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Saul Centers, Inc. Reports Second Quarter 2023 Earnings

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BETHESDA, Md., Aug. 3, 2023 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced operating results for the quarter ended June 30, 2023 ("2023 Quarter").  Total revenue for the 2023 Quarter increased to $63.7 million from $60.3 million for the quarter ended June 30, 2022 ("2022 Quarter").  Net income increased to $17.2 million for the 2023 Quarter from $17.0 million for the 2022 Quarter primarily due to (a) higher commercial base rent of $1.3 million, (b) higher residential base rent of $0.8 million and (c) higher lease termination fees of $0.5 million, partially offset by (d) higher interest expense, net and amortization of deferred debt costs of $1.8 million and (e) lower recovery income, net of expenses of $0.7 million.  Net income available to common stockholders increased to $10.4 million, or $0.43 per basic and diluted share, for the 2023 Quarter from $10.2 million, or $0.43 per basic and diluted share, for the 2022 Quarter.

Same property revenue increased $3.4 million, or 5.7%, and same property operating income increased $1.8 million, or 3.9%, for the 2023 Quarter compared to the 2022 Quarter. Same property revenue and same property operating income are non-GAAP financial measures of performance and improve the comparability of these measures by excluding the results of properties that were not in operation for the entirety of the comparable reporting periods. 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) gains 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. Shopping Center same property operating income for the 2023 Quarter totaled $34.5 million, a $0.7 million increase from the 2022 Quarter.  Shopping Center same property operating income increased primarily due to (a) higher base rent of $1.3 million, partially offset by (b) lower expense recoveries, net of expenses of $0.4 million and (c) lower percentage rent of $0.3 million.  Mixed-Use same property operating income totaled $12.7 million, a $1.1 million increase from the 2022 Quarter. Mixed-Use same property operating income increased primarily due to (a) higher residential base rent of $0.8 million and (b) higher lease termination fees of $0.5 million. Reconciliations of (a) total revenue to same property revenue and (b) net income to same property operating income are attached to this press release.

Funds from operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) decreased to $26.5 million, or $0.79 and $0.78 per basic and diluted share, respectively, in the 2023 Quarter compared to $26.6 million, or $0.80 and $0.78 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 decrease in FFO available to common stockholders and noncontrolling interests was primarily the result of (a) higher interest expense, net and amortization of deferred debt costs of $1.8 million, (b) lower recovery income, net of expenses of $0.7 million, (c) lower percentage rent of $0.1 million and (d) higher credit losses on operating lease receivables and corresponding reserves, net (collectively, $0.1 million), partially offset by (e) higher commercial base rent of $1.3 million, (f) higher residential base rent of $0.8 million and (g) higher lease termination fees of $0.5 million.

As of June 30, 2023, 94.0% of the commercial portfolio was leased, compared to 92.6% as of June 30, 2022.  As of June 30, 2023, the residential portfolio was 99.2% leased compared to 98.1% as of June 30, 2022.

For the six months ended June 30, 2023 ("2023 Period"), total revenue increased to $126.8 million from $122.4 million for the six months ended June 30, 2022 ("2022 Period").  Net income increased to $34.9 million for the 2023 Period from $34.5 million for the 2022 Period.  The increase in net income was primarily due to (a) higher commercial base rent of $2.0 million, (b) higher residential base rent of $1.8 million and (c) lower depreciation and amortization of deferred leasing costs of $0.6 million, partially offset by (d) higher interest expense, net and amortization of deferred debt costs of $3.0 million and (e) lower recovery income, net of expenses of $0.9 million. Net income available to common stockholders increased to $21.1 million, or $0.88 per basic and diluted share, for the 2023 Period compared to $20.8 million, or $0.87 per basic and diluted share, for the 2022 Period.

No properties were excluded from same property results. Same property revenue increased $4.3 million, or 3.5%, and same property operating income increased $3.3 million, or 3.7% for the 2023 Period, compared to the 2022 Period.  Shopping Center same property operating income increased $1.6 million, or 2.4%, primarily due to (a) higher base rent of $2.0 million, partially offset by (b) lower lease termination fees of $0.3 million. Mixed-Use same property operating income increased $1.7 million, or 7.6%, primarily due to (a) higher residential base rent of $1.8 million and (b) higher lease termination fees of $0.5 million, partially offset by (c) lower recovery income, net of expenses of $0.7 million.

FFO available to common stockholders and noncontrolling interests, after deducting preferred stock dividends decreased to $53.4 million, or $1.60 and $1.57 per basic and diluted share, respectively, in the 2023 Period from $53.6 million, or $1.61 and $1.58 per basic and diluted share, respectively, in the 2022 Period.  FFO available to common stockholders and noncontrolling interests decreased primarily due to (a) higher interest expense, net and amortization of deferred debt costs of $3.0 million, (b) lower recovery income, net of expenses of $0.9 million and (c) higher general and administrative expenses of $0.5 million, partially offset by (d) higher commercial base rent of $2.0 million, (e) higher residential base rent of $1.8 million and (f) higher lease termination fees of $0.2 million.

As of July 31, 2023, the Company had collected 99.1% of contractual base rent and operating expense and real estate tax recoveries due during the 2023 Quarter.  For additional discussion of how the COVID-19 pandemic has impacted the Company's business, please see Part 1, Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations) of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.              

Although we are and will continue to be actively engaged in rent collection efforts related to uncollected rent, and we continue to work with certain tenants who have requested rent deferrals, we can provide no assurance that such efforts or our efforts in future periods will be successful.  As of June 30, 2023, of the $9.4 million of rents previously deferred, $8.8 million has come due and $0.3 million has been written off. Of the amounts that have come due, $8.5 million, or approximately 96%, has been paid as of July 31, 2023.            

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 61 properties, which includes (a) 50 community and neighborhood shopping centers and seven mixed-use properties with approximately 9.8 million square feet of leasable area and (b) four non-operating land and development properties. Over 85% of the Saul Centers' property operating income is generated by properties in the metropolitan Washington, D.C./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 (i) Form 10-K for the year ended December 31, 2022 and (ii) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 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 (i) our Annual Report on Form 10-K for the year ended December 31, 2022 and (ii) our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

 

Saul Centers, Inc.

Consolidated Balance Sheets

(Unaudited)


(Dollars in thousands, except per share amounts)

June 30,
2023


December 31,
2022

Assets




Real estate investments




Land

$         511,529


$         511,529

Buildings and equipment

1,590,762


1,576,924

Construction in progress

410,966


319,683


2,513,257


2,408,136

Accumulated depreciation

(708,770)


(688,475)


1,804,487


1,719,661

Cash and cash equivalents

11,473


13,279

Accounts receivable and accrued income, net

51,949


56,323

Deferred leasing costs, net

22,799


22,388

Other assets

15,986


21,651

Total assets

$      1,906,694


$      1,833,302

Liabilities




Notes payable, net

$         951,505


$         961,577

Revolving credit facility payable, net

217,328


161,941

Term loan facility payable, net

99,456


99,382

Construction loan payable, net

25,841


Accounts payable, accrued expenses and other liabilities

54,211


42,978

Deferred income

21,836


23,169

Dividends and distributions payable

22,473


22,453

Total liabilities

1,392,650


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, 24,048,626 and

24,016,009 shares issued and outstanding, respectively

240


240

Additional paid-in capital

448,231


446,301

Partnership units in escrow

39,650


39,650

Distributions in excess of accumulated net income

(280,850)


(273,559)

Accumulated other comprehensive income

3,131


2,852

Total Saul Centers, Inc. equity

395,402


400,484

Noncontrolling interests

118,642


121,318

Total equity

514,044


521,802

Total liabilities and equity

$      1,906,694


$      1,833,302

 

Saul Centers, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)



Three Months Ended June 30,


Six Months Ended June 30,


2023


2022


2023


2022

Revenue

(unaudited)


(unaudited)

Rental revenue

$             62,002


$             59,134


$       123,830


$           119,814

Other

1,707


1,159


2,928


2,623

Total revenue

63,709


60,293


126,758


122,437

Expenses








Property operating expenses

8,997


7,641


17,783


17,179

Real estate taxes

7,453


7,156


14,948


14,574

Interest expense, net and amortization of deferred debt costs

12,278


10,457


24,099


21,059

Depreciation and amortization of deferred leasing costs

12,114


12,377


24,130


24,704

General and administrative

5,678


5,665


10,946


10,433

Total expenses

46,520


43,296


91,906


87,949

Net Income

17,189


16,997


34,852


34,488

Noncontrolling interests








Income attributable to noncontrolling interests

(4,027)


(3,981)


(8,188)


(8,107)

Net income attributable to Saul Centers, Inc.

13,162


13,016


26,664


26,381

Preferred stock dividends

(2,799)


(2,799)


(5,597)


(5,597)

Net income available to common stockholders

$             10,363


$             10,217


$         21,067


$             20,784

Per share net income available to common stockholders








Basic and diluted

$                  0.43


$                  0.43


$              0.88


$                  0.87

 

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)

2023


2022


2023


2022

Net income

$              17,189


$              16,997


$             34,852


$             34,488

Add:








Real estate depreciation and amortization

12,114


12,377


24,130


24,704

FFO

29,303


29,374


58,982


59,192

Subtract:








Preferred stock dividends

(2,799)


(2,799)


(5,597)


(5,597)

FFO available to common stockholders and noncontrolling interests

$              26,504


$              26,575


$             53,385


$             53,595

Weighted average shares and units:








Basic

33,340


33,256


33,332


33,210

Diluted (2)

34,049


33,981


34,040


33,933

Basic FFO per share available to common stockholders and noncontrolling interests

$                  0.79


$                  0.80


$                 1.60


$                 1.61

Diluted FFO per share available to common stockholders and

noncontrolling interests

$                  0.78


$                  0.78


$                 1.57


$                 1.58


(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. 

(2)

Beginning March 5, 2021, fully diluted shares and units includes 1,416,071 limited partnership units that were held in escrow related to the contribution of Twinbrook Quarter. Half of the units held in escrow were released on October 18, 2021. The remaining units held in escrow are scheduled to be released on October 18, 2023. 

 

Reconciliation of revenue to same property revenue (3)

(in thousands)


Three Months Ended June 30,


Six Months Ended June 30,



2023


2022


2023


2022



(unaudited)


(unaudited)

Total revenue


$              63,709


$              60,293


$           126,758


$           122,437

Less: Acquisitions, dispositions and development properties





Total same property revenue


$              63,709


$              60,293


$           126,758


$           122,437










Shopping Centers


$              43,974


$              42,038


$             88,199


$             86,137

Mixed-Use properties


19,735


18,255


38,559


36,300

Total same property revenue


$              63,709


$              60,293


$           126,758


$           122,437










Total Shopping Center revenue


$              43,974


$              42,038


$             88,199


$             86,137

Less: Shopping Center acquisitions, dispositions and development properties





Total same Shopping Center revenue


$              43,974


$              42,038


$             88,199


$             86,137










Total Mixed-Use property revenue


$              19,735


$              18,255


$             38,559


$             36,300

Less: Mixed-Use acquisitions, dispositions and development properties





Total same Mixed-Use property revenue


$              19,735


$              18,255


$             38,559


$             36,300



(3)

Same property revenue is a non-GAAP financial measure of performance that management believes 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 June 30,


Six Months Ended June 30,

(In thousands)

2023


2022


2023


2022


(unaudited)


(unaudited)

Net income

$              17,189


$              16,997


$             34,852


$             34,488

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

12,278


10,457


24,099


21,059

Add: Depreciation and amortization of deferred leasing costs

12,114


12,377


24,130


24,704

Add: General and administrative

5,678


5,665


10,946


10,433

Property operating income

47,259


45,496


94,027


90,684

Less: Acquisitions, dispositions and development properties




Total same property operating income

$              47,259


$              45,496


$             94,027


$             90,684









Shopping Centers

$              34,512


$              33,854


$             69,477


$             67,861

Mixed-Use properties

12,747


11,642


24,550


22,823

Total same property operating income

$              47,259


$              45,496


$             94,027


$             90,684









Shopping Center operating income

$              34,512


$              33,854


$             69,477


$             67,861

Less: Shopping Center acquisitions, dispositions and development

properties




Total same Shopping Center operating income

$              34,512


$              33,854


$             69,477


$             67,861









Mixed-Use property operating income

$              12,747


$              11,642


$             24,550


$             22,823

Less: Mixed-Use acquisitions, dispositions and development properties




Total same Mixed-Use property operating income

$              12,747


$              11,642


$             24,550


$             22,823



(4)

Same property operating income is a non-GAAP financial measure of performance that management believes 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-second-quarter-2023-earnings-301893167.html

SOURCE Saul Centers, Inc.

Saul Centers, Inc.

NYSE:BFS

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REIT - Retail
Real Estate Investment Trusts
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