Saul Centers, Inc. Reports Third Quarter 2019 Earnings

Saul Centers, Inc.

Consolidated Balance Sheets

(In thousands)

September 30,
 2019

December 31,
 2018

(Unaudited)

Assets

Real estate investments

Land

$

450,256

$

488,918

Buildings and equipment

1,284,315

1,273,275

Construction in progress

317,798

185,972

2,052,369

1,948,165

Accumulated depreciation

(553,829)

(525,518)

1,498,540

1,422,647

Cash and cash equivalents

52,269

14,578

Accounts receivable and accrued income, net

55,207

53,876

Deferred leasing costs, net

24,947

28,083

Prepaid expenses, net

9,357

5,175

Other assets

6,444

3,130

Total assets

$

1,646,764

$

1,527,489

Liabilities

Notes payable

$

846,525

$

880,271

Term loan facility payable

74,666

74,591

Revolving credit facility payable

—

45,329

Construction loan payable

93,537

21,655

Dividends and distributions payable

19,634

19,153

Accounts payable, accrued expenses and other liabilities

39,741

32,419

Deferred income

27,224

28,851

Total liabilities

1,101,327

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

Series E Cumulative Redeemable, 44,000 and 0 shares issued and outstanding,
respectively

110,000

—

Common stock, $0.01 par value, 40,000,000 shares authorized, 23,116,013 and 22,739,207
shares issued and outstanding, respectively

231

227

Additional paid-in capital

401,395

384,533

Distributions in excess of accumulated earnings

(215,334)

(208,593)

Accumulated other comprehensive loss

(343)

(255)

Total Saul Centers, Inc. equity

475,949

355,912

Noncontrolling interests

69,488

69,308

Total equity

545,437

425,220

Total liabilities and equity

$

1,646,764

$

1,527,489

Saul Centers, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Revenue

(unaudited)

(unaudited)

Rental revenue

$

55,487

$

55,733

$

168,242

$

165,693

Other

1,565

1,177

6,701

3,407

Total revenue

57,052

56,910

174,943

169,100

Expenses

Property operating expenses

7,525

6,910

22,641

20,766

Real estate taxes

7,114

6,937

21,081

20,559

Interest expense, net and amortization of deferred debt
costs

10,325

10,974

32,185

33,568

Depreciation and amortization of deferred leasing costs

12,018

11,256

35,185

33,956

General and administrative

4,742

4,141

14,696

13,208

Total expenses

41,724

40,218

125,788

122,057

Change in fair value of derivatives

—

10

—

(2)

Gain on sale of property

—

—

—

509

Net Income

15,328

16,702

49,155

47,550

Noncontrolling interests

Income attributable to noncontrolling interests

(3,102)

(3,547)

(10,250)

(9,265)

Net income attributable to Saul Centers, Inc.

12,226

13,155

38,905

38,285

Extinguishment of issuance costs upon redemption of
preferred shares

—

—

—

(2,328)

Preferred stock dividends

(3,210)

(2,953)

(9,116)

(9,309)

Net income available to common
stockholders

$

9,016

$

10,202

$

29,789

$

26,648

Per share net income available to common stockholders

Basic and diluted

$

0.39

$

0.45

$

1.30

$

1.19

Dividends declared per common share outstanding

$

0.53

$

0.52

$

1.59

$

1.56

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)

2019

2018

2019

2018

(unaudited)

(unaudited)

Net income

$

15,328

$

16,702

$

49,155

$

47,550

Subtract:

Gain on sale of property

—

—

—

(509)

Add:

Real estate depreciation and amortization

12,018

11,256

35,185

33,956

FFO

27,346

27,958

84,340

80,997

Subtract:

Extinguishment of issuance costs upon redemption of
preferred shares

—

—

—

(2,328)

Preferred stock dividends

(3,210)

(2,953)

(9,116)

(9,309)

FFO available to common stockholders and
noncontrolling interests

$

24,136

$

25,005

$

75,224

$

69,360

Weighted average shares:

Diluted weighted average common stock

23,121

22,501

22,993

22,336

Convertible limited partnership units

7,869

7,808

7,852

7,700

Average shares and units used to compute FFO per share

30,990

30,309

30,845

30,036

FFO per share available to common stockholders and
noncontrolling interests

$

0.78

$

0.83

$

2.44

$

2.31

(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)

Three months ended September 30,

Nine months ended September 30,

2019

2018

2019

2018

(unaudited)

(unaudited)

Total revenue

$

57,052

$

56,910

$

174,943

$

169,100

Less: Acquisitions, dispositions and development properties

(72)

(82)

(1,155)

(82)

Total same property revenue

$

56,980

$

56,828

$

173,788

$

169,018

Shopping Centers

$

41,313

$

41,091

$

126,730

$

122,770

Mixed-Use properties

15,667

15,737

47,058

46,248

Total same property revenue

$

56,980

$

56,828

$

173,788

$

169,018

Total Shopping Center revenue

$

41,313

$

41,091

$

126,730

$

122,770

Less: Shopping Center acquisitions, dispositions and
development properties

—

—

—

—

Total same Shopping Center revenue

$

41,313

$

41,091

$

126,730

$

122,770

Total Mixed-Use property revenue

$

15,739

$

15,819

$

48,213

$

46,330

Less: Mixed-Use acquisitions, dispositions and development
properties

(72)

(82)

(1,155)

(82)

Total same Mixed-Use property revenue

$

15,667

$

15,737

$

47,058

$

46,248

(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 September 30,

Nine Months Ended September 30,

(In thousands)

2019

2018

2019

2018

(unaudited)

(unaudited)

Net income

$

15,328

$

16,702

$

49,155

$

47,550

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

10,325

10,974

32,185

33,568

Add: Depreciation and amortization of deferred leasing costs

12,018

11,256

35,185

33,956

Add: General and administrative

4,742

4,141

14,696

13,208

Add: Change in fair value of derivatives

—

(10)

—

2

Less: Gain on sale of property

—

—

—

(509)

Property operating income

42,413

43,063

131,221

127,775

Add (Less): Acquisitions, dispositions and development properties

97

(52)

(519)

(52)

Total same property operating income

$

42,510

$

43,011

$

130,702

$

127,723

Shopping Centers

$

32,339

$

32,517

$

99,516

$

96,839

Mixed-Use properties

10,171

10,494

31,186

30,884

Total same property operating income

$

42,510

$

43,011

$

130,702

$

127,723

Shopping Center operating income

$

32,339

$

32,517

$

99,516

$

96,839

Less: Shopping Center acquisitions, dispositions and development
properties

—

—

—

—

Total same Shopping Center operating income

$

32,339

$

32,517

$

99,516

$

96,839

Mixed-Use property operating income

$

10,074

$

10,546

$

31,705

$

30,936

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

97

(52)

(519)

(52)

Total same Mixed-Use property operating income

$

10,171

$

10,494

$

31,186

$

30,884

(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.