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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 2, 2019
 
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 office) (Zip Code)
Registrant’s telephone number, including area code (301) 986-6200
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Common Stock, $0.01 par value
6.875% Series C Preferred Stock, $0.01 par value
6.125% Series D Preferred Stock, $0.01 par value
Name of exchange on which registered:
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Trading symbol:
BFS
BFS/PRC
BFS/PRD






Item 2.02. Results of Operations and Financial Condition.  
On May 2, 2019, Saul Centers, Inc. issued a press release to report its financial results for the quarter ended March 31, 2019. The release is furnished as Exhibit 99.1 hereto.


Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release, dated May 2, 2019, 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 2, 2019    



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
EXHIBIT INDEX
Exhibit        Description
No.
99.1         Press Release, dated May 2, 2019, 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 2019 Earnings
May 2, 2019, Bethesda, MD.
Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended March 31, 2019 (“2019 Quarter”). Total revenue for the 2019 Quarter increased to $59.8 million from $56.1 million for the quarter ended March 31, 2018 (“2018 Quarter”). Net income increased to $17.1 million for the 2019 Quarter from $14.9 million for the 2018 Quarter.
Net income available to common stockholders increased to $10.5 million ($0.46 per diluted share) for the 2019 Quarter from $6.9 million ($0.31 per diluted share) for the 2018 Quarter. Net income available to common stockholders increased primarily due to (a) extinguishment in 2018 of issuance costs upon redemption of preferred shares ($2.3 million), (b) higher termination fees in the core portfolio ($1.2 million), (c) the net operating income of recently acquired properties ($0.6 million), (d) lower preferred stock dividends ($0.5 million) and (e) higher base rent in the core portfolio ($0.5 million) partially offset by (f) higher noncontrolling interests ($1.3 million).
Same property revenue increased $2.8 million (4.9%) and same property operating income increased $1.8 million (4.3%) for the 2019 Quarter compared to the 2018 Quarter. 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 deferred leasing costs and (c) general and administrative expenses minus (d) the results of properties which were not in operation for the entirety of the comparable periods. Shopping Center same property operating income for the 2019 Quarter totaled $33.5 million, a $1.4 million increase from the 2018 Quarter. Mixed-Use same property operating income totaled $10.5 million, a $0.4 million increase from the 2018 Quarter. The increase in Shopping Center same property operating income was primarily the result of higher termination fees ($1.2 million). The increase in Mixed-Use same property operating income was primarily the result of (a) higher base rent ($0.2 million) and (b) lower credit losses ($0.2 million).
As of March 31, 2019, 95.2% of the commercial portfolio was leased (not including the residential portfolio), compared to 94.1% at March 31, 2018. On a same property basis, 95.7% of the commercial portfolio was leased as of March 31, 2019, compared to 94.1% at March 31, 2018. As of March 31, 2019, the residential portfolio was 99.0% leased compared to 95.9% at March 31, 2018.
Funds from operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends) was $25.8 million ($0.84 per diluted share) in the 2019 Quarter compared to $20.6 million ($0.69 per diluted share) in the 2018 Quarter. FFO is a non-GAAP supplemental earnings measure which the Company considers meaningful in measuring its operating performance. A reconciliation of net income to FFO is attached to this press release. The increase in FFO available to common stockholders and noncontrolling interests was primarily due to (a) extinguishment in 2018 of issuance costs upon redemption of preferred shares ($2.3 million), (b) higher termination fees ($1.2 million), (c) the net operating income of recently acquired properties ($0.6 million), (d) lower preferred stock dividends ($0.5 million) and (e) higher base rent in the core portfolio ($0.5 million).
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 60 properties which includes (a) 49 community and neighborhood shopping centers and seven mixed-use properties with approximately 9.3 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.

Contact:    Scott Schneider
(301) 986-6220




www.SaulCenters.com


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 Form 10-K filed on February 26, 2019, 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, and (xii) unanticipated changes in the Company’s intention or ability to prepay certain debt prior to maturity. 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 our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2019.



www.SaulCenters.com


Saul Centers, Inc.
Consolidated Balance Sheets
(In thousands)
 
March 31,
2019
 
December 31,
2018
 
(Unaudited)
Assets
 
 
 
Real estate investments
 
 
 
Land
$
488,942

 
$
488,918

Buildings and equipment
1,275,927

 
1,273,275

Construction in progress
216,545

 
185,972

 
1,981,414

 
1,948,165

Accumulated depreciation
(535,269
)
 
(525,518
)
 
1,446,145

 
1,422,647

Cash and cash equivalents
11,456

 
14,578

Accounts receivable and accrued income, net
51,603

 
53,876

Deferred leasing costs, net
26,967

 
28,083

Prepaid expenses, net
4,064

 
5,175

Other assets
5,593

 
3,130

Total assets
$
1,545,828

 
$
1,527,489

 
 
 
 
Liabilities
 
 
 
Notes payable
$
873,143

 
$
880,271

Revolving credit facility payable
38,465

 
45,329

Term loan facility payable
74,616

 
74,591

Construction loan payable
36,897

 
21,655

Dividends and distributions payable
19,224

 
19,153

Accounts payable, accrued expenses and other liabilities
47,671

 
32,419

Deferred income
25,481

 
28,851

Total liabilities
1,115,497

 
1,102,269

 
 
 
 
Equity
 
 
 
Preferred stock, 1,000,000 shares authorized:
 
 
 
Series C Cumulative Redeemable, 42,000 shares issued and outstanding
105,000

 
105,000

Series D Cumulative Redeemable, 30,000 shares issued and outstanding
75,000

 
75,000

Common stock, $0.01 par value, 40,000,000 shares authorized, 22,860,039 and 22,739,207 shares issued and outstanding, respectively
229

 
227

Additional paid-in capital
391,122

 
384,533

Distributions in excess of accumulated net income and accumulated
 other comprehensive loss
(210,207
)
 
(208,593
)
Accumulated other comprehensive loss
(289
)
 
(255
)
Total Saul Centers, Inc. equity
360,855

 
355,912

Noncontrolling interests
69,476

 
69,308

Total equity
430,331

 
425,220

Total liabilities and equity
$
1,545,828

 
$
1,527,489





Saul Centers, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
 
Three Months Ended March 31,
 
2019
 
2018
Revenue
(unaudited)
Rental Revenue
$
56,803

 
$
54,990

Other
2,947

 
1,118

Total revenue
59,750

 
56,108

Expenses
 
 
 
Property operating expenses
8,001

 
7,123

Real estate taxes
7,148

 
6,845

Interest expense, net and amortization of deferred debt costs
11,067

 
11,424

Depreciation and amortization of deferred leasing costs
11,643

 
11,349

General and administrative
4,814

 
4,420

Total expenses
42,673

 
41,161

Net Income
17,077

 
14,947

Noncontrolling interests
 
 
 
Income attributable to noncontrolling interests
(3,630
)
 
(2,359
)
Net income attributable to Saul Centers, Inc.
13,447

 
12,588

Extinguishment of issuance costs upon redemption of preferred shares

 
(2,328
)
Preferred stock dividends
(2,953
)
 
(3,403
)
Net income available to common stockholders
$
10,494

 
$
6,857

Per share net income available to common stockholders
 
 
 
Basic and diluted
$
0.46

 
$
0.31

Dividends declared per common share outstanding
$
0.53

 
$
0.52







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)
2019
 
2018
 
(unaudited)
Net income
$
17,077

 
$
14,947

Add:
 
 
 
Real estate depreciation and amortization
11,643

 
11,349

FFO
28,720

 
26,296

Subtract:
 
 
 
Preferred stock dividends
(2,953
)
 
(3,403
)
Extinguishment of issuance costs upon redemption of preferred shares

 
(2,328
)
FFO available to common stockholders and noncontrolling interests
$
25,767

 
$
20,565

Weighted average shares:
 
 
 
Diluted weighted average common stock
22,863

 
22,218

Convertible limited partnership units
7,835

 
7,567

Average shares and units used to compute FFO per share
30,698

 
29,785

FFO per share available to common stockholders and noncontrolling interests
$
0.84

 
$
0.69



(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 impairment charges on real estate assets and gains or losses from real estate 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 (2)
(in thousands)
 
Three months ended March 31,
 
 
2019
 
2018
 
 
(unaudited)
Total revenue
 
$
59,750

 
$
56,108

Less: Acquisitions, dispositions and development properties
 
(889
)
 

Total same property revenue
 
$
58,861

 
$
56,108

 
 
 
 
 
Shopping Centers
 
$
43,159

 
$
40,924

Mixed-Use properties
 
15,702

 
15,184

Total same property revenue
 
$
58,861

 
$
56,108

 
 
 
 
 
Total Shopping Center revenue
 
$
43,159

 
$
40,924

Less: Shopping Center acquisitions, dispositions and development properties
 

 

Total same Shopping Center revenue
 
$
43,159

 
$
40,924

 
 
 
 
 
Total Mixed-Use property revenue
 
$
16,591

 
$
15,184

Less: Mixed-Use acquisitions, dispositions and development properties
 
(889
)
 

Total same Mixed-Use property revenue
 
$
15,702

 
$
15,184


(2)
Same property revenue is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the results of properties that were not in operation for the entirety of the comparable reporting periods. Same property revenue adjusts property revenue by subtracting the revenue of properties not in operation for the entirety of the comparable reporting periods. Same property revenue is a measure of the operating performance of the Company’s properties but does not measure the Company’s performance as a whole. Same property revenue should not be considered as an alternative to total revenue, its most directly comparable GAAP measure, as an indicator of the Company’s operating performance. Management considers same property revenue a meaningful supplemental measure of operating performance because it is not affected by the cost of the Company’s funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to ownership of the Company’s properties. Management believes the exclusion of these items from same property revenue is useful because the resulting measure captures the actual revenue generated and actual expenses incurred by operating the Company’s properties. Other REITs may use different methodologies for calculating same property revenue. Accordingly, the Company’s same property revenue may not be comparable to those of other REITs.





Reconciliation of net income to same property operating income (3)
 
Three Months Ended March 31,
(In thousands)
2019
 
2018
 
(unaudited)
Net income
$
17,077

 
$
14,947

Add: Interest expense, net and amortization of deferred debt costs
11,067

 
11,424

Add: Depreciation and amortization of deferred leasing costs
11,643

 
11,349

Add: General and administrative
4,814

 
4,420

Property operating income
44,601

 
42,140

Less: Acquisitions, dispositions and development properties
(628
)
 

Total same property operating income
$
43,973

 
$
42,140

 
 
 
 
Shopping Centers
$
33,471

 
$
32,047

Mixed-Use properties
10,502

 
10,093

Total same property operating income
$
43,973

 
$
42,140

 
 
 
 
Shopping Center operating income
$
33,471

 
$
32,047

Less: Shopping Center acquisitions, dispositions and development properties

 

Total same Shopping Center operating income
$
33,471

 
$
32,047

 
 
 
 
Mixed-Use property operating income
$
11,130

 
$
10,093

Less: Mixed-Use acquisitions, dispositions and development properties
(628
)
 

Total same Mixed-Use property operating income
$
10,502

 
$
10,093



(3) Same property operating income is a non-GAAP financial measure of performance that improves the comparability of reporting periods by excluding the results of properties that were not in operation for the entirety of the comparable reporting periods. Same property operating income adjusts property operating income by subtracting the results of properties that were not in operation for the entirety of the comparable periods. Same property operating income is a measure of the operating performance of the Company’s properties but does not measure the Company’s performance as a whole. Same property operating income should not be considered as an alternative to property operating income, its most directly comparable GAAP measure, as an indicator of the Company’s operating performance. Management considers same property operating income a meaningful supplemental measure of operating performance because it is not affected by the cost of the Company’s funding, the impact of depreciation and amortization expenses, gains or losses from the acquisition and sale of operating real estate assets, general and administrative expenses or other gains and losses that relate to ownership of the Company’s properties. Management believes the exclusion of these items from property operating income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred by operating the Company’s properties. Other REITs may use different methodologies for calculating same property operating income. Accordingly, same property operating income may not be comparable to those of other REITs.


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