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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K
____________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 3, 2018
__________________________
Saul Centers, Inc.
(Exact name of registrant as specified in its charter)
_________________________

Maryland
 
1-12254
 
52-1833074
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification Number)
 
 
 
7501 Wisconsin Avenue, Bethesda, Maryland
 
20814
(Address of Principal Executive Offices)
 
(Zip Code)
(301) 986-6200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)

_______________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o






Item 2.02. Results of Operations and Financial Condition.  
On May 3, 2018, Saul Centers, Inc. issued a press release to report its financial results for the quarter ended March 31, 2018. The release is furnished as Exhibit 99.1 hereto.


Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release, dated May 3, 2018, of Saul Centers, Inc.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

SAUL CENTERS, INC.
By:     /s/ Scott V. Schneider__________ ____________
Scott V. Schneider                                             Senior Vice President and Chief Financial Officer    
Dated: May 3, 2018    



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
EXHIBIT INDEX
Exhibit        Description
No.
99.1         Press Release, dated May 3, 2018, of Saul Centers, Inc.
Section 2: EX-99.1 (EX-99.1)
Exhibit 99.1
SAUL CENTERS, INC.
7501 Wisconsin Avenue, Suite 1500, Bethesda, Maryland 20814-6522
(301) 986-6200
Saul Centers, Inc. Reports First Quarter 2018 Earnings
May 3, 2018, Bethesda, MD.
Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended March 31, 2018 (“2018 Quarter”). Total revenue for the 2018 Quarter decreased to $56.5 million from $58.5 million for the quarter ended March 31, 2017 (“2017 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 $14.9 million for the 2018 Quarter from $17.4 million for the 2017 Quarter.
Net income available to common stockholders decreased to $6.9 million ($0.31 per diluted share) for the 2018 Quarter compared to $10.6 million ($0.49 per diluted share) for the 2017 Quarter.
Same property revenue decreased $1.9 million (3.3%) and same property operating income decreased $2.8 million (6.5%) for the 2018 Quarter compared to the 2017 Quarter. We define same property revenue as total revenue minus the sum of interest income and revenue of properties not in operation for the entirety of the comparable reporting periods. We define same property operating income as net income plus the sum of interest expense and amortization of deferred debt costs, depreciation and amortization, general and administrative expense, loss on the early extinguishment of debt (if any), predevelopment expense and acquisition related costs, minus the sum of interest income, the change in the fair value of derivatives, gains on property dispositions (if any) and the results of properties which were not in operation for the entirety of the comparable periods. Shopping Center same property operating income for the 2018 Quarter totaled $31.0 million, a $2.8 million decrease from the 2017 Quarter. The decrease in Shopping Center same property operating income was primarily due to (a) the impact of the terminations of Safeway at Broadlands and K-Mart at Kentlands ($3.3 million) and (b) higher property operating expenses net of recoveries ($0.2 million), partially offset by (c) higher base rent ($0.6 million). Mixed-Use same property operating income totaled $10.1 million, unchanged from the prior year.
As of March 31, 2018, 94.1% of the commercial portfolio was leased (not including the residential portfolio), compared to 95.6% at March 31, 2017. On a same property basis, 94.0% of the commercial portfolio was leased as of March 31, 2018, compared to 95.6% at March 31, 2017. As of March 31, 2018, the residential portfolio was 95.9% leased compared to 91.8% at March 31, 2017.
Funds from operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) was $20.6 million ($0.69 per diluted share) in the 2018 Quarter compared to $25.6 million ($0.87 per diluted share) in the 2017 Quarter. FFO for the 2018 Quarter decreased primarily due to (a) extinguishment of issuance costs upon redemption of preferred shares ($2.3 million), (b) the impact of the terminations of Safeway at Broadlands and K-Mart at Kentlands ($3.3 million), and (c) increased preferred stock dividends as a result of the 30-day overlap between sale of $75.0 million of Series D Preferred Stock and redemption of $75.0 million of Series C Preferred Stock ($0.3 million), partially offset by (d) higher base rent ($0.9 million). 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.
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 58 properties which includes (a) 49 community and neighborhood shopping centers and six mixed-use properties with approximately 9.2 million square feet of leasable area and (b) three land and development properties. Over 85% of the Saul Centers' property operating income is generated by properties in the metropolitan Washington, DC/Baltimore area.

Contact:    Scott Schneider
(301) 986-6220


www.SaulCenters.com


Saul Centers, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
 
March 31,
2018
 
December 31,
2017
 
(Unaudited)
Assets
 
 
 
Real estate investments
 
 
 
Land
$
450,256

 
$
450,256

Buildings and equipment
1,262,320

 
1,261,830

Construction in progress
108,735

 
91,114

 
1,821,311

 
1,803,200

Accumulated depreciation
(498,002
)
 
(488,166
)
 
1,323,309

 
1,315,034

Cash and cash equivalents
8,979

 
10,908

Accounts receivable and accrued income, net
50,821

 
54,057

Deferred leasing costs, net
26,838

 
27,255

Prepaid expenses, net
4,085

 
5,248

Other assets
15,115

 
9,950

Total assets
$
1,429,147

 
$
1,422,452

 
 
 
 
Liabilities
 
 
 
Notes payable
$
876,544

 
$
897,888

Revolving credit facility payable
12,930

 
60,734

Term loan facility payable
74,518

 

Dividends and distributions payable
18,158

 
18,520

Accounts payable, accrued expenses and other liabilities
26,035

 
23,123

Deferred income
27,605

 
29,084

Total liabilities
1,035,790

 
1,029,349

 
 
 
 
Equity
 
 
 
Preferred stock
180,000

 
180,000

Common stock
222

 
221

Additional paid-in capital
356,715

 
352,590

Accumulated deficit and other comprehensive loss
(202,812
)
 
(198,406
)
Total Saul Centers, Inc. stockholders’ equity
334,125

 
334,405

Noncontrolling interests
59,232

 
58,698

Total equity
393,357

 
393,103

Total liabilities and equity
$
1,429,147

 
$
1,422,452





Saul Centers, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
 
Three Months Ended March 31,
 
2018
 
2017
Revenue
(unaudited)
Base rent
$
45,867

 
$
44,476

Expense recoveries
8,771

 
8,594

Percentage rent
418

 
382

Other
1,440

 
5,014

Total revenue
56,496

 
58,466

Operating expenses
 
 
 
Property operating expenses
7,123

 
6,652

Provision for credit losses
286

 
343

Real estate taxes
6,845

 
6,590

Interest expense and amortization of deferred debt costs
11,526

 
11,864

Depreciation and amortization of deferred leasing costs
11,349

 
11,342

General and administrative
4,420

 
4,301

Total operating expenses
41,549

 
41,092

Operating income
14,947

 
17,374

Change in fair value of derivatives

 

Net income
14,947

 
17,374

Income attributable to noncontrolling interests
(2,359
)
 
(3,670
)
Net income attributable to Saul Centers, Inc.
12,588

 
13,704

Extinguishment of issuance costs upon redemption of preferred shares
(2,328
)
 

Preferred stock dividends
(3,403
)
 
(3,094
)
Net income available to common stockholders
$
6,857

 
$
10,610

Per share net income available to common stockholders
 
 
 
Basic and diluted
$
0.31

 
$
0.49

 
 
 
 
Weighted Average Common Stock:
 
 
 
Common stock
22,178

 
21,745

Effect of dilutive options
40

 
147

Diluted weighted average common stock
22,218

 
21,892

 
 
 
 






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)
2018
 
2017
 
(unaudited)
Net income
$
14,947

 
$
17,374

Add:
 
 
 
Real estate depreciation and amortization
11,349

 
11,342

FFO
26,296

 
28,716

Subtract:
 
 
 
Extinguishment of issuance costs upon redemption of preferred shares
(2,328
)
 

Preferred stock dividends
(3,403
)
 
(3,094
)
FFO available to common stockholders and noncontrolling interests
$
20,565

 
$
25,622

Weighted average shares:
 
 
 
Diluted weighted average common stock
22,218

 
21,892

Convertible limited partnership units
7,567

 
7,457

Average shares and units used to compute FFO per share
29,785

 
29,349

FFO per share available to common stockholders and noncontrolling interests
$
0.69

 
$
0.87

 
 
 
 
(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 revenue to same property revenue
(in thousands)
 
Three months ended March 31,
 
 
2018
 
2017
Total revenue
 
$
56,496

 
$
58,466

Less: Interest income
 
(102
)
 
(13
)
Less: Acquisitions, dispositions and development properties
 
(1,210
)
 
(1,360
)
Total same property revenue
 
$
55,184

 
$
57,093

Shopping Centers
 
$
39,762

 
$
42,077

Mixed-Use properties
 
15,422

 
15,016

Total same property revenue
 
$
55,184

 
$
57,093

















Reconciliation of net income to same property operating income
 
Three Months Ended March 31,
 
(In thousands)
2018
 
2017
 
 
(unaudited)
 
Net income
$
14,947

 
$
17,374

 
Add: Interest expense and amortization of deferred debt costs
11,526

 
11,864

 
Add: Depreciation and amortization of deferred leasing costs
11,349

 
11,342

 
Add: General and administrative
4,420

 
4,301

 
Less: Interest income
(102
)
 
(13
)
 
Property operating income
42,140

 
44,868

 
Less: Acquisitions, dispositions and development property
(1,017
)
 
(903
)
 
Total same property operating income
$
41,123

 
$
43,965

 
 
 
 
 
 
Shopping Centers
$
31,030

 
$
33,830

 
Mixed-Use properties
10,093

 
10,135

 
Total same property operating income
$
41,123

 
$
43,965


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