Saul Centers, Inc. Reports Third Quarter 2009 Earnings BETHESDA, Md., Nov. 5 /PRNewswire-FirstCall/ -- Saul Centers, Inc. (NYSE: BFS - News), an equity real estate investment trust (REIT), announced its operating results for the quarter ended September 30, 2009. Total revenue for the three months ended September 30, 2009 ("2009 Quarter") decreased 1.6% to $40,273,000 compared to $40,947,000 for the three months ended September 30, 2008 ("2008 Quarter"). Operating income, which is net income available to common stockholders before gain on property dispositions, loss on early extinguishment of debt, income attributable to the noncontrolling interest and preferred stock dividends, increased 0.8% to $11,349,000 for the 2009 Quarter compared to $11,264,000 for the 2008 Quarter. Net income available to common stockholders was $5,822,000 or $0.32 per diluted share for the 2009 Quarter, compared to net income available to common stockholders of $5,736,000 or $0.32 per diluted share for the 2008 Quarter. Results for the 2008 Quarter were impacted by a one-time non-cash depreciation charge of $1,112,000 arising from the demolition of a portion of the Smallwood Village Center in conjunction with the Company's redevelopment of the property. Same property revenue for the total portfolio decreased 2.3% for the 2009 Quarter compared to the 2008 Quarter and same property operating income decreased 2.0%. The same property comparisons exclude the results of operations of properties not in operation for each of the comparable reporting quarters. Same property operating income in the shopping center portfolio decreased 2.9% for the 2009 Quarter compared to the 2008 Quarter. The primary cause of this decrease was a decline in base rent due to decreased leasing levels, and to a lesser extent, reduced other income, primarily due to reduced lease termination fees collected during the 2009 Quarter. Same property operating income in the office portfolio increased 1.4% for the 2009 Quarter. For the nine months ended September 30, 2009 ("2009 Period"), total revenue decreased 0.3% to $119,378,000 compared to $119,774,000 for the nine months ended September 30, 2008 ("2008 Period") and operating income decreased 3.0% to $33,473,000 compared to $34,512,000 for the 2008 Period. Net income available to common stockholders was $15,712,000 or $0.88 per diluted share for the 2009 Period, compared to $19,212,000 or $1.07 per diluted share for the 2008 Period. Overall same property revenue for the total portfolio decreased 1.5% for the 2009 Period compared to the 2008 Period and same property operating income decreased 3.1%. For the 2009 Period, shopping center same property operating income decreased 4.3% due to overall increases in tenant vacancies and credit loss reserves. Same property operating income in the office portfolio increased 1.1% for the 2009 Period, due primarily to lease termination fees received, which were largely offset by increased tenant vacancy at Avenel Business Park. As of September 30, 2009, 91.8% of the operating portfolio, including the Northrock and Westview Village development projects which are phasing into service, was leased compared to 94.7% at September 30, 2008. On a same property basis, 92.9% of the portfolio was leased, compared to the prior year level of 94.7%. The 2009 leasing percentages declined due to a net decrease of approximately 147,000 square feet of leased space. Funds from operations (FFO) available to common shareholders (after deducting preferred stock dividends) decreased 8.3% to $14,648,000 in the 2009 Quarter compared to $15,966,000 for the 2008 Quarter. On a diluted per share basis, FFO available to common shareholders decreased 7.4% to $0.63 per share for the 2009 Quarter compared to $0.68 per share for the 2008 Quarter. FFO, a widely accepted non-GAAP financial measure of operating performance for REITs, is defined as net income plus income attributable to the noncontrolling interest, extraordinary items and real estate depreciation and amortization, excluding gains from property dispositions. FFO available to common shareholders for the 2009 Period decreased 11.8% to $41,666,000 from $47,263,000 during the 2008 Period. Per share FFO available to common shareholders for the 2009 Period decreased 11.4% to $1.79 per diluted share compared to $2.02 per diluted share for the 2008 Period. FFO decreased in the 2009 Period primarily due to the expense associated with the second quarter financing activities ($2,023,000 or $0.09 per diluted share), increased preferred stock dividends ($1,687,000 or $0.07 per diluted share), and to a lesser extent, decreased property operating income. During the 2009 second quarter, the Company refinanced mortgage debt on four properties. As a result of these refinancings, the Company incurred expense totaling $1,660,000 related to the early retirement of the existing mortgage debt due to mature December 2011. The Company also modified its existing revolving credit agreement which was due to expire in December 2010. Interest expense and amortization of deferred debt costs includes $363,000 associated with the modification. Therefore, total expense recognized in the 2009 Period for these financing activities was $2,023,000. Saul Centers is a self-managed, self-administered equity REIT headquartered in Bethesda, Maryland. Saul Centers currently operates and manages a real estate portfolio of 52 community and neighborhood shopping center and office properties totaling approximately 8.4 million square feet of leasable area. Over 80% of the Company's property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area.
Saul Centers, Inc.
Condensed Consolidated Balance Sheets
($ in thousands)
September 30, December 31,
2009 2008
---- ----
Assets (Unaudited)
Real estate investments
Land $223,035 $215,407
Buildings and equipment 738,125 713,154
Construction in progress 126,066 98,920
------- ------
1,087,226 1,027,481
Accumulated depreciation (270,413) (252,763)
-------- --------
816,813 774,718
Cash and cash equivalents 14,297 13,006
Accounts receivable and accrued
income, net 36,815 37,495
Deferred leasing costs, net 16,170 16,901
Prepaid expenses, net 4,860 2,981
Deferred debt costs, net 7,466 5,875
Other assets 8,294 2,897
----- -----
Total assets $904,715 $853,873
======== ========
Liabilities
Mortgage notes payable $569,634 $548,265
Construction loans payable 48,294 19,230
Dividends and distributions
payable 12,179 12,864
Accounts payable, accrued
expenses and other liabilities 27,295 22,394
Deferred income 24,015 23,233
------ ------
Total liabilities 681,417 625,986
------- -------
Stockholders' equity
Preferred stock 179,328 179,328
Common stock 179 179
Additional paid-in capital 165,794 164,278
Accumulated deficit (123,541) (118,865)
-------- --------
Total Saul Centers, Inc.
stockholders' equity 221,760 224,920
Noncontrolling interest 1,538 2,967
----- -----
Total stockholders' equity 223,298 227,887
------- -------
Total liabilities and
stockholders' equity $904,715 $853,873
======== ========
Saul Centers, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Revenue (Unaudited) (Unaudited)
Base rent $31,776 $31,466 $93,572 $93,599
Expense recoveries 7,145 7,652 21,773 21,730
Percentage rent 214 253 775 799
Other 1,138 1,576 3,258 3,646
----- ----- ----- -----
Total revenue 40,273 40,947 119,378 119,774
------ ------ ------- -------
Operating expenses
Property operating
expenses 4,919 5,360 15,134 14,872
Provision for credit
losses 189 236 748 660
Real estate taxes 4,531 4,241 13,567 12,530
Interest expense and
amortization of
deferred debt costs 8,942 8,568 25,920 25,877
Depreciation and
amortization of
deferred leasing costs 7,084 8,487 21,208 22,419
General and
administrative 3,259 2,791 9,328 8,904
----- ----- ----- -----
Total operating
expenses 28,924 29,683 85,905 85,262
------ ------ ------ ------
Operating income 11,349 11,264 33,473 34,512
Loss on early
extinguishment of debt - - (1,660) -
Gain on property
dispositions - - - 205
--- --- --- ---
Net income 11,349 11,264 31,813 34,717
Income attributable to
the noncontrolling
interest (1,742) (1,743) (4,746) (5,837)
------ ------ ------ ------
Net income attributable
to Saul Centers, Inc. 9,607 9,521 27,067 28,880
Preferred dividends (3,785) (3,785) (11,355) (9,668)
------ ------ ------- ------
Net income available to
common stockholders $5,822 $5,736 $15,712 $19,212
====== ====== ======= =======
Per share net income
available to common
stockholders:
Diluted $0.32 $0.32 $0.88 $1.07
===== ===== ===== =====
Weighted average
common stock:
Common stock 17,892 17,834 17,881 17,801
Effect of dilutive
options 47 157 37 170
-- --- -- ---
Diluted weighted
average common stock 17,939 17,991 17,918 17,971
====== ====== ====== ======
Saul Centers, Inc.
Supplemental Information
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Reconciliation of (Unaudited) (Unaudited)
net income
attributable to
Saul Centers Inc.
to FFO: (1)
Net income
attributable
to Saul Centers
Inc. $9,607 $9,521 $27,067 $28,880
Less: Gain on
property
dispositions - - - (205)
Add: Real property
depreciation and
amortization 7,084 8,487 21,208 22,419
Add: Income
attributable to
the
noncontrolling
interest 1,742 1,743 4,746 5,837
----- ----- ----- -----
FFO 18,433 19,751 53,021 56,931
Less: Preferred
dividends (3,785) (3,785) (11,355) (9,668)
------ ------ ------- ------
FFO available to
common
shareholders $14,648 $15,966 $41,666 $47,263
======= ======= ======= =======
Weighted average
shares :
Diluted
weighted
average
common
stock 17,939 17,991 17,918 17,971
Convertible
limited
partnership
units 5,416 5,416 5,416 5,416
----- ----- ----- -----
Diluted &
converted
weighted
average
shares 23,355 23,407 23,334 23,387
====== ====== ====== ======
Per share amounts:
FFO available to
common
shareholders
(diluted) $0.63 $0.68 $1.79 $2.02
===== ===== ===== =====
Reconciliation of
net income
attributable to
Saul Centers
Inc. to same
property operating
income:
Net income
attributable
to Saul
Centers Inc. $9,607 $9,521 $27,067 $28,880
Add: Interest
expense and
amortization
of deferred
debt costs 8,942 8,568 25,920 25,877
Add: Depreciation
and amortization
of deferred
leasing costs 7,084 8,487 21,208 22,419
Add: General and
administrative 3,259 2,791 9,328 8,904
Add: Loss on early
extinguishment
of debt - - 1,660 -
Less: Gain on
property
dispositions - - - (205)
Less: Interest income - (190) (6) (501)
Add: Income
attributable to
the noncontrolling
interest 1,742 1,743 4,746 5,837
----- ----- ----- -----
Property
operating
income 30,634 30,920 89,923 91,211
Less:
Acquisitions &
developments (319) - (3,729) (2,298)
Total same
property
operating
income $30,315 $30,920 $86,194 $88,913
======= ======= ======= =======
Total shopping
centers $23,448 $24,149 $65,219 $68,158
Total office
properties 6,867 6,771 20,975 20,755
----- ----- ------ ------
Total same
property
operating
income $30,315 $30,920 $86,194 $88,913
======= ======= ======= =======
(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 income
attributable to the noncontrolling interest, extraordinary items
and real estate depreciation and amortization, excluding 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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