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Saul Centers, Inc. Reports Fourth Quarter 2023 Earnings

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Saul Centers, Inc. (BFS) reported positive financial results for the quarter and year ended December 31, 2023, with increases in total revenue and net income. Same property revenue and operating income also saw growth. Funds From Operations (FFO) increased, driven by higher termination fees and base rent. The commercial portfolio's leasing percentage improved. The company's focus on the metropolitan Washington, DC/Baltimore area remains strong.
Positive
  • Total revenue and net income increased for the 2023 Quarter and Period compared to 2022.
  • Same property revenue and operating income grew for both the quarter and year.
  • FFO increased due to higher termination fees and base rent.
  • Commercial portfolio leasing percentage improved year over year.
  • Strong focus on properties in the metropolitan Washington, DC/Baltimore area.
Negative
  • None.

Insights

Analyzing Saul Centers, Inc.'s operating results reveals a positive trajectory in financial performance, with total revenue and net income for both the quarter and the year showing an uptick. The increase in net income is attributable to higher termination fees and base rent, signaling robust demand for the company's properties. However, it is crucial to note the rise in interest expense and general and administrative expenses, which could indicate growing operational costs that may impact future margins.

The reported occupancy rates, particularly the year-over-year increase in the commercial portfolio's leased percentage, suggest a strong leasing momentum. This is a critical metric as it directly affects revenue stability and potential growth. The residential portfolio's high occupancy rate further underscores the company's market strength in its operational regions.

From a financial perspective, the increase in Funds From Operations (FFO) is noteworthy. FFO is a key measure for REITs as it provides a clearer picture of operational performance by excluding depreciation and other non-cash charges. An increase in FFO, especially when it outpaces net income growth, is often viewed favorably by investors as it may indicate improved cash flow generation and the potential for increased dividends.

The reported gains in same property revenue and operating income reflect positively on Saul Centers' asset management strategies, suggesting effective cost control and the ability to enhance property value. The differentiation between Shopping Center and Mixed-Use properties' performance highlights the nuanced dynamics within the portfolio. A more significant increase in Shopping Center income could indicate sector-specific tailwinds or successful lease negotiations.

Understanding the geographic concentration of Saul Centers' portfolio, mainly in the Washington, DC/Baltimore area, provides context for the company's performance. This region's economic health, including employment rates and consumer spending, can significantly influence the company's results. Thus, the positive results may reflect not only company-specific factors but also broader regional economic stability.

When assessing Saul Centers' performance, it is essential to consider the REIT industry standards and norms. The company's focus on both Shopping Center and Mixed-Use properties is a strategic choice that may provide diversification benefits. The increase in same property operating income for these types is a sign of operational efficiency and can be a differentiator among peers. Additionally, the consistent increase in FFO is particularly relevant for REIT investors, as it often correlates with the ability to sustain or increase dividend payouts, a key attraction for REIT investments.

Lastly, the non-GAAP measures such as same property revenue and FFO are standard in the REIT industry for assessing operational performance. However, investors should also consider GAAP measures and understand the adjustments made to arrive at these non-GAAP figures, ensuring a comprehensive view of the company's financial health.

BETHESDA, Md., Feb. 29, 2024 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended December 31, 2023 ("2023 Quarter"). Total revenue for the 2023 Quarter increased to $66.7 million from $62.3 million for the quarter ended December 31, 2022 ("2022 Quarter").  Net income increased to $17.5 million for the 2023 Quarter from $15.4 million for the 2022 Quarter.  Net income for the 2023 Quarter increased compared to the 2022 Quarter due to (a) higher termination fees of $2.4 million and (b) higher base rent of $1.4 million, partially offset by (c) higher interest expense, net and amortization of deferred debt costs of $0.9 million, and (d) higher general and administrative expenses of $0.9 million. Net income available to common stockholders was $10.4 million ($0.43 per basic and diluted share) for the 2023 Quarter compared to $9.1 million ($0.38 per basic and diluted share) for the 2022 Quarter. 

Same property revenue increased 7.0% and same property operating income increased 8.8% for the 2023 Quarter compared to the 2022 Quarter.  We define same property revenue as total revenue minus the revenue of properties not in operation for the entirety of the comparable reporting periods. We define same property operating income as net income plus (a) interest expense, net and amortization of deferred debt costs, (b) depreciation and amortization of deferred leasing costs, (c) general and administrative expenses, (d) change in fair value of derivatives, and (e) loss on early extinguishment of debt minus (f) gain on sale of property and (g) the results of properties not in operation for the entirety of the comparable periods.  No properties were excluded from same property results for the 2023 Quarter.  Shopping Center same property operating income increased 10.9% and Mixed-Use same property operating income increased 2.7% for the 2023 Quarter compared to the 2022 Quarter.  The increase in Shopping Center same property operating income was primarily due to (a) higher termination fees of $2.5 million and (b) higher base rent of $1.0 million.  The increase in Mixed-Use same property operating income was primarily due to higher base rent of $0.4 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 total revenue to same property revenue and net income to same property operating income are attached to this press release.

For the 2023 Quarter, Funds From Operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends and extinguishment of issuance costs upon redemption of preferred shares) increased to $26.9 million  ($0.79 and $0.79 per basic and diluted share, respectively) from $24.7 million ($0.74 and $0.72 per basic and diluted share, respectively) in the 2022 Quarter.  FFO is a non-GAAP supplemental earnings measure that the Company considers meaningful in measuring its operating performance.  A reconciliation of net income to FFO is attached to this press release.  The increase in FFO available to common stockholders and noncontrolling interests was primarily due to (a) higher termination fees of $2.4 million and (b) higher base rent of $1.4 million, partially offset by (c) higher interest expense, net and amortization of deferred debt costs of $0.9 million, and (d)  higher general and administrative expenses of $0.9 million.

As of December 31, 2023, 94.2% of the commercial portfolio was leased (all properties except the residential portfolio), compared to 93.2% at December 31, 2022.  The residential portfolio was 98.0% leased at December 31, 2023, compared to 97.2% at December 31, 2022.

For the year ended December 31, 2023 ("2023 Period"), total revenue increased to $257.2 million from $245.9 million for the year ended December 31, 2022 ("2022 Period").  Net income increased to $69.0 million for the 2023 Period from $65.4 million for the 2022 Period. The increase in net income was primarily due to (a) higher base rent of $7.3 million, (b) higher termination fees of $2.7 million, and (c) higher other property revenue of $0.5 million, partially offset by (d) higher interest expense, net and amortization of deferred debt costs of $5.2 million, (e) lower expense recovery income, net of expenses, of $1.5 million. Net income available to common stockholders was $41.5 million ($1.73 per basic and diluted share) for the 2023 Period compared to $39.0 million ($1.63 per basic and diluted share) for the 2022 Period.

Same property revenue increased 4.6% and same property operating income increased 4.8% for the 2023 Period compared to the 2022 Period.  No properties were excluded from same property results for the 2023 Period.  Shopping Center same property operating income increased 4.2% and Mixed-Use same property operating income increased 6.5% for the 2023 Period compared to the 2022 Period.  Shopping Center same property operating income increased primarily due to (a) higher base rent of $4.2 million, (b) higher termination fees of $2.3 million, partially offset by (c) lower expense recovery income, net of expenses of $0.7 million.  Mixed-Use same property operating income increased primarily due to higher base rent of $3.1 million.

For the 2023 Period, FFO available to common stockholders and noncontrolling interests (after deducting preferred stock dividends and extinguishment of issuance costs upon redemption of preferred shares) increased 3.0% to $106.3 million  ($3.17 and $3.12 per basic and diluted share, respectively) from $103.2 million ($3.10 and $3.04 per basic and diluted share, respectively) in the 2022 Period.  FFO available to common stockholders and noncontrolling interests increased primarily due to (a) higher base rent of $7.3 million and (b) higher termination fees of $2.7 million, partially offset by (c) higher interest expense, net and amortization of deferred debt costs of $5.2 million, (d) lower expense recovery income, net of expenses, of $1.5 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 61 properties that includes (a) 57 community and neighborhood Shopping Centers and Mixed-Use properties with approximately 9.8 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 29, 2024, 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, (xii) unanticipated changes in the Company's intention or ability to prepay certain debt prior to maturity and (xiii) an epidemic or pandemic (such as the outbreak and worldwide spread of COVID-19), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may (as with COVID-19) precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period.  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 29, 2024.

 

Saul Centers, Inc.

Consolidated Balance Sheets

(In thousands)



December 31,

(Dollars in thousands, except per share amounts)

2023


2022

Assets




Real estate investments




Land

$               511,529


$                511,529

Buildings and equipment

1,595,023


1,574,381

Construction in progress

514,553


322,226


2,621,105


2,408,136

Accumulated depreciation

(729,470)


(688,475)

Total real estate investments, net

1,891,635


1,719,661

Cash and cash equivalents

8,407


13,279

Accounts receivable and accrued income, net

56,032


56,323

Deferred leasing costs, net

23,728


22,388

Other assets

14,335


21,651

Total assets

$            1,994,137


$             1,833,302

Liabilities




Mortgage notes payable, net

$               935,451


$                961,577

Revolving credit facility payable, net

274,715


161,941

Term loan facility payable, net

99,530


99,382

Construction loans payable, net

77,305


Accounts payable, accrued expenses and other liabilities

57,022


42,978

Deferred income

22,748


23,169

Dividends and distributions payable

22,937


22,453

Total liabilities

1,489,708


1,311,500

Equity




   Preferred stock, 1,000,000 shares authorized:




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

75,000


75,000

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

110,000


110,000

Common stock, $0.01 par value, 40,000,000 shares authorized, 24,082,887
and 24,016,009 shares issued and outstanding, respectively

241


240

Additional paid-in capital

449,959


446,301

Partnership units in escrow


39,650

Distributions in excess of accumulated earnings

(288,825)


(273,559)

Accumulated other comprehensive income

2,014


2,852

Total Saul Centers, Inc. equity

348,389


400,484

Noncontrolling interests

156,040


121,318

Total equity

504,429


521,802

Total liabilities and equity

$            1,994,137


$             1,833,302

 

Saul Centers, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)



Three Months Ended December 31,


Year Ended December 31,


2023


2022


2023


2022


(unaudited)



Revenue






Rental revenue

$               62,859


$                61,072


$              249,057


$             240,837

Other

3,824


1,264


8,150


5,023

Total revenue

66,683


62,336


257,207


245,860

Expenses








Property operating expenses

9,987


9,760


37,489


35,934

Real estate taxes

7,061


6,937


29,650


28,588

Interest expense, net and amortization of deferred debt costs

12,635


11,775


49,153


43,937

Depreciation and amortization of deferred leasing costs

12,203


12,069


48,430


48,969

General and administrative

7,334


6,404


23,459


22,392

Loss on early extinguishment of debt




648

Total expenses

49,220


46,945


188,181


180,468

Net Income

17,463


15,391


69,026


65,392

Noncontrolling interests








Income attributable to noncontrolling interests

(4,257)


(3,528)


(16,337)


(15,198)

Net income attributable to Saul Centers, Inc.

13,206


11,863


52,689


50,194

Preferred stock dividends

(2,799)


(2,799)


(11,194)


(11,194)

Net income available to common stockholders

$               10,407


$                  9,064


$                41,495


$               39,000

Per share net income available to common stockholders








Basic and diluted

$                   0.43


$                    0.38


$                    1.73


$                   1.63









Weighted Average Common Stock:








Common stock

24,077


24,011


24,051


23,964

Effect of dilutive options

2



2


8

Diluted weighted average common stock

24,079


24,011


24,053


23,972

 

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)

2023


2022


2023


2022

Net income

$       17,463


$       15,391


$       69,026


$        65,392

Add:








Real estate depreciation and amortization

12,203


12,069


48,430


48,969

FFO

29,666


27,460


117,456


114,361

Subtract:








Preferred stock dividends

(2,799)


(2,799)


(11,194)


(11,194)

FFO available to common stockholders and noncontrolling interests

$       26,867


$       24,661


$     106,262


$      103,167

Weighted average shares and units:








Basic

33,876


33,309


33,474


33,256

Diluted (2)

34,115


34,017


34,066


33,972

Basic FFO per share available to common stockholders and noncontrolling interests

$           0.79


$           0.74


$           3.17


$            3.10

Diluted FFO per share available to common stockholders and noncontrolling interests.

$           0.79


$           0.72


$           3.12


$            3.04



(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.



(2)  

Beginning March 5, 2021, fully diluted shares and units includes 1.4 million limited partnership units were held in escrow that related to the contribution of Twinbrook Quarter by 1592 Rockville Pike. Half of the units held in escrow were released on October 18, 2021. The remaining units held in escrow were released on October 18, 2023.

 

Reconciliation of total revenue to same property revenue (3)


(in thousands)


Three Months Ended December 31,


Year Ended December 31,



2023


2022


2023


2022

Total revenue


$           66,683


$          62,336


$           257,207


$           245,860

Less: Acquisitions, dispositions and development properties





Total same property revenue


$           66,683


$          62,336


$           257,207


$           245,860










Shopping Centers


$           47,136


$          43,440


$           179,350


$           172,055

Mixed-Use properties


19,547


18,896


77,857


73,805

Total same property revenue


$           66,683


$          62,336


$           257,207


$           245,860










Total Shopping Center revenue


$           47,136


$          43,440


$           179,350


$           172,055

Less: Shopping Center acquisitions, dispositions and development properties





Total same Shopping Center revenue


$           47,136


$          43,440


$           179,350


$           172,055










Total Mixed-Use property revenue


$           19,547


$          18,896


$             77,857


$             73,805

Less: Mixed-Use acquisitions, dispositions and development properties





Total same Mixed-Use revenue


$           19,547


$          18,896


$             77,857


$             73,805


(3) 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 (4)




Three Months Ended December 31,


Year Ended December 31,


(In thousands)

2023


2022


2023


2022


Net income

$      17,463


$     15,391


$      69,026


$      65,392


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

12,635


11,775


49,153


43,937


Add: Depreciation and amortization of deferred leasing costs

12,203


12,069


48,430


48,969


Add: General and administrative

7,334


6,404


23,459


22,392


Add: Loss on early extinguishment of debt




648


Property operating income

49,635


45,639


190,068


181,338


Less: Acquisitions, dispositions and development properties





Total same property operating income

$      49,635


$     45,639


$    190,068


$    181,338











Shopping Centers

$      37,319


$     33,646


$    140,866


$    135,160


Mixed-Use properties

12,316


11,993


49,202


46,178


Total same property operating income

$      49,635


$     45,639


$    190,068


$    181,338











Shopping Center operating income

$      37,319


$     33,646


$    140,866


$    135,160


Less: Shopping Center acquisitions, dispositions and development properties





Total same Shopping Center operating income

$      37,319


$     33,646


$    140,866


$    135,160











Mixed-Use property operating income

$      12,316


$     11,993


$      49,202


$      46,178


Less: Mixed-Use acquisitions, dispositions and development properties





Total same Mixed-Use property operating income

$      12,316


$     11,993


$      49,202


$      46,178


(4)  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.

Cision View original content:https://www.prnewswire.com/news-releases/saul-centers-inc-reports-fourth-quarter-2023-earnings-302076452.html

SOURCE Saul Centers, Inc.

FAQ

What was Saul Centers, Inc.'s total revenue for the 2023 Quarter?

$66.7 million

How did net income change for the 2023 Quarter compared to the 2022 Quarter?

Net income increased to $17.5 million from $15.4 million.

What contributed to the increase in net income for the 2023 Quarter?

Higher termination fees and base rent, partially offset by higher expenses.

What is Saul Centers, Inc.'s ticker symbol?

BFS

Where is Saul Centers, Inc. headquartered?

Bethesda, Maryland

Saul Centers, Inc.

NYSE:BFS

BFS Rankings

BFS Latest News

BFS Stock Data

941.04M
23.98M
48.06%
46.17%
0.39%
REIT - Retail
Real Estate Investment Trusts
Link
United States of America
BETHESDA