Saul Centers, Inc. Reports First Quarter 2023 Earnings

Saul Centers, Inc.

Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except per share amounts)

March 31,
2023

December 31,
2022

Assets

Real estate investments

Land

$         511,529

$         511,529

Buildings and equipment

1,583,705

1,576,924

Construction in progress

365,612

319,683

2,460,846

2,408,136

Accumulated depreciation

(698,597)

(688,475)

1,762,249

1,719,661

Cash and cash equivalents

11,812

13,279

Accounts receivable and accrued income, net

52,614

56,323

Deferred leasing costs, net

22,855

22,388

Other assets

18,475

21,651

Total assets

$      1,868,005

$      1,833,302

Liabilities

Notes payable, net

$         959,395

$         961,577

Revolving credit facility payable, net

192,134

161,941

Term loan facility payable, net

99,419

99,382

Accounts payable, accrued expenses and other liabilities

55,790

42,978

Deferred income

22,970

23,169

Dividends and distributions payable

22,462

22,453

Total liabilities

1,352,170

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, 24,029,935 and

24,016,009 shares issued and outstanding, respectively

240

240

Additional paid-in capital

447,134

446,301

Partnership units in escrow

39,650

39,650

Distributions in excess of accumulated net income

(277,020)

(273,559)

Accumulated other comprehensive income

1,402

2,852

Total Saul Centers, Inc. equity

396,406

400,484

Noncontrolling interests

119,429

121,318

Total equity

515,835

521,802

Total liabilities and equity

$      1,868,005

$      1,833,302

Saul Centers, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended March 31,

2023

2022

Revenue

(unaudited)

Rental revenue

$             61,829

$             60,680

Other

1,220

1,464

Total revenue

63,049

62,144

Expenses

Property operating expenses

8,785

9,538

Real estate taxes

7,495

7,418

Interest expense, net and amortization of deferred debt costs

11,821

10,602

Depreciation and amortization of deferred leasing costs

12,017

12,327

General and administrative

5,268

4,768

Total expenses

45,386

44,653

Net Income

17,663

17,491

Noncontrolling interests

Income attributable to noncontrolling interests

(4,161)

(4,126)

Net income attributable to Saul Centers, Inc.

13,502

13,365

Preferred stock dividends

(2,798)

(2,798)

Net income available to common stockholders

$             10,704

$             10,567

Per share net income available to common stockholders

Basic and diluted

$                  0.45

$                  0.44

Reconciliation of net income to FFO available to common stockholders and

noncontrolling interests (1)

Three Months Ended March 31,

(In thousands, except per share amounts)

2023

2022

Net income

$              17,663

$              17,491

Add:

Real estate depreciation and amortization

12,017

12,327

FFO

29,680

29,818

Subtract:

Preferred stock dividends

(2,798)

(2,798)

FFO available to common stockholders and noncontrolling interests

$              26,882

$              27,020

Weighted average shares and units:

Basic

33,323

33,164

Diluted ⁽²⁾

34,031

33,886

Basic FFO per share available to common stockholders and noncontrolling interests

$                  0.81

$                  0.81

Diluted FFO per share available to common stockholders and noncontrolling interests

$                  0.79

$                  0.80

(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 March 31,

2023

2022

(unaudited)

Total revenue

$              63,049

$              62,144

Less: Acquisitions, dispositions and development properties

—

—

Total same property revenue

$              63,049

$              62,144

Shopping Centers

$              44,225

$              44,099

Mixed-Use properties

18,824

18,045

Total same property revenue

$              63,049

$              62,144

Total Shopping Center revenue

$              44,225

$              44,099

Less: Shopping Center acquisitions, dispositions and development properties

—

—

Total same Shopping Center revenue

$              44,225

$              44,099

Total Mixed-Use property revenue

$              18,824

$              18,045

Less: Mixed-Use acquisitions, dispositions and development properties

—

—

Total same Mixed-Use property revenue

$              18,824

$              18,045

(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 March 31,

(In thousands)

2023

2022

(unaudited)

Net income

$              17,663

$              17,491

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

11,821

10,602

Add: Depreciation and amortization of deferred leasing costs

12,017

12,327

Add: General and administrative

5,268

4,768

Property operating income

46,769

45,188

Less: Acquisitions, dispositions and development properties

—

—

Total same property operating income

$              46,769

$              45,188

Shopping Centers

$              34,965

$              34,007

Mixed-Use properties

11,804

11,181

Total same property operating income

$              46,769

$              45,188

Shopping Center operating income

$              34,965

$              34,007

Less: Shopping Center acquisitions, dispositions and development properties

—

—

Total same Shopping Center operating income

$              34,965

$              34,007

Mixed-Use property operating income

$              11,804

$              11,181

Less: Mixed-Use acquisitions, dispositions and development properties

—

—

Total same Mixed-Use property operating income

$              11,804

$              11,181

(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.