Saul Centers, Inc. Reports Fourth Quarter 2016 Earnings

BETHESDA, Md., March 7, 2017 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended December 31, 2016 ("2016 Quarter"). Total revenue for the 2016 Quarter increased to $54.2 million from $52.9 million for the quarter ended December 31, 2015 ("2015 Quarter").  Operating income, which is net income before the impact of the change in fair value of derivatives, loss on early extinguishment of debt, gains on sales of property and gains on casualty settlements, decreased to $13.4 million for the 2016 Quarter from $14.1 million for the 2015 Quarter.

The Park Van Ness mixed-use development opened in May 2016 and, as of March 1, 2017, 217 apartment leases have been executed (80.1%).  Concurrent with the opening in May, interest, real estate taxes and all other costs associated with the property, including depreciation, began to be charged to expense, while revenue continues to grow as occupancy increases.  As a result, net income for the 2016 Quarter was adversely impacted by $0.9 million.

Net income attributable to common stockholders was $8.4 million ($0.38 per diluted share) for the 2016 Quarter compared to $8.2 million ($0.38 per diluted share) for the 2015 Quarter.  The increase in net income attributable to common stockholders was primarily due to (a) gain on sale of Crosstown Business Center ($1.0 million) partially offset by (b) the net impact of Park Van Ness ($0.9 million).

Same property revenue increased 0.3% and same property operating income decreased 1.3% for the 2016 Quarter compared to the 2015 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 1.0% and Mixed-Use same property operating income decreased 2.4%.  The decrease in Shopping Center same property operating income was primarily the result of lower termination fee income.  The decrease in Mixed-Use same property operating income was the result of higher provision for credit losses in 2016, as a result of collection in 2015 of previously reserved rents.

For the year ended December 31, 2016 ("2016 Period"), total revenue increased to $217.1 million from $209.1 million for the year ended December 31, 2015 ("2015 Period").  Operating income was $55.7 million for the 2016 Period compared to $52.9 million for the 2015 Period.  Operating income for the 2016 Period increased primarily due to (a) $5.4 million of increased property operating income, partially offset by (b) $1.1 million of higher depreciation expense, (c) $1.1 million of higher general and administrative expenses, and (d) $0.5 million of higher interest expense and amortization of deferred debt costs.

Net income attributable to common stockholders was $32.9 million ($1.52 per diluted share) for the 2016 Period compared to $30.1 million ($1.42 per diluted share) for the 2015 Period.  Net income attributable to common stockholders for the 2016 Period increased primarily due to (a) $5.4 million of increased property operating income partially offset by (b) $1.1 million of higher depreciation expense, (c) $1.1 million of higher general and administrative expenses, and (d) $0.5 million of higher interest expense and amortization of deferred debt costs.

Same property revenue increased 3.0% and same property operating income increased 3.3% for the 2016 Period compared to the 2015 Period.  Shopping Center same property operating income increased 3.0% and Mixed-Use same property operating income increased 4.6%.  Shopping Center same property operating income increased $3.6 million primarily due to (a) higher base rent ($2.6 million), exclusive of the impact of a lease termination at 11503 Rockville Pike, (b) the net impact of a lease termination at 11503 Rockville Pike ($1.9 million), and (c) higher operating expense recoveries, net of expenses ($0.8 million), partially offset by (d) lower termination fee income ($0.9 million) and (e) higher provision for credit losses ($0.5 million).  Mixed-Use same property operating income increased $1.6 million primarily due to (a) increased base rent ($0.8 million) and (b) increased termination fee income ($0.6 million).

As of December 31, 2016, 95.4% of the commercial portfolio was leased (all properties except the apartments at Clarendon Center and Park Van Ness), compared to 94.8% at December 31, 2015.  On a same property basis, 95.4% of the portfolio was leased at December 31, 2016, compared to 95.0% at December 31, 2015.  As of December 31, 2016, the apartments at Clarendon Center were 97.1% leased compared to 99.2% leased at December 31, 2015, and the apartments at Park Van Ness were 72.7% leased.

Funds From Operations ("FFO") available to common stockholders and noncontrolling interests (after deducting preferred stock dividends and preferred stock redemption charges) decreased to $21.2 million ($0.73 per diluted share) in the 2016 Quarter from $21.9 million ($0.76 per diluted share) in the 2015 Quarter.  Concurrent with the opening of Park Van Ness in May, interest, real estate taxes and all other costs associated with the property began to be charged to expense while revenue continues to grow as occupancy increases.  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 stockholders and noncontrolling interests for the 2016 Quarter was primarily due to (a) higher general and administrative expenses ($0.4 million) and (b) the adverse impact of the initial operations of Park Van Ness ($0.2 million).

FFO available to common stockholders and noncontrolling interests (after deducting preferred stock dividends and preferred stock redemptions) increased 4.7% to $87.7 million ($3.03 per diluted share) in the 2016 Period from $83.8 million ($2.95 per diluted share) in the 2015 Period.  FFO available to common stockholders and noncontrolling interests for the 2016 Period increased primarily due to (a) higher overall property operating income ($4.8 million), exclusive of the impact of Park Van Ness, (b) lower interest expense and amortization of debt expense ($1.3 million), exclusive of the impact of Park Van Ness, partially offset by (c) the adverse impact of the initial operations of Park Van Ness ($1.1 million) and (d) higher general and administrative expenses ($1.1 million).

In January 2017, the Company purchased for $76.3 million, including acquisition costs, Burtonsville Town Square, a 121,000 square foot shopping center located in Burtonsville, Maryland.  Burtonsville Town Square is 100% leased and anchored by Giant Food and CVS Pharmacy.  It has expansion development potential of up to 18,000 square feet of additional retail space.  The purchase was funded with a new $40.0 million mortgage loan and through the Company's credit line facility.

Saul Centers is a self-managed, self-administered equity REIT headquartered in Bethesda, Maryland. Saul Centers currently operates and manages a real estate portfolio comprised of 59 properties which includes (a) 56 community and neighborhood shopping centers and mixed-use properties with approximately 9.5 million square feet of leasable area and (b) three land and development properties.  Approximately 85% of the Company's property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area.

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SOURCE Saul Centers, Inc.