Saul Centers, Inc. Reports Second Quarter 2013 Earnings

BETHESDA, Md., July 30, 2013 /PRNewswire/ -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust (REIT), announced its operating results for the quarter ended June 30, 2013 ("2013 Quarter").  Total revenue for the 2013 Quarter increased to $48.8 million from $47.4 million for the quarter ended June 30, 2012 ("2012 Quarter").  Operating income, which is net income available to common stockholders before income attributable to noncontrolling interests, preferred stock dividends and the impact of preferred stock redemptions, decreased to $7.7 million for the 2013 Quarter from $9.6 million for the 2012 Quarter.  Operating income for the 2013 Quarter was adversely impacted by $2.0 million of additional depreciation expense and $1.2 million of predevelopment expenses, both of which are related to the Company's redevelopment of Van Ness Square.  Without these expenses, operating income for the 2013 Quarter would have been $10.9 million, or $1.3 million more than the 2012 Quarter.

The Company recently completed negotiation of lease termination agreements with tenants of Van Ness Square and the building is currently vacant.  The Company intends to develop a primarily residential project with street-level retail.  Costs incurred to terminate leases were recognized as expense over the remaining terms of the leases and costs to demolish the existing improvements are recognized as expenses when incurred.  The Company will recognize additional predevelopment expenses in future periods when the existing improvements of Van Ness Square and the adjacent 4469 Connecticut Avenue are demolished, the timing of which is uncertain and dependent on the issuance of various governmental approvals and permits. 

Net income attributable to common stockholders was $3.4 million ($0.17 per diluted share) for the 2013 Quarter compared to $4.3 million ($0.22 per diluted share) for the 2012 Quarter.  Net income attributable to common stockholders for the 2013 Quarter was adversely impacted primarily by the $3.2 million of depreciation and predevelopment expense related to Van Ness Square offset in part by a $0.6 million decrease in preferred stock dividends.  Without these items, as adjusted for noncontrolling interests, net income attributable to common stockholders would have been $5.4 million, or $1.1 million more than the 2012 Quarter. The $1.1 million increase is primarily attributable to reduced interest expense, increased operating income generated by Clarendon Center and the leasing of major tenant space in the shopping center portfolio. 

During the quarter ended March 31, 2013, the Company issued $140.0 million of 6.875% Series C Cumulative Redeemable Preferred Stock, redeemed all $79.3 million of its 9.0% Series B preferred stock and redeemed $60.0 million of its 8.0% Series A preferred stock.  The changes in preferred stock reduced second quarter 2013 preferred stock dividends to $3.2 million from $3.8 million in 2012. 

Same property revenue increased 3.2% and same property operating income increased 3.0% for the 2013 Quarter compared to the 2012 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 increased 2.2% and mixed-use same property operating income increased 5.7%.  The leasing of office space at Clarendon Center was the primary contributor of improved mixed-use property operating income.

For the six months ended June 30, 2013 ("2013 Period"), total revenue increased to $98.0 million from $94.4 million for the six months ended June 30, 2012 ("2012 Period").  Operating income decreased to $11.1 million for the 2013 Period from $18.9 million for the 2012 Period.  Operating income for the 2013 Period was adversely impacted by $8.0 million of additional depreciation expense and $3.6 million of predevelopment expenses, both of which are related to the Company's activities at Van Ness Square.  Without these expenses, operating income for the 2013 Period would have been $22.7 million, or $3.9 million more than the 2012 Period. 

Net loss attributable to common stockholders was $1.2 million ($0.06 per diluted share) for the 2013 Period compared to net income of $8.4 million ($0.43 per diluted share) for the 2012 Period.  Net income attributable to common stockholders for the 2013 Period was adversely impacted primarily by the $11.6 million of depreciation and predevelopment expense related to Van Ness Square and a $5.2 million charge against common equity resulting from the redemption of preferred stock.  Without these items, as adjusted for noncontrolling interests, net income attributable to common stockholders would have been $12.6 million, or $4.2 million more than the 2012 Period. The $4.2 million increase is primarily attributable to reduced interest expense, increased operating income generated by Clarendon Center and the leasing of major tenant space in the shopping center portfolio.

Same property revenue increased 3.7% and same property operating income increased 4.1% for the 2013 Period compared to the 2012 Period.  Shopping center same property operating income increased 3.7% and mixed-use same property operating income increased 5.3%.  The shopping centers were primarily impacted by revenue received as a result of the occupancy of approximately 132,000 square feet of anchor-tenant space which was vacant during the 2012 Period.  The leasing of Clarendon Center office space was the primary contributor of improved mixed-use property operating income.

As of June 30, 2013, 93.6% of the commercial portfolio was leased (all properties except the apartments at Clarendon Center, which were 98% leased), compared to 91.1% at June 30, 2012.  On a same property basis, 93.8% of the portfolio was leased at June 30, 2013, compared to 92.8% for the prior year.

Funds from operations (FFO) available to common shareholders (after deducting preferred stock dividends) increased 9.3% to $17.0 million ($0.63 per diluted share) in the 2013 Quarter from $15.6 million ($0.59 per diluted share) in the 2012 Quarter.  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.  FFO available to common shareholders for the 2013 Quarter was adversely impacted by predevelopment expenses ($1.2 million).  Without this item, FFO available to common shareholders would have been $18.2 million, or $2.6 million more than the 2012 Quarter.  The $2.6 million increase is primarily attributable to improved overall portfolio property operating income ($1.3 million) and reduced interest expense and amortization of deferred debt costs ($0.8 million).

FFO available to common shareholders (after deducting preferred stock dividends and the impact of preferred stock redemptions) decreased 12.0% to $27.2 million ($1.00 per diluted share) in the 2013 Period from $30.9 million ($1.17 per diluted share) in the 2012 Period.  FFO available to common shareholders for the 2013 Period was adversely impacted by the redemption of preferred stock ($5.2 million) and predevelopment expenses ($3.6 million).  Without these items, FFO available to common shareholders would have been $36.0 million, or $5.1 million more than the 2012 Period.  The $5.1 million increase is attributable to improved overall portfolio property operating income ($3.5 million) and reduced interest expense and amortization of deferred debt costs ($1.8 million).

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 59 community and neighborhood shopping center and mixed-use properties totaling 9.3 million square feet of leasable area.  Over 85% of the Company's property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area.   

SOURCE Saul Centers, Inc.