Saul Centers, Inc. Reports Third Quarter 2017 Earnings

BETHESDA, Md., Nov. 2, 2017 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended September 30, 2017 ("2017 Quarter").  Total revenue for the 2017 Quarter increased to $56.2 million from $53.2 million for the quarter ended September 30, 2016 ("2016 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 $14.4 million for the 2017 Quarter from $12.7 million for the 2016 Quarter.

The Park Van Ness mixed-use development opened in May 2016, and, as of September 30, 2017, 254 apartments were leased (93.7%).  Concurrent with the opening in 2016, interest, real estate taxes and all other costs associated with the property, including depreciation, began to be charged to expense, while revenue continues to grow as occupancy increases.  As a result, net income for the 2017 Quarter was adversely impacted by $0.4 million. 

Net income attributable to common stockholders increased to $8.4 million ($0.38 per diluted share) for the 2017 Quarter compared to $7.1 million ($0.33 per diluted share) for the 2016 Quarter.

Same property revenue increased $2.2 million (4.2%) and same property operating income increased $1.1 million (2.8%) for the 2017 Quarter compared to the 2016 Quarter.  We define same property revenue as total revenue minus the sum of interest income and revenue of properties not in operation for the entirety of the comparable reporting periods.  We define same property operating income as net income plus the sum of interest expense and amortization of deferred debt costs, depreciation and amortization, general and administrative expense, loss on the early extinguishment of debt (if any), predevelopment expense and acquisition related costs, minus the sum of interest income, the change in the fair value of derivatives, gains on property dispositions (if any) and the results of properties which were not in operation for the entirety of the comparable periods.  Shopping Center same property operating income for the 2017 Quarter totaled $31.0 million, a $0.7 million increase from the 2016 Quarter.  The increase in Shopping Center same property operating income was primarily due to (a) higher base rent ($0.4 million), (b) higher other revenue ($0.2 million) and (c) lower provision for credit losses ($0.1 million).  Mixed-Use same property operating income totaled $9.9 million, a $0.4 million increase from the 2016 Quarter.  The increase in Mixed-Use same property operating income was due primarily to (a) Park Van Ness ($1.1 million) partially offset by (b) lower termination fees ($0.3 million) and (c) lower parking revenue as a result of a garage refurbishment ($0.2 million).

As of September 30, 2017, 95.5% of the commercial portfolio was leased (not including the apartments at Clarendon Center and Park Van Ness), compared to 94.7% at September 30, 2016.  On a same property basis, 95.4% of the commercial portfolio was leased as of September 30, 2017, compared to 95.3% at September 30, 2016.  The apartments at Clarendon Center were 96.3% leased as of September 30, 2017, compared to 96.7% as of September 30, 2016.  The apartments at Park Van Ness were 93.7% leased as of September 30, 2017, compared to 61.3% at September 30, 2016. 

For the nine months ended September 30, 2017 ("2017 Period"), total revenue increased to $170.6 million from $162.9 million for the nine months ended September 30, 2016 ("2016 Period").  Operating income increased to $46.2 million for the 2017 Period from $42.4 million for the 2016 Period.  The increase in operating income was primarily due to (a) higher property operating income ($6.7 million) partially offset by (b) higher interest expense and amortization of deferred debt costs ($1.3 million), (c) higher depreciation and amortization of deferred leasing costs ($0.9 million),  and (d) higher general and administrative expenses ($0.7 million).

Net income attributable to common stockholders increased to $27.4 million ($1.25 per diluted share) for the 2017 Period compared to $24.5 million ($1.14 per diluted share) for the 2016 Period.  The increase in net income attributable to common stockholders was primarily due to (a) higher property operating income ($6.7 million) partially offset by (b) higher interest expense and amortization of deferred debt costs ($1.3 million), (c) higher income attributable to noncontrolling interests ($1.0 million), (d) higher depreciation and amortization of deferred leasing costs ($0.9 million), and (e) higher general and administrative expenses ($0.7 million).

Same property revenue increased 0.5% and same property operating income increased 0.7% for the 2017 Period, compared to the 2016 Period.  Shopping Center same property operating income increased 2.3% and mixed-use same property operating income decreased 4.7%.  Shopping Center same property operating income increased primarily due to (a) higher other revenue ($0.9 million), (b) higher base rent ($0.7 million) and (c) a reduction in property operating expenses, net of recoveries ($0.4 million).  Mixed-Use same property operating income decreased primarily due to (a) lower termination fees ($0.6 million) and (b) lower parking revenue as a result of a garage refurbishment ($0.3 million).

Funds from operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) was $22.7 million ($0.77 per diluted share) in the 2017 Quarter compared to $21.3 million ($0.73 per diluted share) in the 2016 Quarter.  FFO for the 2017 Quarter increased primarily due to (a) Park Van Ness ($1.0 million), (b) lower interest expense exclusive of interest expense related to Park Van Ness and Burtonsville Town Square ($0.4 million), and (c) Burtonsville Town Square, which was acquired in January 2017 ($0.4 million).  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.

FFO available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) increased 7.1% to $71.3 million ($2.42 per diluted share) in the 2017 Period from $66.5 million ($2.30 per diluted share) in the 2016 Period.  FFO available to common stockholders and noncontrolling interests increased primarily due to (a) lower interest expense exclusive of interest expense related to Park Van Ness and Burtonsville Town Square ($2.2 million), (b) Park Van Ness ($1.8 million) and (c) Burtonsville Town Square ($1.2 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 58 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) three land and development properties. Approximately 85% of the Saul Centers' property operating income is generated by properties in the metropolitan Washington, DC/Baltimore area.

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SOURCE Saul Centers, Inc.