Saul Centers, Inc. Reports Second Quarter 2008 Earnings

BETHESDA, Md., Aug 07, 2008 /PRNewswire-FirstCall via COMTEX/ -- TWBC | Quote | Chart | News | PowerRating -- Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust (REIT), announced its operating results for the quarter ended June 30, 2008. Total revenue for the three months ended June 30, 2008 ("2008 Quarter") increased 8.2% to $40,105,000 compared to $37,077,000 for the three months ended June 30, 2007 ("2007 Quarter"). Operating income, which is net income available to common stockholders before gain on property disposition, minority interests and preferred stock dividends, increased 9.9% to $12,175,000 for the 2008 Quarter compared to $11,077,000 for the 2007 Quarter. This $1,098,000 increase in operating income was offset by the $1,786,000 increase in preferred stock dividends from the Company's issuance of approximately $79,300,000 of Series B preferred stock in March 2008. As a result, net income available to common stockholders was $6,443,000 or $0.36 per diluted share for the 2008 Quarter, compared to $6,926,000 or $0.39 per diluted share for the 2007 Quarter.

Same property revenue for the total portfolio increased 3.2% for the 2008 Quarter compared to the 2007 Quarter and same property operating income increased 1.2%. The same property comparisons exclude the results of operations of properties not in operation for each of the comparable reporting quarters. Same property operating income in the shopping center portfolio increased 1.0% for the 2008 Quarter compared to the 2007 Quarter. The quarter over quarter shopping center operating income increase resulted primarily from base rent growth at Southdale and several core shopping centers as well as the stabilization of Lansdowne Town Center. The same center operating income increases were offset in part by increased property operating expenses and real estate taxes, net of tenant recoveries, and an increase in credit loss reserves. Same property operating income in the office portfolio increased 2.0% for the 2008 Quarter compared to the 2007 Quarter.

For the six months ended June 30, 2008 ("2008 Period"), total revenue increased 6.9% to $78,827,000 compared to $73,761,000 for the six months ended June 30, 2007 ("2007 Period") and operating income increased 5.3% to $23,248,000 compared to $22,086,000 for the 2007 Period. This $1,162,000 increase in operating income was offset by the $1,883,000 increase in preferred stock dividends from the Company's Series B preferred stock issue. As a result, net income available to common stockholders was $13,476,000 or $0.75 per diluted share for the 2008 Period, compared to $13,800,000 or $0.78 per diluted share for the 2007 Period. Overall same property revenue for the total portfolio increased 3.7% for the 2008 Period compared to the 2007 Period and same property operating income increased 2.2%. For the 2008 Period, shopping center same property operating income increased 2.7% due to the stabilization of Lansdowne Town Center and rental rate growth at Southdale, Seven Corners and several core shopping centers. The same center operating income increases were offset in part by increased property operating expenses and real estate taxes, net of tenant recoveries, and an increase in credit loss reserves. Same property operating income in the office portfolio remained relatively stable, increasing 0.7% for the 2008 Period.

As of June 30, 2008, 94.8% of the operating portfolio was leased compared to 95.7% for June 30, 2007. On a same property basis, 94.8% of the portfolio was leased, compared to the prior year level of 95.8%. The 2008 same property leasing percentages decreased due to a net decrease of approximately 74,000 square feet of leased space. The majority of this leasing decrease, approximately 49,000 square feet, occurred at South Dekalb Plaza in Atlanta, Georgia. Leasing also decreased approximately 13,000 square feet at Smallwood Village Center where the Company is engaged in a major renovation.

Funds from operations (FFO) available to common shareholders (after deducting preferred stock dividends) decreased 1.3% to $15,378,000 in the 2008 Quarter compared to $15,580,000 for the 2007 Quarter. On a diluted per share basis, FFO available to common shareholders decreased 1.5% to $0.66 per share for the 2008 Quarter compared to $0.67 per share for the 2007 Quarter. FFO, a widely accepted non-GAAP financial measure of operating performance for REITs, is defined as net income plus minority interests, extraordinary items and real estate depreciation and amortization, excluding gains from property dispositions. FFO available to common shareholders for the 2008 Period increased 0.8% to $31,297,000 from $31,037,000 during the 2007 Period. Per share FFO available to common shareholders for the 2008 Period remained level with the 2007 Period at $1.34 per diluted share. Improved property operating results were offset by increased preferred stock dividends of $1,786,000 ($0.08 per diluted share) and $1,883,000 ($0.08 per diluted share), for the 2008 Quarter and 2008 Period, respectively, arising from the Company's Series B preferred stock issue.

Saul Centers is a self-managed, self-administered equity real estate investment trust headquartered in Bethesda, Maryland. Saul Centers currently operates and manages a real estate portfolio of 50 community and neighborhood shopping center and office properties totaling approximately 8.2 million square feet of leasable area. Over 80% of the Company's property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area.

Saul Centers, Inc. Condensed Consolidated Balance Sheets ($ in thousands) June 30, December 31, 2008 2007 Assets (Unaudited) Real estate investments Land $215,407 $167,007 Buildings and equipment 711,592 673,328 Construction in progress 67,301 49,592 994,300 889,927 Accumulated depreciation (244,196) (232,669) 750,104 657,258 Cash and cash equivalents 36,964 5,765 Accounts receivable and accrued income, net 33,087 33,967 Deferred leasing costs, net 17,363 16,190 Prepaid expenses, net 1,407 2,571 Deferred debt costs, net 6,440 6,264 Other assets 6,674 5,428 Total assets $852,039 $727,443 Liabilities Mortgage notes payable $565,194 $524,726 Revolving credit facility - 8,000 Dividends and distributions payable 14,803 12,887 Accounts payable, accrued expenses and other liabilities 20,140 13,159 Deferred income 22,654 15,147 Total liabilities 622,791 573,919 Minority interests 3,747 4,745 Stockholders' equity Preferred stock 179,328 100,000 Common stock 180 178 Additional paid-in capital 162,263 161,618 Accumulated deficit (116,270) (113,017) Total stockholders' equity 225,501 148,779 Total liabilities and stockholders' equity $852,039 $727,443 Saul Centers, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Revenue (Unaudited) (Unaudited) Base rent $31,751 $29,531 $62,133 $58,552 Expense recoveries 6,945 6,282 14,078 12,880 Percentage rent 232 312 546 514 Other 1,177 952 2,070 1,815 Total revenue 40,105 37,077 78,827 73,761 Operating expenses Property operating expenses 4,527 4,343 9,512 9,148 Provision for credit losses 241 103 424 215 Real estate taxes 4,278 3,538 8,289 7,064 Interest expense and amortization of deferred debt costs 8,705 8,325 17,309 16,619 Depreciation and amortization of deferred leasing costs 6,989 6,503 13,932 12,951 General and administrative 3,190 3,188 6,113 5,678 Total operating expenses 27,930 26,000 55,579 51,675 Operating income 12,175 11,077 23,248 22,086 Gain on property disposition - - 205 - Minority interests (1,946) (2,151) (4,094) (4,286) Net income 10,229 8,926 19,359 17,800 Preferred dividends (3,786) (2,000) (5,883) (4,000) Net income available to common stockholders $6,443 $6,926 $13,476 $13,800 Per share net income available to common stockholders: Diluted $0.36 $0.39 $0.75 $0.78 Weighted average common stock: Common stock 17,803 17,531 17,785 17,473 Effect of dilutive options 175 176 176 190 Diluted weighted average common stock 17,978 17,707 17,961 17,663 Saul Centers, Inc. Supplemental Information (In thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Reconciliation of net income to funds from operations (FFO)(1): (Unaudited) (Unaudited) Net Income $10,229 $8,926 $19,359 $17,800 Less: Gain on property disposition - - (205) - Add: Real property depreciation & amortization 6,989 6,503 13,932 12,951 Add: Minority interests 1,946 2,151 4,094 4,286 FFO 19,164 17,580 37,180 35,037 Less: Preferred dividends (3,786) (2,000) (5,883) (4,000) FFO available to common shareholders $15,378 $15,580 $31,297 $31,037 Weighted average shares: Diluted weighted average common stock 17,978 17,707 17,961 17,663 Convertible limited partnership units 5,416 5,416 5,416 5,416 Diluted & converted weighted average shares 23,394 23,123 23,377 23,079 Per share amounts: FFO available to common shareholders (diluted) $0.66 $0.67 $1.34 $1.34 Reconciliation of net income to same property operating income: Net income $10,229 $8,926 $19,359 $17,800 Add: Interest expense and amortization of deferred debt costs 8,705 8,325 17,309 16,619 Add: Depreciation and amortization of deferred leasing costs 6,989 6,503 13,932 12,951 Add: General and administrative 3,190 3,188 6,113 5,678 Less: Gain on property disposition - - (205) - Less: Interest income (244) (143) (311) (238) Add: Minority interests 1,946 2,151 4,094 4,286 Property operating income 30,815 28,950 60,291 57,096 Less: Acquisitions & developments (1,513) - (1,931) - Total same property operating income $29,302 $28,950 $58,360 $57,096 Total shopping centers $22,195 $21,984 $44,376 $43,209 Total office properties 7,107 6,966 13,984 13,887 Total same property operating income $29,302 $28,950 $58,360 $57,096 (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 minority interests, extraordinary items and real estate depreciation and amortization, excluding 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 a 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 we believe occurs with our 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.

SOURCE Saul Centers, Inc.

http://www.saulcenters.com/

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