreciation and amortization of deferred leasing costs

11,148

11,905

46,333

45,861

General and administrative

6,097

5,251

20,793

18,459

Total expenses

41,105

42,609

166,893

164,666

Change in fair value of derivatives

(436)

(1)

(436)

(3)

Gain on sale of property

—

—

—

509

Net Income

15,041

15,509

64,196

63,059

Noncontrolling interests

Income attributable to noncontrolling interests

(2,223)

(3,240)

(12,473)

(12,505)

Net income attributable to Saul Centers, Inc.

12,818

12,269

51,723

50,554

Preferred stock dividends

(3,119)

(2,953)

(12,235)

(12,262)

Extinguishment of issuance costs upon redemption of preferred shares

(3,235)

—

(3,235)

(2,328)

Net income available to common stockholders

$

6,464

$

9,316

$

36,253

$

35,964

Per share net income available to common stockholders

Basic

$

0.28

$

0.42

$

1.58

$

1.61

Diluted

$

0.27

$

0.41

$

1.57

$

1.60

Weighted Average Common Stock:

Common stock

23,196

22,664

23,009

22,383

Effect of dilutive options

36

31

44

42

Diluted weighted average common stock

23,232

22,695

23,053

22,425

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)

2019

2018

2019

2018

Net income

$

15,041

$

15,509

$

64,196

$

63,059

Subtract:

Gain on sale of property

—

—

—

(509)

Add:

Real estate depreciation and amortization

11,148

11,905

46,333

45,861

FFO

26,189

27,414

110,529

108,411

Subtract:

Preferred stock dividends

(3,119)

(2,953)

(12,235)

(12,262)

Extinguishment of issuance costs upon redemption of preferred shares

(3,235)

—

(3,235)

(2,328)

FFO available to common stockholders and noncontrolling interests

$

19,835

$

24,461

$

95,059

$

93,821

Weighted average shares:

Diluted weighted average common stock

23,232

22,695

23,053

22,425

Convertible limited partnership units

7,882

7,821

7,860

7,731

Average shares and units used to compute FFO per share

31,114

30,516

30,913

30,156

FFO per share available to common stockholders and noncontrolling interests

$

0.64

$

0.80

$

3.08

$

3.11

(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 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 total revenue to same property revenue (2)

(in thousands)

Three Months Ended December 31,

Year Ended December 31,

2019

2018

2019

2018

Total revenue

$

56,582

$

58,119

$

231,525

$

227,219

Less: Acquisitions, dispositions and development properties

(54)

(892)

(1,209)

(973)

Total same property revenue

$

56,528

$

57,227

$

230,316

$

226,246

Shopping Centers

$

41,104

$

41,574

$

167,834

$

164,344

Mixed-Use properties

15,424

15,653

62,482

61,902

Total same property revenue

$

56,528

$

57,227

$

230,316

$

226,246

Total Shopping Center revenue

$

41,158

$

41,574

$

167,888

$

164,344

Less: Shopping Center acquisitions, dispositions and development properties

(54)

—

(54)

—

Total same Shopping Center revenue

$

41,104

$

41,574

$

167,834

$

164,344

Total Mixed-Use property revenue

$

15,424

$

16,545

$

63,637

$

62,875

Less: Mixed-Use acquisitions, dispositions and development properties

—

(892)

(1,155)

(973)

Total same Mixed-Use revenue

$

15,424

$

15,653

$

62,482

$

61,902

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 December 31,

Year Ended December 31,

(In thousands)

2019

2018

2019

2018

Net income

$

15,041

$

15,509

$

64,196

$

63,059

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

9,649

11,200

41,834

44,768

Add: Depreciation and amortization of deferred leasing costs

11,148

11,905

46,333

45,861

Add: General and administrative

6,097

5,251

20,793

18,459

Add: Change in fair value of derivatives

436

1

436

3

Less: Gain on sale of property

—

—

—

(509)

Property operating income

42,371

43,866

173,592

171,641

Less: Acquisitions, dispositions and development properties

(49)

(676)

(568)

(727)

Total same property operating income

$

42,322

$

43,190

$

173,024

$

170,914

Shopping Centers

$

32,204

$

32,862

$

131,720

$

129,701

Mixed-Use properties

10,118

10,328

41,304

41,213

Total same property operating income

$

42,322

$

43,190

$

173,024

$

170,914

Shopping Center operating income

$

32,253

$

32,862

$

131,769

$

129,701

Less: Shopping Center acquisitions, dispositions and development properties

(49)

$

—

(49)

—

Total same Shopping Center operating income

$

32,204

$

32,862

$

131,720

$

129,701

Mixed-Use property operating income

$

10,118

$

11,004

$

41,823

$

41,940

Less: Mixed-Use acquisitions, dispositions and development properties

—

(676)

(519)

(727)

Total same Mixed-Use property operating income

$

10,118

$

10,328

$

41,304

$

41,213

(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.