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BETHESDA, Md., Nov. 8, 2022 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended September 30, 2022 ("2022 Quarter"). Total revenue for the 2022 Quarter increased to $61.1 million from $60.3 million for the quarter ended September 30, 2021 ("2021 Quarter"). Net income decreased to $15.5 million for the 2022 Quarter from $16.9 million for the 2021 Quarter primarily due to (a) higher general and administrative expenses of $0.9 million, (b) loss on early extinguishment of debt of $0.6 million, (c) lower recovery income, net of expenses of $0.3 million, partially offset by (d) higher base rent across the portfolio of $0.4 million. Net income available to common stockholders decreased to $9.2 million, or $0.38 per basic and diluted share, for the 2022 Quarter from $10.3 million, or $0.44 per basic and diluted share, for the 2021 Quarter.
Same property revenue increased $0.8 million, or 1.4%, and same property operating income increased $0.1 million, or 0.3%, for the 2022 Quarter compared to the 2021 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 lease 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 for same property results for the 2022 Quarter. Shopping Center same property operating income for the 2022 Quarter totaled $33.7 million, a $0.2 million decrease from the 2021 Quarter. Mixed-Use same property operating income totaled $11.4 million, a $0.3 million increase from the 2021 Quarter. Reconciliations of (a) total revenue to same property revenue and (b) net income to same property operating income are attached to this press release.
As of September 30, 2022, 93.0% of the commercial portfolio was leased, compared to 92.5% at September 30, 2021. As of September 30, 2022, the residential portfolio was 97.2% leased compared to 97.8% at September 30, 2021.
For the nine months ended September 30, 2022 ("2022 Period"), total revenue increased to $183.5 million from $179.0 million for the nine months ended September 30, 2021 ("2021 Period"). Net income increased to $50.0 million for the 2022 Period from $45.8 million for the 2021 Period. The increase in net income was primarily due to (a) lower interest expense, net and amortization of deferred debt costs of $2.4 million and (b) higher base rent across the portfolio of $2.3 million, partially offset by (c) loss on early extinguishment of debt of $0.6 million. Net income available to common stockholders increased to $29.9 million, or $1.25 per basic and diluted share, for the 2022 Period compared to $27.8 million, or $1.17 per basic and diluted share, for the 2021 Period.
No properties were excluded for same property results for the 2022 Period. Same property revenue increased $4.5 million, or 2.5%, and same property operating income increased $3.3 million, or 2.5% for the 2022 Period, compared to the 2021 Period. Shopping Center same property operating income increased $1.7 million, or 1.7%, and Mixed-Use same property operating income increased $1.6 million, or 4.9%. Shopping Center same property operating income increased primarily due to (a) higher base rent of $0.8 million, (b) lower credit losses on operating lease receivables and corresponding reserves, net of $0.6 million and (c) higher percentage rent of $0.2 million. Mixed-Use same property operating income increased primarily due to (a) higher base rent of $1.5 million, (b) higher parking income, net of expenses of $0.4 million, (c) higher other property revenue of $0.2 million, (d) lower credit losses on operating lease receivables and corresponding reserves, net of $0.1 million partially offset by (e) lower recovery income, net of expenses of $0.8 million.
Funds from operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) was $24.9 million, or $0.75 and $0.73 per basic and diluted share, respectively, in the 2022 Quarter compared to $26.6 million, or $0.82 and $0.79 per basic and diluted share, respectively, in the 2021 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 general and administrative expenses of $0.9 million, or $0.03 per basic and diluted share, (b) loss on early extinguishment of debt of $0.6 million, or $0.02 per basic and diluted share, (c) lower recovery income, net of expenses of $0.3 million, or $0.01 per basic and diluted share, and (d) higher interest expense, net and amortization of deferred debt costs of $0.2 million, or $0.01 per basic and diluted share, partially offset by (e) higher base rent across the portfolio of $0.4 million, or $0.01 per basic and diluted share.
FFO available to common stockholders and noncontrolling interests, after deducting preferred stock dividends increased to $78.5 million, or $2.36 and $2.31 per basic and diluted share, respectively, in the 2022 Period from $75.3 million, or $2.37 and $2.29 per basic and diluted share, respectively, in the 2021 Period. FFO available to common stockholders and noncontrolling interests increased primarily due to (a) lower interest expense, net and amortization of deferred debt costs of $2.4 million, or $0.07 per basic and diluted share, (b) higher base rent of $2.3 million, or $0.07 per basic and diluted share, (c) lower credit losses on operating lease receivables and corresponding reserves, net of $0.7 million, or $0.02 per basic and diluted share, partially offset by (d) higher general and administrative expenses of $1.8 million, or $0.05 per basic and diluted share, and (e) loss on early extinguishment of debt of $0.6 million, or $0.02 per basic and diluted share.
As of October 31, 2022, payments by tenants of contractual base rent and operating expense and real estate tax recoveries totaled approximately 99% for the 2022 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 September 30, 2022.
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 September 30, 2022, of the $9.4 million of rents previously deferred, $8.0 million has come due and $0.3 million has been written off. Of the amounts that have come due, $7.6 million, or approximately 95%, has been paid.
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 land and development properties. Over 85% of the Saul Centers' property operating income is generated by properties in the metropolitan
Washington, DC/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, 2021 and (ii) our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 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, 2021 and (ii) our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022.
Saul Centers, Inc. Consolidated Balance Sheets (Unaudited) | |||
(Dollars in thousands, except per share amounts) | September 30, | December 31, | |
Assets | |||
Real estate investments | |||
Land | $ 511,529 | $ 511,529 | |
Buildings and equipment | 1,574,872 | 1,566,686 | |
Construction in progress | 285,810 | 205,911 | |
2,372,211 | 2,284,126 | ||
Accumulated depreciation | (679,121) | (650,113) | |
1,693,090 | 1,634,013 | ||
Cash and cash equivalents | 10,291 | 14,594 | |
Accounts receivable and accrued income, net | 58,682 | 58,659 | |
Deferred leasing costs, net | 22,221 | 24,005 | |
Other assets | 25,734 | 15,490 | |
Total assets | $ 1,810,018 | $ 1,746,761 | |
Liabilities | |||
Notes payable, net | $ 969,109 | $ 941,456 | |
Revolving credit facility payable, net | 125,747 | 103,167 | |
Term loan facility payable, net | 99,344 | 99,233 | |
Accounts payable, accrued expenses and other liabilities | 39,169 | 25,558 | |
Deferred income | 25,887 | 25,188 | |
Dividends and distributions payable | 22,445 | 21,672 | |
Total liabilities | 1,281,701 | 1,216,274 | |
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, 42,000,000 shares authorized, 24,001,546 and 23,840,471 shares issued and outstanding, respectively | 240 | 238 | |
Additional paid-in capital | 445,456 | 436,609 | |
Partnership units in escrow | 39,650 | 39,650 | |
Distributions in excess of accumulated net income | (268,451) | (256,448) | |
Accumulated other comprehensive income | 3,063 | — | |
Total Saul Centers, Inc. equity | 404,958 | 405,049 | |
Noncontrolling interests | 123,359 | 125,438 | |
Total equity | 528,317 | 530,487 | |
Total liabilities and equity | $ 1,810,018 | $ 1,746,761 |
Saul Centers, Inc. Consolidated Statements of Operations (In thousands, except per share amounts) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Revenue | (unaudited) | (unaudited) | |||||
Rental revenue | $ 59,951 | $ 59,058 | $ 179,765 | $ 175,634 | |||
Other | 1,136 | 1,198 | 3,759 | 3,351 | |||
Total revenue | 61,087 | 60,256 | 183,524 | 178,985 | |||
Expenses | |||||||
Property operating expenses | 8,995 | 8,210 | 26,174 | 24,420 | |||
Real estate taxes | 7,078 | 7,154 | 21,652 | 22,121 | |||
Interest expense, net and amortization of deferred debt costs | 11,103 | 10,914 | 32,162 | 34,559 | |||
Depreciation and amortization of lease costs | 12,195 | 12,467 | 36,899 | 37,852 | |||
General and administrative | 5,555 | 4,626 | 15,988 | 14,234 | |||
Loss on early extinguishment of debt | 648 | — | 648 | — | |||
Total expenses | 45,574 | 43,371 | 133,523 | 133,186 | |||
Net Income | 15,513 | 16,885 | 50,001 | 45,799 | |||
Noncontrolling interests | |||||||
Income attributable to noncontrolling interests | (3,563) | (3,747) | (11,670) | (9,653) | |||
Net income attributable to Saul Centers, Inc. | 11,950 | 13,138 | 38,331 | 36,146 | |||
Preferred stock dividends | (2,798) | (2,798) | (8,395) | (8,395) | |||
Net income available to common stockholders | $ 9,152 | $ 10,340 | $ 29,936 | $ 27,751 | |||
Per share net income available to common stockholders | |||||||
Basic and diluted | $ 0.38 | $ 0.44 | $ 1.25 | $ 1.17 |
Reconciliation of net income to FFO available to common stockholders and noncontrolling interests (1) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
(In thousands, except per share amounts) | 2022 | 2021 | 2022 | 2021 | |||
Net income | $ 15,513 | $ 16,885 | $ 50,001 | $ 45,799 | |||
Add: | |||||||
Real estate depreciation and amortization | 12,195 | 12,467 | 36,899 | 37,852 | |||
FFO | 27,708 | 29,352 | 86,900 | 83,651 | |||
Subtract: | |||||||
Preferred stock dividends | (2,798) | (2,798) | (8,395) | (8,395) | |||
FFO available to common stockholders and noncontrolling interests | $ 24,910 | $ 26,554 | $ 78,505 | $ 75,256 | |||
Weighted average shares and units: | |||||||
Basic | 33,295 | 32,237 | 33,238 | 31,774 | |||
Diluted (2) | 34,005 | 33,656 | 33,957 | 32,877 | |||
Basic FFO per share available to common stockholders and noncontrolling interests | $ 0.75 | $ 0.82 | $ 2.36 | $ 2.37 | |||
Diluted FFO per share available to common stockholders and noncontrolling interests | $ 0.73 | $ 0.79 | $ 2.31 | $ 2.29 |
(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 |
(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 |
Reconciliation of revenue to same property revenue (3) | ||||||||
(in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2022 | 2021 | 2022 | 2021 | |||||
(unaudited) | (unaudited) | |||||||
Total revenue | $ 61,087 | $ 60,256 | $ 183,524 | $ 178,985 | ||||
Less: Acquisitions, dispositions and development properties | — | — | — | — | ||||
Total same property revenue | $ 61,087 | $ 60,256 | $ 183,524 | $ 178,985 | ||||
Shopping Centers | $ 42,478 | $ 42,485 | $ 128,615 | $ 126,935 | ||||
Mixed-Use properties | 18,609 | 17,771 | 54,909 | 52,050 | ||||
Total same property revenue | $ 61,087 | $ 60,256 | $ 183,524 | $ 178,985 | ||||
Total Shopping Center revenue | $ 42,478 | $ 42,485 | $ 128,615 | $ 126,935 | ||||
Less: Shopping Center acquisitions, dispositions and development properties | — | — | — | — | ||||
Total same Shopping Center revenue | $ 42,478 | $ 42,485 | $ 128,615 | $ 126,935 | ||||
Total Mixed-Use property revenue | $ 18,609 | $ 17,771 | $ 54,909 | $ 52,050 | ||||
Less: Mixed-Use acquisitions, dispositions and development properties | — | — | — | — | ||||
Total same Mixed-Use property revenue | $ 18,609 | $ 17,771 | $ 54,909 | $ 52,050 |
(3) | Same property revenue is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the results of |
Reconciliation of net income to same property operating income (4) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
(In thousands) | 2022 | 2021 | 2022 | 2021 | |||
(unaudited) | (unaudited) | ||||||
Net income | $ 15,513 | $ 16,885 | $ 50,001 | $ 45,799 | |||
Add: Interest expense, net and amortization of deferred debt costs | 11,103 | 10,914 | 32,162 | 34,559 | |||
Add: Depreciation and amortization of lease costs | 12,195 | 12,467 | 36,899 | 37,852 | |||
Add: General and administrative | 5,555 | 4,626 | 15,988 | 14,234 | |||
Add: Loss on early extinguishment of debt | 648 | — | 648 | — | |||
Property operating income | 45,014 | 44,892 | 135,698 | 132,444 | |||
Less: Acquisitions, dispositions and development properties | — | — | — | — | |||
Total same property operating income | $ 45,014 | $ 44,892 | $ 135,698 | $ 132,444 | |||
Shopping Centers | $ 33,652 | $ 33,845 | $ 101,513 | $ 99,848 | |||
Mixed-Use properties | 11,362 | 11,047 | 34,185 | 32,596 | |||
Total same property operating income | $ 45,014 | $ 44,892 | $ 135,698 | $ 132,444 | |||
Shopping Center operating income | $ 33,652 | $ 33,845 | $ 101,513 | $ 99,848 | |||
Less: Shopping Center acquisitions, dispositions and development properties | — | — | — | — | |||
Total same Shopping Center operating income | $ 33,652 | $ 33,845 | $ 101,513 | $ 99,848 | |||
Mixed-Use property operating income | $ 11,362 | $ 11,047 | $ 34,185 | $ 32,596 | |||
Less: Mixed-Use acquisitions, dispositions and development properties | — | — | — | — | |||
Total same Mixed-Use property operating income | $ 11,362 | $ 11,047 | $ 34,185 | $ 32,596 |
(4) | Same property operating income is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the |
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SOURCE Saul Centers, Inc.