Saul Centers, Inc. Reports Fourth Quarter 2010 Earnings

Mar 01, 2011, 17:30 ET from Saul Centers, Inc.

BETHESDA, Md., March 1, 2011 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust (REIT), announced its operating results for the quarter ended December 31, 2010.  Total revenue for the three months ended December 31, 2010 ("2010 Quarter") decreased 3.4% to $40,295,000 compared to $41,698,000 for the three months ended December 31, 2009 ("2009 Quarter").  Operating income, which is net income available to common stockholders before loss on early extinguishment of debt, gain on casualty settlements, acquisition related costs, discontinued operations, income attributable to the noncontrolling interest and preferred stock dividends, decreased 13.8% to $10,049,000 for the 2010 Quarter compared to $11,660,000 for the 2009 Quarter, primarily due to a single-location office tenant default ($700,000) and increased general and administrative expense ($385,000).  Net income decreased 22.3% to $8,870,000 for the 2010 Quarter compared to $11,417,000 for the 2009 Quarter primarily due to acquisition related costs arising from the purchases of two retail properties ($1,009,000), the office tenant default ($700,000) and increased general and administrative expense ($385,000).  Net income available to common stockholders was $3,921,000, or $0.21 per diluted share, for the 2010 Quarter compared to $5,861,000, or $0.33 per diluted share, for the 2009 Quarter.  

Same property revenue for the total portfolio decreased 4.7% for the 2010 Quarter compared to the 2009 Quarter and same property operating income decreased 5.3%.  The same property comparisons exclude the results of operations of properties not fully in operation for each of the comparable reporting quarters.  Same property operating income in the shopping center portfolio decreased 2.2% for the 2010 Quarter compared to the 2009 Quarter, due to reduced minimum rent income ($325,000) and reduced termination fee income ($240,000).  Same property operating income in the office/mixed-use portfolio decreased 15.6% for the 2010 Quarter compared to the 2009 Quarter primarily due to a single-location office tenant default ($700,000).  

For the year ended December 31, 2010 ("2010 Year"), total revenue increased 1.6% to $163,546,000 compared to $160,968,000 for the year ended December 31, 2009 ("2009 Year") and operating income decreased 3.1% to $43,818,000 compared to $45,199,000 for the 2009 Year primarily due to a single-location office tenant default ($1,400,000), increased snow removal expense, net of tenant recoveries, from severe winter storms impacting the Mid-Atlantic region ($1,200,000), increased general and administrative expense ($1,000,000) and decreased lease termination fees ($750,000) offset in part by the collection of rents and other past due charges from a former anchor tenant ($1,940,000) and operating income generated from shopping centers recently developed/acquired ($1,000,000).  Net income available to common stockholders was $21,623,000 or $1.18 per diluted share for the 2010 Year, compared to $21,573,000 or $1.20 per diluted share for the 2009 Year.  

Same property revenue for the total portfolio increased 0.6% for the 2010 Year compared to the 2009 Year and same property operating income decreased 0.7%.  Shopping center same property operating income increased 1.4% for the 2010 Year primarily due to the collection of rents and other past due charges from a former anchor tenant ($1,940,000). Excluding this one-time revenue, same property shopping center operating income decreased 0.7% compared to the prior year.  Same property operating income in the office/mixed-use portfolio decreased 7.5% for the 2010 Year due primarily to a single-location office tenant default ($1,400,000).  

As of December 31, 2010, 90.3% of retail and office space was leased compared to 91.5% at December 31, 2009.  Clarendon Center's newly constructed apartments were 44% leased at December 31, 2010.  On a same property basis, 92.0% of the portfolio was leased as of December 31, 2010 compared to 92.7% at December 31, 2009.  

Funds from operations (FFO) available to common shareholders (after deducting preferred stock dividends) decreased 20.4% to $11,436,000 in the 2010 Quarter compared to $14,359,000 for the 2009 Quarter.  On a diluted per share basis, FFO available to common shareholders decreased 21.3% to $0.48 per share for the 2010 Quarter compared to $0.61 per share for the 2009 Quarter.  FFO decreased in the 2010 Quarter primarily due to costs related to the acquisition of two retail properties, a single-location office tenant default,  increased general and administrative expense and the increase in the expense incurred to retire debt prior to its maturity.  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 from property dispositions and extraordinary items.  FFO available to common shareholders for the 2010 Year decreased 9.8% to $50,556,000 from $56,025,000 during the 2009 Year.   Per share FFO available to common shareholders for the 2010 Year decreased 11.7% to $2.12 per diluted share compared to $2.40 per diluted share for the 2009 Year.  FFO decreased in the 2010 Year primarily due to higher losses on early extinguishment of debt ($3,195,000 or $0.13 per diluted share), by a decline in property operating income due to (1) a single-location office tenant default, (2) increased snow removal expense, net of tenant recoveries, (3) increased general and administrative expense and (4) decreased lease termination fees, offset in part by (5) the collection of rents and other past due charges from a former anchor tenant, and (6) operating income generated from shopping centers recently developed/acquired (collectively $1,410,000 or $0.06 per diluted share) and costs of acquiring two properties (approximately $1,179,000 or $0.05 per diluted share).

In September 2010, the Company sold its Lexington property for $8,100,000 and recognized a gain of $3,591,000.  Net proceeds from the sale of Lexington together with additional cash of $7,400,000 were used to purchase 11503 Rockville Pike, a property containing approximately 20,000 square feet of retail space located on the east side of Rockville Pike near the White Flint Metro Station in Montgomery County, Maryland.  The property, which is fully leased, is zoned for up to 297,000 square feet of rentable mixed use space.  The Company does not anticipate redeveloping this property in the foreseeable future.  

In December 2010, the Company purchased for $34.3 million the Metro Pike Center, approximately 67,000 square feet of retail space located on the west side of Rockville Pike near the White Flint Metro Station in Montgomery County, Maryland.  The property was acquired subject to the assumption of a $16.2 million mortgage loan.  The property, which is 89% leased, is zoned for up to 807,000 square feet of rentable mixed use space.  The Company does not anticipate redeveloping this property in the foreseeable future.

As of December 31, 2010, the Company substantially completed construction of Clarendon Center adjacent to the Clarendon Metro Station in Arlington, Virginia.  Clarendon Center will provide 45,000 square feet of retail space, 170,000 square feet of office space and 244 apartment units. As of February 28, 2011, the office and retail space is 66% leased and the apartments are 83% leased.

At December 31, 2010, approximately 85% of the Company's debt consisted of fixed rate, amortizing non-recourse mortgage loans, none of which mature before October 2012.  As a result of the Company's 2010 refinancing activities, no more than $62 million of fixed-rate debt will mature in any future calendar year.  The Company's $150 million revolving credit facility matures June 2012, can be extended for one year at the Company's option, and had no outstanding borrowings as of December 31, 2010.

During 2010, the Company paid quarterly dividends to its common stockholders totaling $1.44 per share, compared to $1.53 per share in 2009.  On January 31, 2011, the Company paid a quarterly dividend of $0.36 per share to its common stockholders ($1.44 per share annual rate).

Saul Centers is a self-managed, self-administered equity REIT headquartered in Bethesda, Maryland. Saul Centers currently operates and manages a real estate portfolio of 54 community and neighborhood shopping center and office/mixed-use properties totaling approximately 8.9 million square feet of leasable area.  Over 80% of the Company's property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area.  

Saul Centers, Inc.

Condensed Consolidated Balance Sheets

($ in thousands)

December 31,

December 31,

2010

2009

Assets

(Unaudited)

Real estate investments

Land

$                       275,044

$                       223,193

Buildings and equipment

870,143

740,442

Construction in progress

78,849

147,589

1,224,036

1,111,224

Accumulated depreciation

(296,786)

(276,310)

927,250

834,914

Cash and cash equivalents

12,968

20,607

Accounts receivable and accrued income, net

36,417

37,503

Deferred leasing costs, net

17,835

15,609

Prepaid expenses, net

3,024

3,096

Deferred debt costs, net

7,192

7,537

Other assets

9,202

6,308

Total assets

$                    1,013,888

$                       925,574

Liabilities

Mortgage notes payable

$                       601,147

$                       576,069

Construction loans payable

110,242

60,737

Dividends and distributions payable

12,415

12,220

Accounts payable, accrued expenses and other liabilities

23,544

23,395

Deferred income

26,727

27,090

Total liabilities

774,075

699,511

Stockholders' equity

Preferred stock

179,328

179,328

Common stock

186

180

Additional paid-in capital

189,787

169,363

Accumulated deficit and other comprehensive loss

(129,345)

(124,167)

Total Saul Centers, Inc. stockholders' equity

239,956

224,704

Noncontrolling interest

(143)

1,359

Total stockholders' equity

239,813

226,063

Total liabilities and stockholders' equity

$                    1,013,888

$                       925,574

Saul Centers, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended December 31,

Year Ended December 31,

2010

2009

2010

2009

Revenue

(Unaudited)

(Unaudited)

Base rent

$                         31,805

$                         32,244

$                       126,518

$                       125,727

Expense recoveries

6,951

7,684

29,534

29,442

Percentage rent

531

551

1,458

1,326

Other

1,008

1,219

6,036

4,473

Total revenue

40,295

41,698

163,546

160,968

Operating expenses

Property operating expenses

5,492

6,246

23,198

21,301

Provision for credit losses

638

171

1,337

919

Real estate taxes

4,295

4,196

17,793

17,754

Interest expense and amortization of deferred debt costs

8,699

8,769

34,958

34,689

Depreciation and amortization of deferred leasing costs

7,109

7,028

28,474

28,150

General and administrative

4,013

3,628

13,968

12,956

Total operating expenses

30,246

30,038

119,728

115,769

Operating income

10,049

11,660

43,818

45,199

Loss on early extinguishment of debt

(926)

(550)

(5,405)

(2,210)

Gain on casualty settlement

775

329

2,475

329

Acquisition related costs

(1,009)

-

(1,179)

-

Income from continuing operations

8,889

11,439

39,709

43,318

Discontinued operations:

(Loss) income from operations of property sold

(19)

(22)

(115)

(88)

Gain on property sale

-

-

3,591

-

Income (loss) from discontinued operations

(19)

(22)

3,476

(88)

Net income

8,870

11,417

43,185

43,230

Income attributable to the noncontrolling interest

(1,164)

(1,771)

(6,422)

(6,517)

Net income attributable to Saul Centers, Inc.

7,706

9,646

36,763

36,713

Preferred dividends

(3,785)

(3,785)

(15,140)

(15,140)

Net income available to common stockholders

$                           3,921

$                           5,861

$                         21,623

$                         21,573

Per share net income available to common stockholders :

Diluted

$                             0.21

$                             0.33

$1.18

$1.20

Weighted average common stock :

Common stock

18,465

17,975

18,267

17,904

Effect of dilutive options

124

43

110

39

Diluted weighted average common stock

18,589

18,018

18,377

17,943

Saul Centers, Inc.

Supplemental Information

(In thousands, except per share amounts)

Three Months Ended December 31,

Year Ended December 31,

2010

2009

2010

2009

Reconciliation of net income to FFO available to common shareholders:       (1)

(Unaudited)

(Unaudited)

Net income

$                           8,870

$                         11,417

$                         43,185

$                         43,230

Less:

Gain on property dispositions

(775)

(329)

(6,066)

(329)

Add:

Real property depreciation and amortization

7,109

7,028

28,474

28,150

Add:

Real property depreciation - discontinued operations

17

28

103

114

FFO

15,221

18,144

65,696

71,165

Less:

Preferred dividends

(3,785)

(3,785)

(15,140)

(15,140)

FFO available to common shareholders

$                         11,436

$                         14,359

$                         50,556

$                         56,025

Weighted average shares :

Diluted weighted average common stock

18,589

18,018

18,377

17,943

Convertible limited partnership units

5,416

5,416

5,416

5,416

Diluted & converted weighted average shares

24,005

23,434

23,793

23,359

Per share amounts:

FFO available to common shareholders (diluted)

$0.48

$0.61

$2.12

$2.40

Reconciliation of net income to same property operating income:

Net income

$                           8,870

$                         11,417

$                         43,185

$                         43,230

Add:

Interest expense and amortization of deferred debt costs

8,699

8,769

34,958

34,689

Add:

Depreciation and amortization of deferred leasing costs

7,109

7,028

28,474

28,150

Add:

Depreciation and amortization - discontinued operations

17

28

103

114

Add:

Acquisition related costs

1,009

-

1,179

-

Add:

General and administrative

4,013

3,628

13,968

12,956

Add:

Loss on early extinguishment of debt

926

550

5,405

2,210

Less:

Gain on casualty settlement

(775)

(329)

(2,475)

(329)

Less:

Gain on property sale

-

-

(3,591)

-

Less:

Interest income

(11)

(3)

(33)

(9)

Property operating income

29,857

31,088

121,173

121,011

Less:

Acquisitions & developments

(760)

(352)

(1,856)

(846)

Total same property operating income

$                         29,097

$                         30,736

$                       119,317

$                       120,165

Total shopping centers

$                         23,080

$                         23,603

$                         93,320

$                         92,057

Total office properties

6,017

7,133

25,997

28,108

Total same property operating income

$                         29,097

$                         30,736

$                       119,317

$                       120,165

(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  extraordinary items 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 we believe occurs with our 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.

SOURCE Saul Centers, Inc.



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http://www.saulcenters.com