Saul Centers, Inc. Reports Second Quarter 2015 Earnings

Jul 30, 2015, 16:45 ET from Saul Centers, Inc.

BETHESDA, Md., July 30, 2015 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended June 30, 2015 ("2015 Quarter").  Total revenue for the 2015 Quarter decreased to $51.7 million from $52.3 million for the quarter ended June 30, 2014 ("2014 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, decreased to $12.9 million for the 2015 Quarter from $14.4 million for the 2014 Quarter. 

Net income attributable to common stockholders was $7.3 million ($0.35 per diluted share) for the 2015 Quarter compared to $12.8 million ($0.62 per diluted share) for the 2014 Quarter.  The decrease in net income attributable to common stockholders resulted primarily from (a) a $6.1 million gain on sale of property in 2014 and (b) the $1.6 million impact of a bankruptcy settlement and collection in 2014, partially offset by (c) $1.9 million lower noncontrolling interest.

Same property revenue decreased $1.0 million (2.0%) and same property operating income decreased $1.7 million (4.1%) for the 2015 Quarter compared to the 2014 Quarter.  Same property operating income equals property revenue minus the sum of (a) property operating expenses, (b) provision for credit losses and (c) real estate taxes and the comparisons exclude the results of properties not in operation for the entirety of the comparable reporting periods.  Shopping center same property operating income decreased $1.1 million (3.7%) primarily due to the $1.6 million impact of a bankruptcy settlement and collection in 2014 which was partially offset by $0.5 million of increased base rent.  Mixed-use same property operating income decreased $0.5 million (5.5%) primarily due to (a) higher real estate tax expense, the majority of which is not recoverable ($0.3 million) and (b) higher provision for credit losses related to a rent dispute ($0.2 million).

For the six months ended June 30, 2015 ("2015 Period"), total revenue decreased to $103.8 million from $105.2 million for the six months ended June 30, 2014 ("2014 Period").  Operating income decreased to $25.6 million for the 2015 Period from $27.1 million for the 2014 Period.  The decrease in operating income was due primarily to (a) the net impact in 2014 of a lease termination ($1.2 million), and (b) the impact in 2014 of a bankruptcy settlement and collection ($1.6 million) partially offset by (c) lower general and administrative expenses, primarily due to severance expense in 2014 ($0.8 million) and (d) lower predevelopment expenses ($0.5 million). 

Net income attributable to common stockholders was $14.4 million ($0.68 per diluted share) for the 2015 Period compared to $19.9 million ($0.96 per diluted share) for the 2014 Period.  The decrease in net income attributable to common stockholders was due primarily to (a) the gain on sale of property in 2014 ($6.1 million), (b) the impact in 2014 of a bankruptcy settlement and collection ($1.6 million), (c) the net impact in 2014 of a lease termination ($1.2 million), partially offset by (d) lower noncontrolling interest ($1.8 million), (e) lower general and administrative expenses, primarily due to severance expense in 2014 ($0.8 million) and (f) lower predevelopment expenses ($0.5 million).

Same property revenue decreased $2.3 million (2.2%) and same property operating income decreased $3.4 million (4.3%) for the 2015 Period compared to the 2014 Period.  Shopping center same property operating income decreased $2.0 million (3.3%) primarily due to (a) the net impact in 2014 of a lease termination ($1.2 million), (b) the impact in 2014 of a bankruptcy settlement and collection ($1.6 million) partially offset by (c) increased base rent ($0.7 million). Mixed-use same property operating income decreased $1.4 million (7.4%) primarily due to (a) higher real estate tax expense, the majority of which is not recoverable ($0.6 million), (b) higher provision for credit losses related to a rent dispute ($0.3 million), (c) lower base rent ($0.2 million) and (d) higher repairs and maintenance expense, the majority of which is not recoverable ($0.2 million).

As of June 30, 2015, 95.0% of the commercial portfolio was leased (not including the apartments at Clarendon Center), compared to 94.2% as of June 30, 2014.  On a same property basis, 94.9% of the portfolio was leased as of June 30, 2015, compared to 94.2% as of June 30, 2014.  The apartments at Clarendon Center were 98.8% leased as of June 30, 2015 compared to 100.0% as of June 30, 2014.

Funds from operations ("FFO") available to common shareholders (after deducting preferred stock dividends) decreased 4.1% to $20.6 million ($0.73 per diluted share) in the 2015 Quarter from $21.5 million ($0.77 per diluted share) in the 2014 Quarter.  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.  The decrease in FFO available to common shareholders for the 2015 Quarter was primarily due to the impact in 2014 of a bankruptcy settlement and collection in 2014 ($1.6 million) which was partially offset by higher property operating income ($0.4 million).

FFO available to common shareholders decreased 1.3% to $40.7 million ($1.43 per diluted share) in the 2015 Period from $41.2 million ($1.48 per diluted share) in the 2014 Period.  The decrease in FFO available to common shareholders for the 2015 Period was primarily attributable to (a) the net impact in 2014 of a lease termination ($1.2 million), (b) the impact in 2014 of a bankruptcy settlement and collection ($1.6 million), partially offset by (c) lower general and administrative expenses ($0.8 million), (d) lower predevelopment expenses ($0.5 million), (e) lower acquisition related costs ($0.4 million), and (f) lower preferred stock dividends ($0.2 million).

Saul Centers is a self-managed, self-administered equity REIT headquartered in Bethesda, Maryland, which currently operates and manages a real estate portfolio of 59 properties which includes (a) 50 community and neighborhood shopping centers and six mixed-use properties with approximately 9.4 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.

      

Saul Centers, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

June 30,  2015

December 31,  2014

(Unaudited)

Assets

Real estate investments

Land

$

421,499

$

420,622

Buildings and equipment

1,116,381

1,109,276

Construction in progress

53,485

30,261

1,591,365

1,560,159

Accumulated depreciation

(414,694)

(396,617)

1,176,671

1,163,542

Cash and cash equivalents

11,714

12,128

Accounts receivable and accrued income, net

47,084

46,784

Deferred leasing costs, net

27,049

26,928

Prepaid expenses, net

1,663

4,093

Deferred debt costs, net

9,455

9,874

Other assets

4,407

3,638

Total assets

$

1,278,043

$

1,266,987

Liabilities

Notes payable

$

813,861

$

808,997

Revolving credit facility payable

22,000

43,000

Construction loan payable

17,531

5,391

Dividends and distributions payable

15,290

14,352

Accounts payable, accrued expenses and other liabilities

31,724

23,537

Deferred income

31,816

32,453

Total liabilities

932,222

927,730

Stockholders' equity

Preferred stock

180,000

180,000

Common stock

211

209

Additional paid-in capital

297,009

287,995

Accumulated deficit and other comprehensive loss

(179,373)

(175,668)

Total Saul Centers, Inc. stockholders' equity

297,847

292,536

Noncontrolling interests

47,974

46,721

Total stockholders' equity

345,821

339,257

Total liabilities and stockholders' equity

$

1,278,043

$

1,266,987

      

Saul Centers, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Revenue

(unaudited)

(unaudited)

Base rent

$

41,876

$

41,038

$

83,355

$

81,601

Expense recoveries

7,797

7,825

16,529

16,614

Percentage rent

558

453

996

905

Other

1,480

2,970

2,919

6,113

Total revenue

51,711

52,286

103,799

105,233

Operating expenses

Property operating expenses

6,196

6,138

13,812

13,723

Provision for credit losses

414

107

660

310

Real estate taxes

5,876

5,584

11,777

11,037

Interest expense and amortization of deferred debt costs

11,353

11,486

22,759

22,953

Depreciation and amortization of deferred leasing costs

10,811

10,309

21,251

20,489

General and administrative

4,139

4,023

7,910

8,703

Acquisition related costs

216

21

379

Predevelopment expenses

503

Total operating expenses

38,789

37,863

78,190

78,097

Operating income

12,922

14,423

25,609

27,136

Change in fair value of derivatives

(5)

(6)

(7)

Gain on sale of property

11

6,069

11

6,069

Net Income

12,933

20,487

25,614

33,198

Income attributable to noncontrolling interests

(2,537)

(4,433)

(5,011)

(6,857)

Net income attributable to Saul Centers, Inc.

10,396

16,054

20,603

26,341

Preferred stock dividends

(3,094)

(3,207)

(6,188)

(6,413)

Net income attributable to common stockholders

$

7,302

$

12,847

$

14,415

$

19,928

Per share net income attributable to common stockholders

Basic and diluted

$

0.35

$

0.62

$

0.68

$

0.96

Weighted Average Common Stock:

Common stock

21,098

20,717

21,058

20,670

Effect of dilutive options

45

26

82

32

Diluted weighted average common stock

21,143

20,743

21,140

20,702

     

Reconciliation of net income to FFO attributable to common shareholders (1)

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except per share amounts)

2015

2014

2015

2014

(unaudited)

(unaudited)

Net income

$

12,933

$

20,487

$

25,614

$

33,198

Subtract:

Gain on sale of property

(11)

(6,069)

(11)

(6,069)

Add:

Real estate depreciation and amortization

10,811

10,309

21,251

20,489

FFO

23,733

24,727

46,854

47,618

Subtract:

Preferred stock dividends

(3,094)

(3,207)

(6,188)

(6,413)

FFO available to common shareholders

$

20,639

$

21,520

$

40,666

$

41,205

Weighted average shares:

Diluted weighted average common stock

21,143

20,743

21,140

20,702

Convertible limited partnership units

7,237

7,164

7,225

7,114

Average shares and units used to compute FFO per share

28,380

27,907

28,365

27,816

FFO per share available to common shareholders

$

0.73

$

0.77

$

1.43

$

1.48

(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, 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.

       

Reconciliation of net income to same property operating income

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

2015

2014

2015

2014

(unaudited)

(unaudited)

Net income

$

12,933

$

20,487

$

25,614

$

33,198

Add: Interest expense and amortization of deferred debt costs

11,353

11,486

22,759

22,953

Add: Depreciation and amortization of deferred leasing costs

10,811

10,309

21,251

20,489

Add: General and administrative

4,139

4,023

7,910

8,703

Add: Predevelopment expenses

503

Add: Acquisition related costs

216

21

379

Add: Change in fair value of derivatives

5

6

7

Less: Gains on sale of property

(11)

(6,069)

(11)

(6,069)

Less: Interest income

(13)

(21)

(26)

(35)

Property operating income

39,212

40,436

77,524

80,128

Less: Acquisitions, dispositions and development property

660

221

1,181

362

Total same property operating income

$

38,552

$

40,215

$

76,343

$

79,766

Shopping centers

$

29,686

$

30,833

$

58,993

$

61,021

Mixed-Use properties

8,866

9,382

17,350

18,745

Total same property operating income

$

38,552

$

40,215

$

76,343

$

79,766

      

SOURCE Saul Centers, Inc.



RELATED LINKS

http://www.saulcenters.com