PART I
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of
these statements by looking for words such as plans, intends, estimates, anticipates, expects, believes or similar expressions in this Form 10-K. These forward-looking
statements are subject to numerous assumptions, risks and uncertainties. Many of the factors that will determine these items are beyond our ability to control or predict. For further discussion of these factors, see Item 1A. Risk Factors
in this Form 10-K.
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. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Form 10-K or the date of any document incorporated by
reference. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not
undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Form 10-K.
General
Saul Centers, Inc. (Saul Centers) was incorporated under the Maryland General Corporation Law on June 10, 1993. Saul
Centers operates as a real estate investment trust (a REIT) under the Internal Revenue Code of 1986, as amended (the Code). The Company is required to annually distribute at least 90% of its REIT taxable income (excluding net
capital gains) to its stockholders and meet certain organizational and other requirements. Saul Centers has made and intends to continue to make regular quarterly distributions to its stockholders. Saul Centers, together with its wholly owned
subsidiaries and the limited partnerships of which Saul Centers or one of its subsidiaries is the sole general partner, are referred to collectively as the Company. B. Francis Saul II serves as Chairman of the Board of Directors and
Chief Executive Officer of Saul Centers.
The Companys principal business activity is the ownership, management and
development of income-producing properties. The Companys long-term objectives are to increase cash flow from operations and to maximize capital appreciation of its real estate.
Saul Centers was formed to continue and expand the shopping center business previously owned and conducted by the B.F. Saul Real Estate
Investment Trust, the B.F. Saul Company and certain other affiliated entities, each of which is controlled by B. Francis Saul II and his family members (collectively, The Saul Organization). On August 26, 1993, members of The Saul
Organization transferred to Saul Holdings Limited Partnership, a newly formed Maryland limited partnership (the Operating Partnership), and two newly formed subsidiary limited partnerships (the Subsidiary Partnerships, and
collectively with the Operating Partnership, the Partnerships), shopping center and mixed-use properties, and the management functions related to the transferred properties. Since its formation, the Company has developed and purchased
additional properties.
3
The following table lists the properties acquired, developed and/or disposed of by the
Company since January 1, 2010.
|
|
|
|
|
|
|
|
|
|
|
Name of Property
|
|
Location
|
|
Type
|
|
Square
Footage
|
|
|
Year of
Acquisition/
Development/
Disposal
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
11503 Rockville Pike
|
|
Rockville, MD
|
|
Shopping Center
|
|
|
20,000
|
|
|
2010
|
Metro Pike Center
|
|
Rockville, MD
|
|
Shopping Center
|
|
|
67,000
|
|
|
2010
|
4469 Connecticut Ave
|
|
Washington, D.C.
|
|
Mixed-Use
|
|
|
3,000
|
|
|
2011
|
Kentlands Square II
|
|
Gaithersburg, MD
|
|
Shopping Center
|
|
|
241,000
|
|
|
2011
|
Severna Park MarketPlace
|
|
Severna Park, MD
|
|
Shopping Center
|
|
|
254,000
|
|
|
2011
|
Cranberry Square
|
|
Westminster, MD
|
|
Shopping Center
|
|
|
141,000
|
|
|
2011
|
1500 Rockville Pike
|
|
Rockville, MD
|
|
Shopping Center
|
|
|
52,700
|
|
|
2012
|
5541 Nicholson Lane
|
|
Rockville, MD
|
|
Shopping Center
|
|
|
20,100
|
|
|
2012
|
|
|
|
|
|
Developments
|
|
|
|
|
|
|
|
|
|
|
Clarendon Center North
|
|
Arlington, VA
|
|
Mixed-Use
|
|
|
108,000
|
|
|
2010/2011
|
Clarendon Center South
|
|
Arlington, VA
|
|
Mixed-Use
|
|
|
294,000
|
|
|
2010/2011
|
|
|
|
|
|
Dispositions
|
|
|
|
|
|
|
|
|
|
|
Lexington
|
|
Lexington, KY
|
|
Shopping Center
|
|
|
314,500
|
|
|
2010
|
West Park
|
|
Oklahoma City, OK
|
|
Shopping Center
|
|
|
77,000
|
|
|
2012
|
Belvedere
|
|
Baltimore, MD
|
|
Shopping Center
|
|
|
54,900
|
|
|
2012
|
As of December 31, 2012, the Companys properties (the Current Portfolio
Properties) consisted of 50 shopping center properties (the Shopping Centers), seven mixed-use properties which are comprised of office, retail and multi-family residential uses (the Mixed-Use Properties) and two
(non-operating) development properties. Shopping Centers and Mixed-Use Properties represent reportable business segments for financial reporting purposes. Revenue, net income, total assets and other financial information of each reportable segment
are described in Note 16 to the Consolidated Financial Statements contained in Item 8 of this Form 10-K.
4
Organizational Structure
The Company conducts its business through the Operating Partnership and/or directly or indirectly owned subsidiaries. The following diagram depicts the Companys organizational structure and
beneficial ownership of the common and preferred stock of Saul Centers calculated pursuant to Rule 13d-3 of the Exchange Act as of December 31, 2012.
(1)
|
The Saul Organizations ownership percentage in Saul Centers reported above does not include units of limited partnership interest of the Operating Partnership
held by The Saul Organization. In general, most units are convertible into shares of the Companys common stock on a one-for-one basis. However, not all of the units may be convertible into the Companys common stock because (i) the
articles of incorporation limit beneficial and constructive ownership (defined by reference to various Code provisions) to 39.9% in value of the Companys issued and outstanding equity securities, which comprise the ownership limit and
(ii) the convertibility of some of the outstanding units is subject to approval of the Companys stockholders.
|
Management of the Current Portfolio Properties
The Operating Partnership manages the Current Portfolio Properties and will manage any subsequently acquired or developed properties. The management of the properties includes performing property
management, leasing, design, renovation, development and accounting duties for each property. The Operating Partnership provides each property with a fully integrated property management capability, with approximately 60 employees at its
headquarters office and with an extensive and mature network of relationships with tenants and potential tenants as well as with members of the brokerage and property owners communities. The Company currently does not, and does not intend to,
retain third party managers or provide management services to third parties.
The Company augments its property management
capabilities by sharing with The Saul Organization certain ancillary functions, at cost, such as information technology and payroll services, benefits administration and in-house legal services. The Company also shares insurance administration
expenses on a pro rata basis with The Saul Organization. Management believes that these arrangements result in lower costs than could be obtained by contracting with third parties. These arrangements permit the Company to capture greater economies
of scale in purchasing from third party vendors than would otherwise be available to the Company alone and to capture internal economies of scale by avoiding payments representing profits with respect to functions provided internally. The terms
of all sharing arrangements with The Saul Organization, including payments related thereto, are specified in a written agreement and are reviewed annually by the Audit Committee of the Companys Board of Directors.
5
The Company subleases its corporate headquarters space from The Saul Organization at the
Companys share of the cost. A discussion of the lease terms are provided in Note 7, Long Term Lease Obligations, of the Notes to Consolidated Financial Statements.
Principal Offices
The principal offices of the Company are located at 7501
Wisconsin Avenue, Suite 1500, Bethesda, Maryland 20814-6522, and the Companys telephone number is (301) 986-6200. The Companys internet web address is
www.saulcenters.com
. Information contained on the Companys website
is not part of this report. The Company makes available free of charge on its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after the reports are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). Alternatively, you may access these
reports at the SECs website: www.sec.gov.
Policies with Respect to Certain Activities
The following is a discussion of the Companys operating strategy and certain of its investment, financing and other policies. These
strategies and policies have been determined by the Board of Directors and, in general, may be amended or revised from time to time by the Board of Directors without a vote of the Companys stockholders.
Operating Strategies
The Companys primary operating strategy is to focus on its community and neighborhood shopping center business and to operate its
properties to achieve both cash flow growth and capital appreciation. Community and neighborhood shopping centers typically provide reliable cash flow and steady long-term growth potential. Management actively manages its property portfolio by
engaging in strategic leasing activities, tenant selection, lease negotiation and shopping center expansion and reconfiguration. The Company seeks to optimize tenant mix by selecting tenants for its shopping centers that provide a broad spectrum of
goods and services, consistent with the role of community and neighborhood shopping centers as the source for day-to-day necessities. Management believes that such a synergistic tenanting approach results in increased cash flow from existing tenants
by providing the Shopping Centers with consistent traffic and a desirable mix of shoppers, resulting in increased sales and, therefore, increased cash flows.
Management believes there is potential for long term growth in cash flow as existing leases for space in the Shopping Centers expire and are renewed, or newly available or vacant space is leased. The
Company intends to renegotiate leases where possible and seek new tenants for available space in order to optimize the mix of uses to improve foot traffic through the Shopping Centers. As leases expire, management expects to revise rental rates,
lease terms and conditions, relocate existing tenants, reconfigure tenant spaces and introduce new tenants with the goals of increasing occupancy, improving overall retail sales, and ultimately increasing cash flow as economic conditions improve. In
those circumstances in which leases are not otherwise expiring, management selectively attempts to increase cash flow through a variety of means, or in connection with renovations or relocations, recapturing leases with below market rents and
re-leasing at market rates, as well as replacing financially troubled tenants. When possible, management also will seek to include scheduled increases in base rent, as well as percentage rental provisions, in its leases.
The Company will also seek growth opportunities in its Washington, D.C. metropolitan area mixed-use portfolio, primarily through
development and redevelopment, as evidenced by the recent completion of the development of Clarendon Center in Arlington County, Virginia. Management also intends to negotiate lease renewals or to re-lease available space in the Mixed-Use
Properties, while considering the strategic balance of optimizing short-term cash flow and long-term asset value.
It is
managements intention to hold properties for long-term investment and to place strong emphasis on regular maintenance, periodic renovation and capital improvement. Management believes that characteristics such
6
as cleanliness, lighting and security are particularly important in community and neighborhood shopping centers, which are frequently visited by shoppers during hours outside of the normal
work-day. Management believes that the Shopping Centers and Mixed-Use Properties generally are attractive and well maintained. The Shopping Centers and Mixed-Use Properties will undergo expansion, renovation, reconfiguration and modernization from
time to time when management believes that such action is warranted by opportunities or changes in the competitive environment of a property. During 2012, 2011 and 2010, the Company developed two new shopping centers, Westview Village and Northrock
and completed the construction of Clarendon Center, a mixed-use development containing ground floor retail, office and multi-family residential units. The Company will continue its practice of expanding existing properties by undertaking new
construction on outparcels suitable for development as free standing retail or office facilities.
Investment in Real Estate or Interests
in Real Estate
The Companys redevelopment and renovation objective is to selectively and opportunistically redevelop
and renovate its properties, by replacing below-market-rent leases with strong, traffic-generating anchor stores such as supermarkets and drug stores, as well as other desirable local, regional and national tenants. The Companys strategy
remains focused on continuing the operating performance and internal growth of its existing Shopping Centers, while enhancing this growth with selective retail redevelopments and renovations.
The Company recently acquired two properties located along the Rockville Pike corridor in Montgomery County, Maryland. In December 2012,
the Company purchased for $23.0 million, including acquisition costs, approximately 52,700 square feet of retail space located on the east side of Rockville Pike near the Twinbrook Metro Station. The property, which was 90.5% leased to multiple
tenants at December 31, 2012, is zoned for up to 745,000 square feet of rentable mixed-use space. The Company intends to redevelop the site but has not committed to any redevelopment plan.
In December 2012, the Company purchased for $12.2 million, including acquisition costs, approximately 20,100 square feet of mixed-use
space, which was 40.5% leased to multiple tenants, located on the east side of Rockville Pike and adjacent to 11503 Rockville Pike, which was purchased in 2010. The property, when combined with 11503 Rockville Pike, will provide zoning for up
to 325,000 square feet of rentable mixed-use space for a total development potential of up to 622,000 square feet. The Company intends to redevelop the site but has not committed to any redevelopment plan or time table.
In 2011, the Company acquired three Giant Food-anchored shopping centers located in the Maryland suburbs of the Washington, D.C. and
Baltimore metropolitan area. The three centers, Kentlands Square II, Severna Park MarketPlace and Cranberry Square, total 636,000 square feet of leasable area, of which 98% is leased. The $170.9 million purchase price, including acquisition costs,
was financed with (1) $60.0 million from two bridge loans secured by Kentlands Square II and Cranberry Square; (2) a $38.0 million non-recourse permanent loan secured by Severna Park MarketPlace; (3) approximately $17.1 million in
cash and borrowings from the Companys revolving credit facility; and (4) $55.8 million from the issuance of equity to a related party.
In light of the limited amount of quality properties for sale and the escalated pricing of properties that the Company has been presented with or has inquired about over the past year, management believes
acquisition opportunities for investment in existing and new Shopping Center and Mixed-Use Properties in the near future is uncertain. Because of the Companys conservative capital structure, including its cash and capacity under its revolving
credit facility, management believes that the Company is positioned to take advantage of additional investment opportunities as attractive properties are located and market conditions improve. (See Item 1. Business - Capital Policies).
It is managements view that several of the sub-markets in which the Company operates have, or are expected to have in the future, attractive supply/demand characteristics. The Company will continue to evaluate acquisition, development and
redevelopment as integral parts of its overall business plan.
In evaluating a particular redevelopment, renovation,
acquisition, or development, management will consider a variety of factors, including (i) the location and accessibility of the property; (ii) the geographic area (with an emphasis on the Washington, D.C./Baltimore metropolitan area and
the southeastern region of the United States) and demographic characteristics of the community, as well as the local real estate market, including potential for growth and potential regulatory impediments to development; (iii) the size of the
property; (iv) the purchase price; (v) the non-financial terms of the proposed acquisition; (vi) the availability of funds or other consideration for the proposed acquisition and the cost thereof; (vii) the fit of the
property with the Companys existing portfolio;
7
(viii) the potential for, and current extent of, any environmental problems; (ix) the current and historical occupancy rates of the property or any comparable or competing properties in the
same market; (x) the quality of construction and design and the current physical condition of the property; (xi) the financial and other characteristics of existing tenants and the terms of existing leases; and (xii) the potential for
capital appreciation.
The Company recently completed negotiation of lease termination agreements with the tenants of Van Ness
Square and expects the building will be vacant on or about April 30, 2013. Costs incurred related to those termination arrangements are being amortized to expense using the straight-line method over the remaining terms of the leases, are
included in Predevelopment Expenses in the Consolidated Statements of Operations, totaled $2.7 million in 2012 and are expected to total approximately $3.3 million over the first two quarters of 2013. The Company intends to develop
a primarily residential project with street-level retail and 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.
During the second quarter of
2012, the Companys French Market property suffered roof damage during a hail storm. The Company is in the process of obtaining bids to repair the damage and estimates that the cost will be approximately $2.2 million, which is fully covered by
insurance, subject to a $50,000 deductible. The Company recognized a gain of approximately $219,000, equal to the excess of the amount of estimated insurance proceeds over the carrying value of the replaced assets. All tenants remained open for
business throughout the aftermath of the hail storm.
Although it is managements present intention to concentrate future
acquisition and development activities on community and neighborhood shopping centers and mixed-use properties in the Washington, D.C./Baltimore metropolitan area and the southeastern region of the United States, the Company may, in the future, also
acquire other types of real estate in other areas of the country as opportunities present themselves. While the Company may diversify in terms of property locations, size and market, it does not set any limit on the amount or percentage of assets
that may be invested in any one property or any one geographic area.
The Company intends to engage in such future investment
or development activities in a manner that is consistent with the maintenance of its status as a REIT for federal income tax purposes and that will not make the Company become regulated as an investment company under the Investment Company Act of
1940, as amended. Equity investments in acquired properties may be subject to existing mortgage financings and other indebtedness or to new indebtedness which may be incurred in connection with acquiring or refinancing these investments.
Investments in Real Estate Mortgages
While the Companys current portfolio and business objectives emphasize equity investments in commercial and neighborhood shopping centers and mixed-use properties, the Company may, at the discretion
of the Board of Directors, invest in mortgages, participating or convertible mortgages, deeds of trust and other types of real estate interests consistent with its qualification as a REIT. The Company does not presently invest, nor does it intend to
invest, in real estate mortgages.
Investments in Securities of or Interests in Persons Engaged in Real Estate Activities and Other Issues
Subject to the requirements to maintain REIT qualification, the Company may invest in securities of other REITs, other
entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities. The Company does not presently invest, nor does it intend to invest, in any securities of other REITs.
Dispositions
In 2012, the Company sold for $2.0 million the 77,000 square foot West Park shopping center in Oklahoma City, Oklahoma and recognized a
$1.1 million gain and sold for $4.0 million the 54,900 square feet Belvedere shopping center in Baltimore, Maryland and recognized a gain of $3.4 million.
In 2010, the Company sold its Lexington property for $8.1 million and recognized a gain of $3.6 million.
8
The Company may elect to dispose of other properties if, based upon managements
periodic review of the Companys portfolio, the Board of Directors determines that such action would be in the best interest of the Companys stockholders.
Capital Policies
The Company has established a debt capitalization policy
relative to asset value, which is computed by reference to the aggregate annualized cash flow from the properties in the Companys portfolio rather than relative to book value. The Company has used a measure tied to cash flow because it
believes that the book value of its portfolio properties, which is the depreciated historical cost of the properties, does not accurately reflect the Companys ability to incur indebtedness. Asset value, however, is somewhat more variable than
book value, and may not at all times reflect the fair market value of the underlying properties. As a general policy, the Company intends to maintain a ratio of its total debt to total asset value of 50% or less and to actively manage the
Companys leverage and debt expense on an ongoing basis in order to maintain prudent coverage of fixed charges. Given the Companys current debt level, it is managements belief that the ratio of the Companys debt to total asset
value is below 50% as of December 31, 2012.
The organizational documents of the Company do not limit the absolute amount
or percentage of indebtedness that it may incur. The Board of Directors may, from time to time, reevaluate the Companys debt capitalization policy in light of current economic conditions, relative costs of capital, market values of the Company
property portfolio, opportunities for acquisition, development or expansion, and such other factors as the Board of Directors then deems relevant. The Board of Directors may modify the Companys debt capitalization policy based on such a
reevaluation without shareholder approval and consequently, may increase or decrease the Companys debt to total asset ratio above or below 50% or may waive the policy for certain periods of time, subject to maintaining compliance with
financial covenants within existing debt agreements. The Company selectively continues to refinance or renegotiate the terms of its outstanding debt in order to achieve longer maturities, and obtain generally more favorable loan terms, whenever
management determines the financing environment is favorable.
The Company intends to finance future acquisitions and
developments and to make debt repayments by utilizing the sources of capital then deemed to be most advantageous. Such sources may include undistributed operating cash flow, secured or unsecured bank and institutional borrowings, proceeds from the
Companys Dividend Reinvestment and Stock Purchase Plan, proceeds from the sale of properties and private and public offerings of debt or equity securities. Borrowings may be at the Operating Partnership or Subsidiary Partnerships level
and securities offerings may include (subject to certain limitations) the issuance of Operating Partnership interests convertible into common stock or other equity securities.
Other Policies
The Company has the authority to offer equity or debt
securities in exchange for property and to repurchase or otherwise acquire its common stock or other securities in the open market or otherwise, and may engage in such activities in the future. The Company expects, but is not obligated, to issue
common stock to holders of units of the Operating Partnership upon exercise of their redemption rights. The Company has not engaged in trading, underwriting or agency distribution or sale of securities of other issuers other than the Operating
Partnership and does not intend to do so. The Company has not made any loans to third parties, although the Company may in the future make loans to third parties. In addition, the Company has policies relating to related party transactions discussed
in Item 1A. Risk Factors.
Competition
As an owner of, or investor in, community and neighborhood shopping centers and mixed-use properties, the Company is subject to competition from an indeterminate number of companies in connection with the
acquisition, development, ownership and leasing of similar properties. These investors include investors with access to significant capital, such as domestic and foreign corporations and financial institutions, publicly traded and privately held
REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds.
9
Competition may reduce properties available for acquisition or development or increase
prices for raw land or developed properties of the type in which the Company invests. The Company faces competition in providing leases to prospective tenants and in re-letting space to current tenants upon expiration of their respective leases. If
tenants decide not to renew or extend their leases upon expiration, the Company may not be able to re-let the space. Even if the tenants do renew or the Company can re-let the space, the terms of renewal or re-letting, including the cost of required
renovations, may be less favorable than current lease terms or than expectations for the space. This risk may be magnified if the properties owned by our competitors have lower occupancy rates than the Companys properties. As a result, these
competitors may be willing to make space available at lower prices than the space in the Current Portfolio Properties.
Management believes that success in the competition for ownership and leasing property is dependent in part upon the geographic location
of the property, the tenant mix, the performance of property managers, the amount of new construction in the area and the maintenance and appearance of the property. Additional competitive factors impacting the Companys properties include the
ease of access to the properties, the adequacy of related facilities such as parking, and the demographic characteristics in the markets in which the properties compete. Overall economic circumstances and trends and new properties in the vicinity of
each of the Current Portfolio Properties are also competitive factors.
Finally, retailers at our Shopping Centers face
increasing competition from outlet stores, discount shopping clubs and other forms of marketing goods, such as direct mail, internet marketing and telemarketing. This competition may reduce percentage rents payable to us and may contribute to lease
defaults or insolvency of tenants.
Environmental Matters
The Current Portfolio Properties are subject to various laws and regulations relating to environmental and pollution controls. The impact upon the Company from the application of such laws and regulations
either prospectively or retrospectively is not expected to have a materially adverse effect on the Companys property operations. As a matter of policy, the Company requires an environmental study be performed with respect to a property that
may be subject to possible environmental hazards prior to its acquisition to ascertain that there are no material environmental hazards associated with such property.
Employees
As of March 1, 2013, the Company employed approximately 60
persons at its headquarters office, including seven leasing officers. None of the Companys employees are covered by collective bargaining agreements. Management believes that its relationship with employees is good.
Recent Developments
After several challenging years in the financial and real estate markets, there have been recent signs of economic improvement. During the
last several quarters, the Company has seen modestly improved retail sales and retail leasing activity across its portfolio; however, rents remain under pressure. Office space demand throughout the Companys properties slowed during 2012 and
early 2013, primarily due to uncertainty surrounding federal government spending levels.
While overall consumer confidence
appears to have improved, retailers continue to be cautious about capital allocation when implementing store expansion. Vacancies continue to remain elevated compared to pre-recession levels; however, the Companys overall leasing percentage on
a comparative same property basis, which excludes the impact of properties not in operation for the entirety of the comparable periods, at December 31, 2012 increased to 91.9% from 90.7% at December 31, 2011, an increase in space leased of
approximately 107,000 square feet, primarily caused by the leasing of a portion of the space vacated by major shopping center tenants in 2011.
In February 2013, Saul Centers sold, in an underwritten public offering, 5.6 million depositary shares, each representing 1/100th of a share of 6.875% Series C Cumulative Redeemable Preferred Stock,
providing net cash proceeds of approximately $134.8 million. The depositary shares may be redeemed at the Companys option, in whole or in part, at the $25.00 liquidation preference, plus accumulated dividends to but not including the
redemption date, on or after February 12, 2018. The depositary shares pay an annual dividend of $1.71875 per share, equivalent to 6.875% of the $25.00 liquidation preference. The first dividend is scheduled to be paid on April 15,
10
2013 and cover the period from February 12, 2013 through March 31, 2013. The Series C preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption
and is not convertible into any other securities of the Company except in connection with certain changes in control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the
Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events. The proceeds from the offering were used to (a) partially redeem the Companys 8% Series A Cumulative Redeemable
Preferred Stock and related depositary shares and (b) redeem in full all of the Companys 9% Series B Cumulative Redeemable Preferred Stock and related depositary shares.
The Company had access to debt and preferred equity at attractive terms and pricing during 2012 and early 2013. The Company maintains a
ratio of total debt to total asset value of under 50%, which allows it to obtain additional secured borrowings if necessary. And, as of December 31, 2012, amortizing fixed-rate mortgage debt with staggered maturities from 2013 to 2027,
represented approximately 93.6% of the Companys notes payable, thus minimizing refinancing risk. The Company has two fixed-rate debt maturities scheduled for 2013, one of which was refinanced on February 27, 2013. Management currently
expects to repay in full the $6.8 million remaining balance on the second loan on or before its maturity in July 2013. The floating-rate debt of the Company is comprised of a $14.9 million loan secured by Northrock shopping center, which was
refinanced on February 27, 2013 and $38.0 million outstanding under the $175.0 million unsecured revolving credit facility.
Acquisition and Development Activity
A significant contributor to the Companys recent growth in its Shopping Center portfolio has been its land acquisitions and subsequent development, redevelopment of existing centers and operating
property acquisition activities. Redevelopment activities reposition the Companys centers to be competitive in the current retailing environment. These redevelopments typically include an update of the facade, site improvements and
reconfiguring tenant spaces to accommodate tenant size requirements and merchandising evolution. During the period January 1, 2010 through February 28, 2013, the Company acquired eight operating neighborhood shopping center properties.
Since January 1, 2010, the Companys leasable area has grown by approximately 13.1% (1.1 million square feet), from 8.4 million square feet to approximately 9.5 million square feet.
2012 / 2011 / 2010 Acquisitions, Developments and Redevelopments
Ashland Square Phase I
On December 15, 2004, the Company purchased
for $6.3 million, a 19.3 acre parcel of land in Manassas, Prince William County, Virginia. The Company has an approved site plan to develop a grocery-anchored neighborhood shopping center totaling approximately 160,000 square feet. Capital One Bank
operates a branch on the site and the Company previously executed a lease with CVS. During 2012, the Company completed site work for two pads, constructed a 6,500 square foot building that has been leased to a restaurant and CVS constructed a 13,000
square foot pharmacy building. Both facilities have opened for business and the cost to the Company was approximately $3.0 million. The balance of the center is being marketed to grocers and other retail businesses, with a development timetable yet
to be finalized.
Clarendon Center
In late 2010, the Company substantially completed construction of a mixed-use project which includes approximately 42,000 square feet of retail space, 171,000 square feet of office space, 244 apartments
and 600 underground parking spaces, on two city blocks, adjacent to the Clarendon Metro Station in Arlington County, Virginia. Development costs are expected to total approximately $195.0 million upon the completion of final office tenant
improvements. As of December 31, 2012, 208,900 square feet (97.9%) of the commercial space (comprising of all of the retail space and 167,200 square feet (97.4 %) of the office space) as well as 244 apartments (100.0%), were leased.
Westview Village
In November 2007, the Company purchased for $5.0 million, a 10.4 acre site in the Westview development on Buckeystown Pike (MD Route 85) in Frederick, Maryland. Construction was substantially completed in
2009 on a development that totals approximately 98,000 square feet of commercial space, including 60,000 square feet of retail shop space, 11,000 square feet of retail pads and 30,000 square feet of office space. Total construction and development
costs, including land, lease-up and tenant improvement costs, are projected to be approximately $26.5 million. As of December 31, 2012, 56,600 square feet of retail space and 26,700 square feet of office space, or approximately 85.4% of
the total space, had been leased.
11
Northrock
In January 2008, the Company purchased for $12.5 million, approximately 15.4 acres of undeveloped land in Warrenton, Virginia, located at the southwest corner of the U. S. Route 29/211 and Fletcher Drive
intersection. The Company constructed Northrock shopping center, a neighborhood shopping center totaling approximately 100,000 square feet of leasable area. Approximately 80.6% of the project was leased at December 31, 2012, including a 52,700
square foot Harris Teeter supermarket store, 27,800 square feet of small shop space, and pad leases with Capital One Bank and Longhorn Steakhouse. Total construction and development costs, including land, lease-up and tenant improvement costs, are
projected to be approximately $27.9 million.
Seven Corners
During 2010, the Company expanded the Seven Corners shopping center by approximately 6,000 square feet. Red Robin Gourmet Burgers opened in November 2010 in a newly-constructed, free-standing building.
The Company also completed construction of parking lot, landscaping and site lighting improvements to enhance the common areas.
11503
Rockville Pike
On October 1, 2010, the Company purchased for $15.6 million, including acquisition costs,
approximately 20,000 square feet of retail space located on the east side of Rockville Pike (Route 355), near the White Flint Metro Station in Montgomery County, Maryland. The property, which was fully leased to two tenants at December 31,
2012, is zoned for up to 297,000 square feet of rentable mixed use space. The Company intends to redevelop the property but has not committed to any redevelopment plan or time table.
Metro Pike Center
On December 17, 2010, the Company purchased for
$34.3 million, including acquisition costs, approximately 67,000 square feet of retail space located on the west side of Rockville Pike (Route 355) near the White Flint Metro Station in Montgomery County, Maryland. The property was acquired subject
to the assumption of a $16.2 million mortgage loan and a corresponding interest rate swap with a fair value of $0.5 million. The property, which was 83.6% leased at December 31, 2012, is zoned for up to 807,000 square feet of rentable
mixed use space. The Company does not anticipate redeveloping the property in the foreseeable future.
4469 Connecticut Ave
On February 17, 2011, the Company purchased for $1.7 million, including acquisition costs, approximately 3,000 square feet of retail
space located adjacent to the Companys Van Ness Square in Washington D.C. The property is unoccupied and will be included in the project to redevelop Van Ness Square.
Kentlands Square II
On September 23, 2011, the Company purchased for
$74.5 million Kentlands Square II, and incurred acquisition costs of $1.1 million. Kentlands Square II is a 241,000 square foot neighborhood shopping center located in Gaithersburg, Maryland, in Montgomery County, the states most populous and
affluent county. More than 38,000 households, with annual household incomes averaging over $114,000, are located within a three-mile radius of the center. The center was constructed in 1993, is 95.8% leased and is anchored by a 61,000 square foot
Giant Food supermarket and a 104,000 square foot Kmart. The property is adjacent to the Companys Kentlands Square I, which is anchored by Lowes Home Improvement and Kentlands Place.
Severna Park MarketPlace
On September 23, 2011, the Company purchased for $61.0 million Severna Park MarketPlace, and incurred acquisition costs of $0.8
million. Severna Park MarketPlace is a 254,000 square foot neighborhood shopping center located in Severna Park, Maryland, in Anne Arundel County. More than 15,000 households, with annual household incomes averaging over $112,000, are located within
a three-mile radius of the center. The center was constructed in 1974 and renovated in 2000, is 100% leased and is anchored by a 63,000 square foot Giant Food supermarket and a 92,000 square foot Kohls.
Cranberry Square
On
September 23, 2011, the Company purchased for $33.0 million Cranberry Square, and incurred acquisition costs of $0.5 million. Cranberry Square is a 140,000 square foot neighborhood shopping center located in Westminster, Maryland, in Carroll
County. More than 12,000 households, with annual household incomes averaging over $72,000, are located within a three-mile radius of the center. The center was constructed in 1991, is 92.2% leased and is anchored by a 56,000 square foot Giant Food
supermarket and a 24,000 square foot Staples.
12
1500 Rockville Pike
In December 2012, the Company purchased for $23.0 million, including acquisition costs, approximately 52,700 square feet of retail space located on the east side of Rockville Pike near the Twinbrook Metro
Station. The property, which was 90.5% leased to multiple tenants at December 31, 2012, is zoned for up to 745,000 square feet of rentable mixed-use space. The Company intends to redevelop the site but has not committed to any
redevelopment plan or time table.
5541 Nicholson Lane
In December 2012, the Company purchased for $12.2 million, including acquisition costs, approximately 20,100 square feet of mixed-use space, which was 40.5% leased to multiple tenants, located on the east
side of Rockville Pike and adjacent to 11503 Rockville Pike, which was purchased in 2010. The property, when combined with 11503 Rockville Pike, will provide zoning for up to 331,000 square feet of rentable mixed-use space for a total
development potential of up to 622,000 square feet. The Company intends to redevelop the site but has not committed to any redevelopment plan or time table.
Van Ness Square
The Company recently completed negotiation of lease
termination agreements with the tenants of Van Ness Square and expects the building will be vacant on or about April 30, 2013. Costs incurred related to those termination arrangements are being amortized to expense using the straight-line
method over the remaining terms of the leases, are included in Predevelopment Expenses in the Consolidated Statements of Operations, totaled $2.7 million in 2012 and are expected to total approximately $3.3 million over the first
two quarters of 2013. The Company intends to develop a primarily residential project with street-level retail and 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.
13
RISK
FACTORS
Carefully consider the following risks and all of the other information set forth in this Annual Report on
Form 10-K, including the consolidated financial statements and the notes thereto. If any of the events or developments described below were actually to occur, the Companys business, financial condition or results of operations could be
adversely affected.
In this section, unless the context indicates otherwise, the terms Company,
we, us and our refer to Saul Centers, Inc., and its subsidiaries, including the Operating Partnership.
The global financial crisis and economic slowdown may have an adverse impact on our business, our tenants business and our results of
operations.
The continuation or worsening of the recent credit market disruption and global economic crisis may
continue to have an adverse effect on the fundamentals of our business and results of operations, including overall market occupancy and rental rates. While recent economic data appear to reflect some stabilization of the economy and credit markets,
a continuation of these challenging economic conditions could have a negative effect on the financial condition of our tenants or lenders, which may expose us to increased risks of default by these parties.
In the event of a continuation of this disruption in the economy and capital markets, there can be no assurance we will not experience
material adverse effects on our business, financial condition, results of operations or real estate values.
Potential
consequences of a continuation of the credit crisis and global economic slowdown include:
|
|
|
the financial condition of our tenants, many of which operate in the retail industry, may be adversely affected, which may result in tenant defaults
under their leases due to bankruptcy, lack of liquidity, operational failures or for other reasons;
|
|
|
|
the ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition
and development opportunities and refinance existing debt, reduce our returns from acquisition and development activities and increase our future interest expense;
|
|
|
|
reduced values of our properties may limit our ability to dispose of assets at attractive prices and may reduce the ability to refinance loans; and
|
|
|
|
one or more lenders under our credit facility could fail and we may not be able to replace the financing commitment of any such lenders on favorable
terms, or at all.
|
Revenue from our properties may be reduced or limited if the retail operations of our tenants are
not successful.
The global and domestic economies have recently experienced a significant contraction of credit
markets and resulting slowdown in business and consumer spending. We believe that consumers in recent years have cut back their discretionary spending in response to credit constraints, unemployment, a reduction in home equity values, highly
volatile fuel and other commodity prices, and general economic uncertainty. Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of rent due under their leases on a timely basis. The amount of rent we
receive from our tenants generally will depend in part on the success of our tenants retail operations, making us vulnerable to general economic downturns and other conditions affecting the retail industry. Some tenants may terminate their
occupancy due to an inability to operate profitably for an extended period of time, impacting the Companys ability to maintain occupancy levels.
Any reduction in our tenants ability to pay base rent or percentage rent may adversely affect our financial condition and results of operations. Small business tenants and anchor retailers which
lease space in the Companys properties may experience a deterioration in their sales or other revenue, or experience a constraint on the availability of credit necessary to fund operations, which in turn may adversely impact those
tenants ability to pay contractual base rents and operating expense recoveries. Some of our leases provide for the payment, in addition to base rent, of additional rent above the base amount according to a specified percentage of the gross
sales generated by the tenants. Decreasing sales revenue by retail tenants could adversely impact the Companys receipt of percentage rents required to be paid by tenants under certain leases.
14
Our ability to increase our net income depends on the success and continued presence of our shopping
center anchor tenants and other significant tenants.
Our net income could be adversely affected in the
event of a downturn in the business, or the bankruptcy or insolvency, of any anchor store or anchor tenant. Our largest shopping center anchor tenant is Giant Food, which accounted for 5.0% of our total revenue for the year ended December 31,
2012. The closing of one or more anchor stores prior to the expiration of the lease of that store or the termination of a lease by one or more of a propertys anchor tenants could adversely affect that property and result in lease terminations
by, or reductions in rent from, other tenants whose leases may permit termination or rent reduction in those circumstances or whose own operations may suffer as a result. This could reduce our net income.
We may experience difficulty or delay in renewing leases or leasing vacant space.
We derive most of our revenue directly or indirectly from rent received from our tenants. We are subject to the risks that, upon
expiration, leases for space in our properties may not be renewed, the space and other vacant space may not be re-leased, or the terms of renewal or re-lease, including the cost of required renovations or concessions to tenants, may be less
favorable than previous lease terms. Constraints on the availability of credit to office and retail tenants, necessary to purchase and install improvements, fixtures and equipment, and fund start-up business expenses, could impact the Companys
ability to procure new tenants for spaces currently vacant in existing operating properties or properties under development. As a result, our results of operations and our net income could be reduced.
We have substantial relationships with members of The Saul Organization whose interests could conflict with the interests of other stockholders.
Influence of Officers, Directors and Significant Stockholders.
Three of our executive officers, Mr. Saul, and our President, Thomas H. McCormick, and our Executive Vice President-Real Estate, J.
Page Lansdale, are members of The Saul Organization, and persons associated with The Saul Organization constitute four of the 14 members of our Board of Directors. In addition, as of December 31, 2012, Mr. Saul had the potential to
exercise control over 8,696,000 shares of our common stock representing 43.8% of our issued and outstanding shares of common stock. Mr. Saul also beneficially owned, as of December 31, 2012, 6,914,000 units of the Operating Partnership. In
general, these units are convertible into shares of our common stock on a one-for-one basis. The ownership limitation set forth in our articles of incorporation is 39.9% in value of our issued and outstanding equity securities (which includes both
common and preferred stock). As of December 31, 2012, Mr. Saul and members of The Saul Organization owned common stock representing approximately 36.0% in value of all our issued and outstanding equity securities. Members of the Saul
Organization are permitted under our articles of incorporation to convert Operating Partnership units into shares of common stock or acquire additional shares of common stock until The Saul Organizations actual ownership of common stock
reaches 39.9% in value of our equity securities. As of December 31, 2012, 987,000 of the 6,914,000 units of the Operating Partnership would have been permitted to convert into additional shares of common stock, and would have resulted in
Mr. Saul and members of The Saul Organization owning common stock representing approximately 39.9% in value of all our issued and outstanding equity securities.
As a result of these relationships, members of The Saul Organization will be in a position to exercise significant influence over our affairs, which influence might not be consistent with the interests of
some, or a majority, of our stockholders. Except as discussed below, we do not have any written policies or procedures for the review, approval or ratification of transactions with related persons.
Management Time.
Our
Chief Executive Officer, President, Executive Vice President-Real Estate and Senior Vice President-Chief Accounting Officer are also officers of various entities of The Saul Organization. Although we believe that these officers spend sufficient
management time to meet their responsibilities as our officers, the amount of management time devoted to us will depend on our specific circumstances at any given point in time. As a result, in a given period, these officers may spend less than a
majority of their management time on our matters. Over extended periods of time, we believe that our Chief Executive Officer will spend less than a majority of his management time on Company matters, while our President, Executive Vice
President-Real Estate and Senior Vice President-Chief Accounting Officer may or may not spend less than a majority of their time on our matters.
15
Exclusivity and Right of First Refusal Agreements.
We will acquire, develop, own and manage shopping center properties and will own and manage other commercial properties, and, subject to
certain exclusivity agreements and rights of first refusal to which we are a party, The Saul Organization will continue to develop, acquire, own and manage commercial properties and own land suitable for development as, among other things, shopping
centers and other commercial properties. Therefore, conflicts could develop in the allocation of acquisition and development opportunities with respect to commercial properties other than shopping centers and with respect to development sites, as
well as potential tenants and other matters, between us and The Saul Organization. The agreement relating to exclusivity and the right of first refusal between us and The Saul Organization generally requires The Saul Organization to conduct its
shopping center business exclusively through us and to grant us a right of first refusal to purchase commercial properties and development sites in certain market areas that become available to The Saul Organization. The Saul Organization has
granted the right of first refusal to us, acting through our independent directors, in order to minimize potential conflicts with respect to commercial properties and development sites. We and The Saul Organization have entered into this agreement
in order to minimize conflicts with respect to shopping centers and certain of our commercial properties.
Shared Services.
We share with The Saul Organization certain ancillary functions, such as computer and payroll services, benefits administration and
in-house legal services. The terms of all sharing arrangements, including payments related thereto, are reviewed periodically by our Audit Committee, which is comprised solely of independent directors. Included in our general and administrative
expenses or capitalized to specific development projects, for the year ended December 31, 2012, are charges totaling $6.0 million, related to such shared services, which included rental payments for the Companys headquarters lease, which
were billed by The Saul Organization. Although we believe that the amounts allocated to us for such shared services represent a fair allocation between us and The Saul Organization, we have not obtained a third party appraisal of the value of these
services.
The B. F. Saul Insurance Agency of Maryland, Inc., a subsidiary of the B. F. Saul Company and a member of The Saul
Organization, is a general insurance agency that receives commissions and counter-signature fees in connection with our insurance program. Such commissions and fees amounted to approximately $373,000 for the year ended December 31, 2012.
Related Party Rents.
We sublease space for our corporate headquarters from a member of The Saul Organization, the building of which is owned by another member of The Saul Organization. The lease commenced in March 2002, was
extended for five years through March 2017, and provides for base rent escalated at 3% per year, with payment of a pro-rata share of operating expenses over a base year amount. The Company and The Saul Organization entered into a Shared
Services Agreement whereby each party pays a portion of the total rental payments based on a percentage proportionate to the number of employees employed by each party. The Companys rent expense for the year ended December 31, 2012 was
$850,000. Although the Company believes that this lease has terms comparable to what would have been obtained from a third party landlord, it did not seek bid proposals from any independent third parties when entering into its new corporate
headquarters lease.
Conflicts Based on Individual Tax Considerations.
The tax basis of members of The Saul Organization in our portfolio properties which were contributed to certain partnerships at the time
of our initial public offering in 1993 was substantially less than the fair market value thereof at the time of their contribution. In the event of our disposition of such properties, a disproportionately large share of the gain for federal income
tax purposes would be allocated to members of The Saul Organization. In addition, future reductions of the level of our debt, or future releases of the guarantees or indemnities with respect thereto by members of The Saul Organization, would cause
members of The Saul Organization to be considered, for federal income tax purposes, to have received constructive distributions. Depending on the overall level of debt and other factors, these distributions could be in excess of The Saul
Organizations bases in their Partnership units, in which case such excess constructive distributions would be taxable.
Consequently, it is in the interests of The Saul Organization that we continue to hold the contributed portfolio properties, that a
portion of our debt remains outstanding or is refinanced and that The Saul Organization guarantees and indemnities remain in place, in order to defer the taxable gain to members of The Saul Organization. Therefore, The Saul Organization may seek to
cause us to retain the contributed portfolio properties, and to refrain from reducing our debt or releasing The Saul Organization guarantees and indemnities, even when such action may
16
not be in the interests of some, or a majority, of our stockholders. In order to minimize these conflicts, decisions as to sales of the portfolio properties, or any refinancing, repayment or
release of guarantees and indemnities with respect to our debt, will be made by the independent directors.
Ability to Block Certain
Actions.
Under applicable law and the limited partnership agreement of the Operating Partnership, consent of the limited
partners is required to permit certain actions, including the sale of all or substantially all of the Operating Partnerships assets. Therefore, members of The Saul Organization, through their status as limited partners in the Operating
Partnership, could prevent the taking of any such actions, even if they were in the interests of some, or a majority, of our stockholders.
The amount of debt we have and the restrictions imposed by that debt could adversely affect our business and financial condition.
As of December 31, 2012, we had approximately $827.8 million of debt outstanding, $774.9 million of which was
long-term fixed-rate debt secured by 35 of our properties and $52.9 million of which was variable-rate debt due under a secured bank loan ($14.9 million) and our revolving credit facility ($38.0 million).
We currently have a general policy of limiting our borrowings to 50 percent of asset value, i.e., the value of our portfolio, as
determined by our Board of Directors by reference to the aggregate annualized cash flow from our portfolio. Our organizational documents contain no limitation on the amount or percentage of indebtedness which we may incur. Therefore, the Board of
Directors could alter or eliminate the current limitation on borrowing at any time. If our debt capitalization policy were changed, we could increase our leverage, resulting in an increase in debt service that could adversely affect our operating
cash flow and our ability to make expected distributions to stockholders, and in an increased risk of default on our obligations.
We have established our debt capitalization policy relative to asset value, which is computed by reference to the aggregate annualized cash flow from the properties in our portfolio rather than relative
to book value. We have used a measure tied to cash flow because we believe that the book value of our portfolio properties, which is the depreciated historical cost of the properties, does not accurately reflect our ability to borrow. Asset value,
however, is somewhat more variable than book value, and may not at all times reflect the fair market value of the underlying properties.
The amount of our debt outstanding from time to time could have important consequences to our stockholders. For example, it could:
|
|
|
require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations,
property acquisitions and other appropriate business opportunities that may arise in the future;
|
|
|
|
limit our ability to obtain any additional financing we may need in the future for working capital, debt refinancing, capital expenditures,
acquisitions, development or other general corporate purposes;
|
|
|
|
make it difficult to satisfy our debt service requirements;
|
|
|
|
limit our ability to make distributions on our outstanding common and preferred stock;
|
|
|
|
require us to dedicate increased amounts of our cash flow from operations to payments on our variable rate, unhedged debt if interest rates rise;
|
|
|
|
limit our flexibility in planning for, or reacting to, changes in our business and the factors that affect the profitability of our business, which may
place us at a disadvantage compared to competitors with less debt or debt with less restrictive terms; and
|
|
|
|
limit our ability to obtain any additional financing we may need in the future for working capital, debt refinancing, capital expenditures,
acquisitions, development or other general corporate purposes.
|
Our ability to make scheduled payments of
the principal of, to pay interest on, or to refinance, our indebtedness will depend primarily on our future performance, which to a certain extent is subject to economic,
17
financial, competitive and other factors described in this section. If we are unable to generate sufficient cash flow from our business in the future to service our debt or meet our other cash
needs, we may be required to refinance all or a portion of our existing debt, sell assets or obtain additional financing to meet our debt obligations and other cash needs. Our ability to refinance, sell assets or obtain additional financing may not
be possible on terms that we would find acceptable.
We are obligated to comply with financial and other covenants in our debt that could
restrict our operating activities, and the failure to comply could result in defaults that accelerate the payment under our debt.
Our secured debt generally contains customary covenants, including, among others, provisions:
|
|
|
relating to the maintenance of the property securing the debt;
|
|
|
|
restricting our ability to assign or further encumber the properties securing the debt; and
|
|
|
|
restricting our ability to enter into certain new leases or to amend or modify certain existing leases without obtaining consent of the lenders.
|
Our unsecured debt generally contains various restrictive covenants. The covenants in our unsecured debt
include, among others, provisions restricting our ability to:
|
|
|
incur additional unsecured debt;
|
|
|
|
guarantee additional debt;
|
|
|
|
make certain distributions, investments and other restricted payments, including distribution payments on our outstanding stock;
|
|
|
|
increase our overall secured and unsecured borrowing beyond certain levels; and
|
|
|
|
consolidate, merge or sell all or substantially all of our assets.
|
Our ability to meet some of the covenants in our debt, including covenants related to the condition of the property or payment of real
estate taxes, may be dependent on the performance by our tenants under their leases.
In addition, our line of credit requires us and our
subsidiaries to satisfy financial covenants. The material financial covenants require us, on a consolidated basis, to:
|
|
|
maintain tangible net worth, as defined in the loan agreement, of at least $503.3 million plus 80% of the Companys net equity proceeds
received after May 2012;
|
|
|
|
limit the amount of debt as a percentage of gross asset value, as defined in the loan agreement, to less than 60% (leverage ratio);
|
|
|
|
limit the amount of debt so that interest coverage will exceed 2.0x on a trailing four-quarter basis (interest expense coverage);
|
|
|
|
limit the amount of debt so that interest, scheduled principal amortization and preferred dividend coverage exceeds 1.3x on a trailing four-quarter
basis (fixed charge coverage); and
|
|
|
|
limit the amount of variable rate debt and debt with initial loan terms of less than five years to no more than 40% of total debt.
|
As of December 31, 2012, we were in compliance with all such covenants. If we were to breach any of
our debt covenants and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately, and, if the debt is secured, could immediately begin proceedings to take possession of the property
securing the loan. Some of our debt arrangements are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a covenant under
certain of our other debt obligations. As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.
18
Our development activities are inherently risky.
The ground-up development of improvements on real property, which is different from the renovation and redevelopment of existing
improvements, presents substantial risks. In addition to the risks associated with real estate investment in general as described elsewhere, the risks associated with our remaining development activities include:
|
|
|
significant time lag between commencement and completion subjects us to greater risks due to fluctuation in the general economy;
|
|
|
|
failure or inability to obtain construction or permanent financing on favorable terms;
|
|
|
|
expenditure of money and time on projects that may never be completed;
|
|
|
|
inability to achieve projected rental rates or anticipated pace of lease-up;
|
|
|
|
higher-than-estimated construction costs, including labor and material costs; and
|
|
|
|
possible delay in completion of the project because of a number of factors, including weather, labor disruptions, construction delays or delays in
receipt of zoning or other regulatory approvals, or acts of God (such as fires, earthquakes or floods).
|
Redevelopments and acquisitions may fail to perform as expected.
Our investment strategy includes the redevelopment and acquisition of community and neighborhood shopping centers that are anchored by supermarkets, drugstores or high volume, value-oriented retailers
that provide consumer necessities. The redevelopment and acquisition of properties entails risks that include the following, any of which could adversely affect our results of operations and our ability to meet our obligations:
|
|
|
our estimate of the costs to improve, reposition or redevelop a property may prove to be too low, and, as a result, the property may fail to achieve
the returns we have projected, either temporarily or for a longer time;
|
|
|
|
we may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify;
|
|
|
|
we may not be able to integrate new developments or acquisitions into our existing operations successfully;
|
|
|
|
properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project at the time we make the decision to invest, which may
result in the properties failure to achieve the returns we projected;
|
|
|
|
our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs until
after the property is acquired, which could significantly increase our total acquisition costs; and
|
|
|
|
our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller, may fail to reveal
various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.
|
Our ability
to grow will be limited if we cannot obtain additional capital.
Our growth strategy includes the redevelopment of
properties we already own and the acquisition of additional properties. Because we are required to distribute to our stockholders at least 90% of our taxable income each year to continue to qualify as a real estate investment trust, or REIT, for
federal income tax purposes, in addition to our undistributed operating cash flow, we rely upon the availability of debt or equity capital to fund our growth, which financing may or may not be available on favorable terms or at all. The debt could
include mortgage loans from third parties or the sale of debt securities. Equity capital could include our common stock or preferred stock. Additional financing, refinancing or other capital may not be available in the amounts we desire or on
favorable terms. Our access to debt or equity capital depends on a number of factors, including the general state of the capital markets, the markets perception of our growth potential, our ability to pay dividends, and our current and
potential future earnings. Depending on the outcome of these factors, we could experience delay or difficulty in implementing our growth strategy on satisfactory terms, or be unable to implement this strategy.
19
Our performance and value are subject to general risks associated with the real estate industry.
Our economic performance and the value of our real estate assets, and, consequently, the value of our investments,
are subject to the risk that if our properties do not generate revenue sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay distributions to our stockholders will be adversely
affected. As a real estate company, we are susceptible to the following real estate industry risks:
|
|
|
economic downturns in the areas where our properties are located;
|
|
|
|
adverse changes in local real estate market conditions, such as oversupply or reduction in demand;
|
|
|
|
changes in tenant preferences that reduce the attractiveness of our properties to tenants;
|
|
|
|
zoning or regulatory restrictions;
|
|
|
|
decreases in market rental rates;
|
|
|
|
weather conditions that may increase energy costs and other operating expenses;
|
|
|
|
costs associated with the need to periodically repair, renovate and re-lease space; and
|
|
|
|
increases in the cost of adequate maintenance, insurance and other operating costs, including real estate taxes, associated with one or more
properties, which may occur even when circumstances such as market factors and competition cause a reduction in revenue from one or more properties, although real estate taxes typically do not increase upon a reduction in such revenue.
|
Many real estate costs are fixed, even if income from our properties decreases.
Our financial results depend primarily on leasing space in our properties to tenants on terms favorable to us. Costs associated with real
estate investment, such as real estate taxes and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the investment. As a result,
cash flow from the operations of our properties may be reduced if a tenant does not pay its rent or we are unable to rent our properties on favorable terms. Under those circumstances, we might not be able to enforce our rights as landlord without
delays, and may incur substantial legal costs. Additionally, new properties that we may acquire or develop may not produce any significant revenue immediately, and the cash flow from existing operations may be insufficient to pay the operating
expenses and debt service associated with that property until the property is fully leased.
Competition may limit our ability to
purchase new properties and generate sufficient income from tenants.
Numerous commercial developers and real estate
companies compete with us in seeking tenants for properties and properties for acquisition. This competition may:
|
|
|
reduce properties available for acquisition;
|
|
|
|
increase the cost of properties available for acquisition;
|
|
|
|
reduce rents payable to us;
|
|
|
|
interfere with our ability to attract and retain tenants;
|
|
|
|
lead to increased vacancy rates at our properties; and
|
|
|
|
adversely affect our ability to minimize expenses of operation.
|
Retailers at our shopping center properties also face increasing competition from outlet stores, discount shopping clubs, and other forms
of marketing of goods, such as direct mail, internet marketing and telemarketing. This competition may reduce percentage rents payable to us and may contribute to lease defaults and insolvency of tenants. If we are unable to continue to attract
appropriate retail tenants to our properties, or to purchase new properties in our geographic markets, it could materially affect our ability to generate net income, service our debt and make distributions to our stockholders.
20
We may be unable to sell properties when appropriate because real estate investments are illiquid.
Real estate investments generally cannot be sold quickly. In addition, there are some limitations under federal
income tax laws applicable to real estate and to REITs in particular that may limit our ability to sell our assets. We may not be able to alter our portfolio promptly in response to changes in economic or other conditions. Our inability to respond
quickly to adverse changes in the performance of our investments could have an adverse effect on our ability to meet our obligations and make distributions to our stockholders.
Our insurance coverage on our properties may be inadequate.
We
carry comprehensive insurance on all of our properties, including insurance for liability, fire, flood, terrorism and rental loss. These policies contain coverage limitations. We believe this coverage is of the type and amount customarily obtained
for or by an owner of real property assets. We intend to obtain similar insurance coverage on subsequently acquired properties.
As a consequence of the September 11, 2001 terrorist attacks and other significant losses incurred by the insurance industry, the
availability of insurance coverage has decreased and the prices for insurance have increased. As a result, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance
companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts and toxic mold, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have
insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have
invested in a property, as well as the anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property. Material losses in excess of insurance proceeds may occur
in the future. Also, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed. Events such as
these could adversely affect our results of operations and our ability to meet our obligations, including distributions to our stockholders.
Environmental laws and regulations could reduce the value or profitability of our properties.
All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and regulations
relating to hazardous materials, environmental protection and human health and safety. Under various federal, state and local laws, ordinances and regulations, we and our tenants may be required to investigate and clean up certain hazardous or toxic
substances released on or in properties we own or operate, and also may be required to pay other costs relating to hazardous or toxic substances. This liability may be imposed without regard to whether we or our tenants knew about the release of
these types of substances or were responsible for their release. The presence of contamination or the failure to properly remediate contamination at any of our properties may adversely affect our ability to sell or lease those properties or to
borrow using those properties as collateral. The costs or liabilities could exceed the value of the affected real estate. We are not aware of any environmental condition with respect to any of our properties that management believes would have a
material adverse effect on our business, assets or results of operations taken as a whole. The uses of any of our properties prior to our acquisition of the property and the building materials used at the property are among the property-specific
factors that will affect how the environmental laws are applied to our properties. If we are subject to any material environmental liabilities, the liabilities could adversely affect our results of operations and our ability to meet our obligations.
We cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future
laws or regulations will be administered or interpreted or what environmental conditions may be found to exist on the properties in the future. Compliance with existing and new laws and regulations may require us or our tenants to spend funds to
remedy environmental problems. Our tenants, like many of their competitors, have incurred, and will continue to incur, capital and operating expenditures and other costs associated with complying with these laws and regulations, which will adversely
affect their potential profitability. Generally, our tenants must comply with environmental laws and meet remediation requirements. Our leases typically impose obligations on our tenants to indemnify us from any compliance costs we may incur as a
result of the environmental conditions on the property caused by the tenant. If a tenant fails to or cannot comply, we could be forced to pay these costs. If not addressed, environmental conditions could impair our ability to sell or re-lease the
affected properties in the future or result in lower sales prices or rent payments.
21
The Americans with Disabilities Act of 1990 (the ADA) could require us to take remedial
steps with respect to newly acquired properties.
The properties, as commercial facilities, are required to comply
with Title III of the ADA. Investigation of a property may reveal non-compliance with the ADA. The requirements of the ADA, or of other federal, state or local laws, also may change in the future and restrict further renovations of our properties
with respect to access for disabled persons. Future compliance with the ADA may require expensive changes to the properties.
The
revenue generated by our tenants could be negatively affected by various federal, state and local laws to which they are subject.
We and our tenants are subject to a wide range of federal, state and local laws and regulations, such as local licensing requirements, consumer protection laws and state and local fire, life-safety and
similar requirements that affect the use of the properties. The leases typically require that each tenant comply with all regulations. Failure to comply could result in fines by governmental authorities, awards of damages to private litigants, or
restrictions on the ability to conduct business on such properties. Non-compliance of this sort could reduce our revenue from a tenant, could require us to pay penalties or fines relating to any non-compliance, and could adversely affect our ability
to sell or lease a property.
Failure to qualify as a REIT for federal income tax purposes would cause us to be taxed as a corporation,
which would substantially reduce funds available for payment of distributions.
We believe that we are organized and
qualified as a REIT, and currently intend to operate in a manner that will allow us to continue to qualify as a REIT for federal income tax purposes under the Code. However, the IRS could successfully assert that we are not qualified as such. In
addition, we may not remain qualified as a REIT in the future. Qualification as a REIT involves the application of highly technical and complex Code provisions. The complexity of these provisions and of the applicable income tax regulations that
have been issued under the Code by the United States Department of Treasury is greater in the case of a REIT that holds its assets in partnership form. Certain facts and circumstances not entirely within our control may affect our ability to qualify
as a REIT. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying rents and other income. Satisfying this requirement could be difficult, for example, if defaults by tenants were to
reduce the amount of income from qualifying rents. Also, we must make annual distributions to stockholders of at least 90% of our net taxable income (excluding capital gains). In addition, new legislation, new regulations, new administrative
interpretations or new court decisions may significantly change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification. If we fail to qualify as a REIT:
|
|
|
we would not be allowed a deduction for dividend distributions to stockholders in computing taxable income;
|
|
|
|
we would be subject to federal income tax at regular corporate rates;
|
|
|
|
we could be subject to the federal alternative minimum tax;
|
|
|
|
unless we are entitled to relief under specific statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the
year during which we were disqualified;
|
|
|
|
we could be required to pay significant income taxes, which would substantially reduce the funds available for investment and for distribution to our
stockholders for each year in which we failed to qualify; and
|
|
|
|
we would no longer be required by law to make any distributions to our stockholders.
|
We believe that the Operating Partnership is treated as a partnership, and not as a corporation, for federal income tax purposes. If the
IRS were to challenge successfully the status of the Operating Partnership as a partnership for federal income tax purposes:
|
|
|
the Operating Partnership would be taxed as a corporation;
|
|
|
|
we would cease to qualify as a REIT for federal income tax purposes; and
|
|
|
|
the amount of cash available for distribution to our stockholders would be substantially reduced.
|
22
We may be required to incur additional debt to qualify as a REIT.
As a REIT, we must make annual distributions to stockholders of at least 90% of our REIT taxable income. We are subject to income tax on
amounts of undistributed REIT taxable income and net capital gain. In addition, we would be subject to a 4% excise tax if we fail to distribute sufficient income to meet a minimum distribution test based on our ordinary income, capital gain and
aggregate undistributed income from prior years. We intend to make distributions to stockholders to comply with the Codes distribution provisions and to avoid federal income and excise tax. We may need to borrow funds to meet our distribution
requirements because:
|
|
|
our income may not be matched by our related expenses at the time the income is considered received for purposes of determining taxable income; and
|
|
|
|
non-deductible capital expenditures or debt service requirements may reduce available cash but not taxable income.
|
In these circumstances, we might have to borrow funds on unfavorable terms and even if our management believes the market conditions make
borrowing financially unattractive.
The structure of our leases may jeopardize our ability to qualify as a REIT.
If the IRS were to challenge successfully the characterization of one or more of our leases of properties as leases for federal income
tax purposes, the Operating Partnership would not be treated as the owner of the related property or properties for federal income tax purposes. As a result, the Operating Partnership would lose tax depreciation and cost recovery deductions with
respect to one or more of our properties, which in turn could cause us to fail to qualify as a REIT. Although we will use our best efforts to structure any leasing transaction for properties acquired in the future so the lease will be characterized
as a lease and the Operating Partnership will be treated as the owner of the property for federal income tax purposes, we will not seek an advance ruling from the IRS and do not intend to seek an opinion of counsel that the Operating Partnership
will be treated as the owner of any leased properties for federal income tax purposes. Thus, the IRS could successfully assert that future leases will not be treated as leases for federal income tax purposes, which could adversely affect our
financial condition and results of operations.
To maintain our status as a REIT, we limit the amount of shares any one stockholder can
own.
The Code imposes certain limitations on the ownership of the stock of a REIT. For example, not more than 50% in
value of our outstanding shares of capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code). To protect our REIT status, our articles of incorporation restrict beneficial and constructive
ownership (defined by reference to various Code provisions) to no more than 2.5% in value of our issued and outstanding equity securities by any single stockholder with the exception of members of The Saul Organization, who are restricted to
beneficial and constructive ownership of no more than 39.9% in value of our issued and outstanding equity securities.
The
constructive ownership rules are complex. Shares of our capital stock owned, actually or constructively, by a group of related individuals and/or entities may be treated as constructively owned by one of those individuals or entities. As a result,
the acquisition of less than 2.5% or 39.9% in value of our issued and outstanding equity securities, by an individual or entity could cause that individual or entity (or another) to own constructively more than 2.5% or 39.9% in value of the
outstanding stock. If that happened, either the transfer or ownership would be void or the shares would be transferred to a charitable trust and then sold to someone who can own those shares without violating the respective ownership limit.
As of December 31, 2012, Mr. Saul and members of The Saul Organization owned common stock representing
approximately 36.0% in value of all our issued and outstanding equity securities. In addition, members of The Saul Organization beneficially owned Operating Partnership units that are, in general, convertible into our common stock on a one-for-one
basis. Members of the Saul Organization are permitted under our articles of incorporation to convert Operating Partnership units into shares of common stock or acquire additional shares of common stock until The Saul Organizations actual
ownership of common stock reaches 39.9% in value of our equity securities.
The Board of Directors may waive these
restrictions on a case-by-case basis. The Board has authorized the Company to grant waivers to look-through entities, such as mutual funds, in which shares of equity stock owned by
23
the entity are treated as owned proportionally by individuals who are the beneficial owners of the entity. Even though these entities may own stock in excess of the 2.5% ownership limit, no
individual beneficially or constructively would own more than 2.5%. The Board of Directors has agreed to waive the ownership limit with respect to certain mutual funds and similar investors. In addition, the Board of Directors has agreed to waive
the ownership limit with respect to certain bank pledgees of shares of our common stock and units issued by the Operating Partnership and held by members of The Saul Organization.
The ownership restrictions may delay, defer or prevent a transaction or a change of our control that might involve a premium price for
our equity stock or otherwise be in the stockholders best interest.
The lower tax rate on dividends of regular corporations may
cause investors to prefer to hold stock of regular corporations instead of REITs.
On May 28, 2003, the President
signed into law the Jobs and Growth Tax Relief Reconciliation Act of 2003 (as extended by subsequent legislation, which we refer to collectively as the Acts). Under the Acts, the maximum tax rate on the long-term capital gains of non-corporate
taxpayers was reduced to 15% (applicable to sales occurring from May 7, 2003 through December 31, 2012). The Acts also reduced the tax rate on qualified dividend income to the maximum capital gains rate and reduced the maximum
tax rate on ordinary income to 35%. Because, as a REIT, we are not generally subject to tax on the portion of our REIT taxable income or capital gains distributed to our stockholders, our distributions have generally not been eligible for the lower
tax rate on dividends. As a result, our ordinary REIT dividends have generally been taxed at the higher tax rates applicable to ordinary income. The lower rates scheduled to expire in 2012 under the Acts were permanently extended by the American
Taxpayer Relief Act of 2012 (which we refer to as the 2012 Relief Act). The 2012 Relief Act, however, does not extend all of the reduced rates for high-income taxpayers. Beginning January 1, 2013, in the case of married couples filing joint
returns with taxable income in excess of $450,000, heads of households with taxable income in excess of $425,000, and other individuals with taxable income in excess of $400,000, the maximum rates on ordinary income are 39.6% (as compared to 35%
prior to 2013) and the maximum rates on long-term capital gains and qualified dividend income are 20% (as compared to 15% prior to 2013). Estates and trusts have more compressed rate schedules. The changes enacted by the Acts (as modified by the
2012 Relief Act), or future legislation, could cause shares in non-REIT corporations to be a more attractive investment to individual investors than shares in REITs, and could have an adverse effect on the value of the Companys common stock.
We cannot assure you we will continue to pay dividends at historical rates.
Our ability to continue to pay dividends on our common stock at historical rates or to increase our common stock dividend rate will
depend on a number of factors, including, among others, the following:
|
|
|
our financial condition and results of future operations;
|
|
|
|
the performance of lease terms by tenants;
|
|
|
|
the terms of our loan covenants; and
|
|
|
|
our ability to acquire, finance, develop or redevelop and lease additional properties at attractive rates.
|
If we do not maintain or increase the dividend rate on our common stock, it could have an adverse effect on the market price of our
common stock and other securities. Payment of dividends on our common stock may be subject to payment in full of the dividends on any preferred stock or depositary shares and payment of interest on any debt securities we may offer.
Certain tax and anti-takeover provisions of our articles of incorporation and bylaws may inhibit a change of our control.
Certain provisions contained in our articles of incorporation and bylaws and the Maryland General Corporation Law may discourage a third
party from making a tender offer or acquisition proposal to us. If this were to happen, it could delay, deter or prevent a change in control or the removal of existing management. These provisions also may delay or prevent the stockholders from
receiving a premium for their stock over then-prevailing market prices. These provisions include:
|
|
|
the REIT ownership limit described above;
|
24
|
|
|
authorization of the issuance of our preferred stock with powers, preferences or rights to be determined by the Board of Directors;
|
|
|
|
a staggered, fixed-size Board of Directors consisting of three classes of directors;
|
|
|
|
special meetings of our stockholders may be called only by the Chairman of the Board, the president, by a majority of the directors or by stockholders
possessing no less than 25% of all the votes entitled to be cast at the meeting;
|
|
|
|
the Board of Directors, without a stockholder vote, can classify or reclassify unissued shares of preferred stock;
|
|
|
|
a member of the Board of Directors may be removed only for cause upon the affirmative vote of 75% of the Board of Directors or 75% of the
then-outstanding capital stock;
|
|
|
|
advance notice requirements for proposals to be presented at stockholder meetings; and
|
|
|
|
the terms of our articles of incorporation regarding business combinations and control share acquisitions.
|
We may amend or revise our business policies without your approval.
Our Board of Directors may amend or revise our operating policies without stockholder approval. Our investment, financing and borrowing
policies and policies with respect to all other activities, such as growth, debt, capitalization and operations, are determined by the Board of Directors or those committees or officers to whom the Board of Directors has delegated that authority.
The Board of Directors may amend or revise these policies at any time and from time to time at its discretion. A change in these policies could adversely affect our financial condition and results of operations, and the market price of our
securities.
Item 1B. Unresolved Staff Comments
We have received no written comments from the Securities and Exchange Commission staff regarding our periodic or current reports in the
180 days preceding December 31, 2012 that remain unresolved.
Overview
As of December 31, 2012, the Company is the owner, developer and operator of a real estate portfolio composed of 58 operating
properties, totaling approximately 9.5 million square feet of gross leasable area (GLA), and two development parcels. The properties are located primarily in the Washington, D.C./Baltimore, Maryland metropolitan area. The portfolio
is composed of 50 neighborhood and community Shopping Centers, and seven predominantly Mixed-Use Properties totaling approximately 7.9 million and 1.6 million square feet of GLA, respectively. No single property accounted for more than
6.5% of the total gross leasable area. A majority of the Shopping Centers are anchored by several major tenants. Thirty-three of the Shopping Centers were anchored by a grocery store and offer primarily day-to-day necessities and services. Two
retail tenants, Giant Food (5.0%), a tenant at ten Shopping Centers and Safeway (2.7%), a tenant at eight Shopping Centers, individually accounted for more than 2.5% of the Companys total revenue for the year ended December 31, 2012. The
average rent, calculated using annualized base rent for leased space as of December 31, 2012 and 2011, excluding residential, was $17.96 per square foot and $17.31 per square foot, respectively, for the Companys Current Portfolio
Properties.
The Company expects to hold its properties as long-term investments, and it has no maximum period for retention
of any investment. It plans to selectively acquire additional income-producing properties and to expand, renovate, and improve its properties when circumstances warrant. See Item 1. BusinessOperating Strategies and
BusinessCapital Policies.
The Shopping Centers
Community and neighborhood shopping centers typically are anchored by one or more grocery stores, discount department stores or drug
stores. These anchors offer day-to-day necessities rather than apparel and luxury goods and, therefore, generate consistent local traffic. By contrast, regional malls generally are larger and typically are anchored by one or more full-service
department stores.
25
In general, the Shopping Centers are seasoned community and neighborhood shopping centers
located in well established, highly developed, densely populated, middle and upper income areas. The 2012 average estimated population within a one- and three-mile radius of the Shopping Centers is approximately 15,300 and 93,600, respectively. The
2012 average household income within the one- and three-mile radius of the Shopping Centers is approximately $112,400 and $114,000, respectively, compared to a national average of $68,200. Because the Shopping Centers generally are located in highly
developed areas, management believes that there is little likelihood that significant numbers of competing centers will be developed in the future.
The Shopping Center properties range in size from approximately 20,000 to 575,000 square feet of GLA, with six in excess of 300,000 square feet, and average approximately 154,000 square feet. A majority
of the Shopping Centers are anchored by several major tenants and other tenants offering primarily day-to-day necessities and services. Thirty-three of the Shopping Centers are anchored by a grocery store.
Lease Expirations of Shopping Center Properties
The following table sets forth, by year of expiration, the aggregate amount of base rent and leasable area for leases in place at the Shopping Centers that the Company owned as of December 31, 2012,
for each of the next ten years beginning with 2013, assuming that none of the tenants exercise renewal options and excluding an aggregate of 522,500 square feet of unleased space, which represented 6.6% of the GLA of the Shopping Centers as of
December 31, 2012.
Lease Expirations of Shopping Center Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year of Lease Expiration
|
|
Leasable
Area
Represented
by Expiring
Leases
|
|
|
Percentage of
Leasable
Area
Represented
by Expiring
Leases
|
|
|
Annual Base
Rent Under
Expiring Leases
(1)
|
|
|
Percentage
of Annual
Base Rent
Under
Expiring
Leases
|
|
2013
|
|
|
801,450
|
sf
|
|
|
10.2
|
%
|
|
$
|
12,847,135
|
|
|
|
11.3
|
%
|
2014
|
|
|
902,750
|
|
|
|
11.5
|
%
|
|
|
16,930,769
|
|
|
|
14.9
|
%
|
2015
|
|
|
804,644
|
|
|
|
10.2
|
%
|
|
|
13,243,763
|
|
|
|
11.7
|
%
|
2016
|
|
|
1,243,980
|
|
|
|
15.8
|
%
|
|
|
14,096,323
|
|
|
|
12.4
|
%
|
2017
|
|
|
861,598
|
|
|
|
10.9
|
%
|
|
|
16,505,576
|
|
|
|
14.5
|
%
|
2018
|
|
|
408,794
|
|
|
|
5.2
|
%
|
|
|
6,412,468
|
|
|
|
5.6
|
%
|
2019
|
|
|
424,532
|
|
|
|
5.4
|
%
|
|
|
5,183,222
|
|
|
|
4.6
|
%
|
2020
|
|
|
143,256
|
|
|
|
1.8
|
%
|
|
|
2,895,798
|
|
|
|
2.5
|
%
|
2021
|
|
|
158,754
|
|
|
|
2.0
|
%
|
|
|
2,321,444
|
|
|
|
2.0
|
%
|
2022
|
|
|
603,210
|
|
|
|
7.7
|
%
|
|
|
6,831,873
|
|
|
|
6.0
|
%
|
Thereafter
|
|
|
1,001,666
|
|
|
|
12.7
|
%
|
|
|
16,352,247
|
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,354,634
|
sf
|
|
|
93.4
|
%
|
|
$
|
113,620,618
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Calculated using annualized contractual base rent payable as of December 31, 2012 for the gross leasable area expiring, and excluding expenses payable by or
reimbursable from tenants.
|
26
The Mixed-Use Properties
Six of the seven Mixed-Use Properties are located in the Washington, D.C. metropolitan area and contain an aggregate GLA of approximately 1.2 million square feet, comprised of 1.1 million and
131,000 square feet of office and retail space, respectively, and 244 apartments. The seventh Mixed-Use Property is located in Tulsa, Oklahoma and contains GLA of 197,000 square feet. The Mixed-Use Properties represent three distinct styles of
facilities, are located in differing commercial environments with distinctive demographic characteristics, and are geographically removed from one another. Accordingly, management believes that the Washington, D.C. area mixed-use properties compete
for tenants in different commercial and geographic sub-markets of the metropolitan Washington, D.C. market and do not compete with one another.
601 Pennsylvania Avenue is a nine-story, 227,000 square foot Class A office building (with a small amount of street level retail space) built in 1986 and located in a prime location in downtown
Washington, D.C. Washington Square at Old Town is a 235,000 square foot Class A mixed-use office/retail complex completed in 2000 and located on a two-acre site along Alexandrias main street, North Washington Street, in historic Old Town
Alexandria, Virginia. Avenel Business Park is a 391,000 square foot research park located in the suburban Maryland, I-270 biotech corridor. The business park consists of twelve one-story buildings built in six phases, completed between 1981 and
2000. Clarendon Center is a recently constructed mixed-use Class A commercial and residential project located at the Clarendon Metro station in Arlington County, Virginia. This development contains 171,500 square feet of office, 42,000 square
feet of retail and 244 apartment units.
Crosstown Business Center is a 197,000 square foot flex office/warehouse property
located in Tulsa, Oklahoma. The property is located in close proximity to Tulsas international airport and major roadways and has attracted tenants requiring light industrial and distribution facilities.
The economic downturn of the last five years has negatively affected retail and office property operating performance. While the impact
in the Washington, D.C. metropolitan area, where the majority of the Companys properties are located, has generally been less severe, issues facing the Federal government relating to spending cuts and budget policies cloud our current economic
recovery with uncertainty. Overall operating trends have been encouraging, but both retail and office real estate fundamentals continue to be vulnerable to adverse developments in the housing and public and private sector job markets.
The Company recently completed negotiation of lease termination agreements with the tenants of Van Ness Square and expects the building
will be vacant on or about April 30, 2013. Costs incurred related to those termination arrangements are being amortized to expense using the straight-line method over the remaining terms of the leases, are included in Predevelopment
Expenses in the Consolidated Statements of Operations, totaled $2.7 million in 2012 and are expected to total approximately $3.3 million over the first two quarters of 2013. The Company intends to develop a primarily residential project
with street-level retail and 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.
Lease Expirations of Mixed-Use Properties
The following table sets forth, by year of expiration, the aggregate amount of base rent and leasable area for commercial leases in place
at the Mixed-Use Properties that the Company owned as of December 31, 2012, for each of the next ten years beginning with 2013, assuming that none of the tenants exercise renewal options and excluding an aggregate of 245,100 square feet of
unleased office and retail space, which represented 17.2% of the GLA of the commercial space within the Mixed-Use Properties as of December 31, 2012.
27
Commercial Lease Expirations of Mixed-Use Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year of Lease Expiration
|
|
Leasable
Area
Represented
by Expiring
Leases
|
|
|
Percentage of
Leasable
Area
Represented
by Expiring
Leases
|
|
|
Annual Base
Rent Under
Expiring
Leases (1)
|
|
|
Percentage
of Annual
Base Rent
Under
Expiring
Leases
|
|
2013
|
|
|
176,835
|
sf
|
|
|
12.4
|
%
|
|
$
|
3,909,384
|
|
|
|
10.9
|
%
|
2014
|
|
|
234,604
|
|
|
|
16.5
|
%
|
|
|
9,680,872
|
|
|
|
27.1
|
%
|
2015
|
|
|
63,056
|
|
|
|
4.4
|
%
|
|
|
1,659,700
|
|
|
|
4.6
|
%
|
2016
|
|
|
141,045
|
|
|
|
9.9
|
%
|
|
|
3,293,279
|
|
|
|
9.2
|
%
|
2017
|
|
|
115,077
|
|
|
|
8.1
|
%
|
|
|
1,983,124
|
|
|
|
5.6
|
%
|
2018
|
|
|
44,491
|
|
|
|
3.1
|
%
|
|
|
1,470,047
|
|
|
|
4.1
|
%
|
2019
|
|
|
38,842
|
|
|
|
2.7
|
%
|
|
|
1,747,461
|
|
|
|
4.9
|
%
|
2020
|
|
|
98,829
|
|
|
|
6.9
|
%
|
|
|
1,463,617
|
|
|
|
4.1
|
%
|
2021
|
|
|
75,417
|
|
|
|
5.3
|
%
|
|
|
3,888,164
|
|
|
|
10.9
|
%
|
2022
|
|
|
75,559
|
|
|
|
5.3
|
%
|
|
|
2,484,204
|
|
|
|
7.0
|
%
|
Thereafter
|
|
|
114,615
|
|
|
|
8.1
|
%
|
|
|
4,134,620
|
|
|
|
11.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,178,370
|
sf
|
|
|
82.8
|
%
|
|
$
|
35,714,472
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Calculated using annualized contractual base rent payable as of December 31, 2012 for the gross leasable area expiring, and excluding expenses payable by or
reimbursable from tenants.
|
As of December 31, 2012, the Company had 244 apartment leases, 233 of which
will expire in 2013, nine of which will expire in 2014, and two of which will expire in 2015. Annual base rent due under these leases is $7.1 million, $241,000, and $72,000 for the years ending December 31, 2013, 2014 and 2015,
respectively.
28
Current Portfolio Properties
The following table sets forth, at the dates indicated, certain information regarding the Current Portfolio Properties:
Saul Centers, Inc.
Schedule of Current Portfolio Properties
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
Location
|
|
Leasable
Area
(Square
Feet)
|
|
|
Year Acquired
or
Developed
(Renovated)
|
|
Land
Area
(Acres)
|
|
|
Percentage Leased
(1)
|
|
|
Anchor / Significant
Tenants
|
|
|
|
|
|
Dec-12
|
|
|
Dec-11
|
|
|
Shopping Centers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashburn Village
|
|
Ashburn, VA
|
|
|
221,273
|
|
|
1994/00/01/02/06
|
|
|
26.4
|
|
|
|
92
|
%
|
|
|
88
|
%
|
|
Giant Food, Hallmark Cards, McDonalds, Burger King, Dunkin Donuts, Kinder Care
|
Ashland Square Phase I
|
|
Dumfries, VA
|
|
|
23,120
|
|
|
2007
|
|
|
2.0
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Capital One Bank, CVS Pharmacy, All American Steakhouse
|
Beacon Center
|
|
Alexandria, VA
|
|
|
358,015
|
|
|
1972 (1993/99/07)
|
|
|
32.3
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Lowes Home Improvement Center, Giant Food, Office Depot, Outback Steakhouse, Marshalls, Hancock Fabrics, Party Depot, Panera Bread, TGI Fridays, Starbucks, Famous Daves,
Chipotle
|
BJs Wholesale Club
|
|
Alexandria, VA
|
|
|
115,660
|
|
|
2008
|
|
|
9.6
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
BJs Wholesale Club
|
Boca Valley Plaza
|
|
Boca Raton, FL
|
|
|
121,269
|
|
|
2004
|
|
|
12.7
|
|
|
|
87
|
%
|
|
|
80
|
%
|
|
Publix, Wachovia Bank, Jaco Hybrid Training, Subway
|
Boulevard
|
|
Fairfax, VA
|
|
|
49,140
|
|
|
1994 (1999/09)
|
|
|
5.0
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Panera Bread, Party City, Petco
|
Briggs Chaney MarketPlace
|
|
Silver Spring, MD
|
|
|
194,347
|
|
|
2004
|
|
|
18.2
|
|
|
|
99
|
%
|
|
|
99
|
%
|
|
Safeway, Ross Dress For Less, Family Dollar, Advance Auto. McDonalds, Wendys, Chuck E Cheeses
|
Broadlands Village
|
|
Ashburn, VA
|
|
|
159,734
|
|
|
2003/4/6
|
|
|
24.0
|
|
|
|
85
|
%
|
|
|
91
|
%
|
|
Safeway, The All American Steakhouse, Bonefish Grill, Starbucks, LA Boxing
|
Countryside Marketplace
|
|
Sterling, VA
|
|
|
141,696
|
|
|
2004
|
|
|
16.0
|
|
|
|
92
|
%
|
|
|
90
|
%
|
|
Safeway, CVS Pharmacy, Starbucks, McDonalds
|
Cranberry Square
|
|
Westminster, MD
|
|
|
141,569
|
|
|
2011
|
|
|
18.9
|
|
|
|
92
|
%
|
|
|
91
|
%
|
|
Giant Food, Staples, Party City, Pier 1 Imports, Jos A Banks, Wendys, Giant Gas
|
Cruse MarketPlace
|
|
Cumming, GA
|
|
|
78,686
|
|
|
2004
|
|
|
10.6
|
|
|
|
84
|
%
|
|
|
88
|
%
|
|
Publix, Subway
|
Flagship Center
|
|
Rockville, MD
|
|
|
21,500
|
|
|
1972, 1989
|
|
|
0.5
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Capital One Bank
|
French Market
|
|
Oklahoma City, OK
|
|
|
244,724
|
|
|
1974 (1984/98)
|
|
|
13.8
|
|
|
|
87
|
%
|
|
|
94
|
%
|
|
Burlington Coat Factory, Bed Bath & Beyond, Staples, Lakeshore Learning Center, Alfred Angelo, Dollar Tree
|
Germantown
|
|
Germantown, MD
|
|
|
27,241
|
|
|
1992
|
|
|
2.7
|
|
|
|
81
|
%
|
|
|
82
|
%
|
|
Jiffy Lube
|
Giant
|
|
Milford Mill, MD
|
|
|
70,040
|
|
|
1972 (1990)
|
|
|
5.0
|
|
|
|
94
|
%
|
|
|
94
|
%
|
|
Giant Food
|
The Glen
|
|
Woodbridge, VA
|
|
|
136,440
|
|
|
1994 (2005)
|
|
|
14.7
|
|
|
|
96
|
%
|
|
|
96
|
%
|
|
Safeway Marketplace, The All American Steakhouse, Panera Bread, Five Guys, Chipotle
|
Great Eastern
|
|
District Heights, MD
|
|
|
255,398
|
|
|
1972 (1995)
|
|
|
31.9
|
|
|
|
75
|
%
|
|
|
98
|
%
|
|
Fresh World, Pep Boys, Big Lots, No Excuse Workout
|
Great Falls Center
|
|
Great Falls, VA
|
|
|
91,666
|
|
|
2008
|
|
|
11.0
|
|
|
|
98
|
%
|
|
|
95
|
%
|
|
Safeway, CVS Pharmacy, Capital One Bank, Starbucks, Subway, Walpole Woodworkers
|
Hampshire Langley
|
|
Takoma Park, MD
|
|
|
131,700
|
|
|
1972 (1979)
|
|
|
9.9
|
|
|
|
100
|
%
|
|
|
98
|
%
|
|
Expo E Mart, Radio Shack, Starbucks, Footlocker, Chuck E. Cheeses
|
Hunt Club Corners
|
|
Apopka, FL
|
|
|
101,522
|
|
|
2006
|
|
|
13.1
|
|
|
|
94
|
%
|
|
|
94
|
%
|
|
Publix, Walgreens, Radio Shack, Hallmark
|
Jamestown Place
|
|
Altamonte Springs, FL
|
|
|
96,372
|
|
|
2005
|
|
|
10.9
|
|
|
|
93
|
%
|
|
|
90
|
%
|
|
Publix, Carrabas Italian Grill
|
Kentlands Square I
|
|
Gaithersburg, MD
|
|
|
114,381
|
|
|
2002
|
|
|
11.5
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Lowes Home Improvement Center, Chipotle
|
Kentlands Square II
|
|
Gaithersburg, MD
|
|
|
240,683
|
|
|
2011
|
|
|
22.3
|
|
|
|
96
|
%
|
|
|
100
|
%
|
|
Giant Food, Kmart, Party City, Panera Bread, Not Your Average Joes, Payless Shoes, Hallmark, Chick-Fil-A, Coal Fire Pizza
|
Kentlands Place
|
|
Gaithersburg, MD
|
|
|
40,648
|
|
|
2005
|
|
|
3.4
|
|
|
|
100
|
%
|
|
|
97
|
%
|
|
Elizabeth Ardens Red Door Salon, Bonefish Grill, Subway
|
29
Saul Centers, Inc.
Schedule of Current Portfolio Properties
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
Location
|
|
Leasable
Area
(Square
Feet)
|
|
|
Year Acquired
or
Developed
(Renovated)
|
|
Land
Area
(Acres)
|
|
|
Percentage Leased
(1)
|
|
|
Anchor / Significant
Tenants
|
|
|
|
|
|
Dec-12
|
|
|
Dec-11
|
|
|
Shopping Centers (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lansdowne Town Center
|
|
Leesburg, VA
|
|
|
189,352
|
|
|
2006
|
|
|
23.4
|
|
|
|
93
|
%
|
|
|
96
|
%
|
|
Harris Teeter, CVS Pharmacy, Panera Bread, Not Your Average Joes, Starbucks, Velocity 5, Capital One Bank
|
Leesburg Pike Plaza
|
|
Baileys Crossroads, VA
|
|
|
97,752
|
|
|
1966 (1982/95)
|
|
|
9.4
|
|
|
|
100
|
%
|
|
|
95
|
%
|
|
CVS Pharmacy, Party Depot, FedEx Kinkos, Radio Shack, Verizon Wireless
|
Lumberton Plaza
|
|
Lumberton, NJ
|
|
|
193,044
|
|
|
1975 (1992/96)
|
|
|
23.3
|
|
|
|
93
|
%
|
|
|
76
|
%
|
|
Bottom Dollar Food, Rite Aid, Virtua Health Center, Radio Shack, Family Dollar, Retro Fitness, Big Lots
|
Metro Pike Center
|
|
Rockville, MD
|
|
|
67,488
|
|
|
2010
|
|
|
4.6
|
|
|
|
84
|
%
|
|
|
76
|
%
|
|
McDonalds, Jennifer Convertibles, Fed ExKinkos, Dunkin Donuts, Seven Eleven
|
Shops at Monocacy
|
|
Frederick, MD
|
|
|
109,144
|
|
|
2004
|
|
|
13.0
|
|
|
|
92
|
%
|
|
|
91
|
%
|
|
Giant Food, Giant Gas Station, Panera Bread, Starbucks, Five Guys, California Tortilla
|
Northrock
|
|
Warrenton, VA
|
|
|
99,789
|
|
|
2009
|
|
|
15.4
|
|
|
|
81
|
%
|
|
|
81
|
%
|
|
Harris Teeter, Longhorn Steakhouse, Ledos Pizza, Capital One Bank
|
Olde Forte Village
|
|
Ft. Washington, MD
|
|
|
143,577
|
|
|
2003
|
|
|
16.0
|
|
|
|
96
|
%
|
|
|
94
|
%
|
|
Safeway, Advance Auto, Dollar Tree, Radio Shack, McDonalds, Wendys, Ledos Pizza
|
Olney
|
|
Olney, MD
|
|
|
53,765
|
|
|
1975 (1990)
|
|
|
3.7
|
|
|
|
94
|
%
|
|
|
96
|
%
|
|
Rite Aid, Olney Grill, Ledos Pizza, Popeyes
|
Orchard Park
|
|
Dunwoody, GA
|
|
|
87,885
|
|
|
2007
|
|
|
10.5
|
|
|
|
92
|
%
|
|
|
90
|
%
|
|
Kroger, GNC, Subway
|
Palm Springs Center
|
|
Altamonte Springs, FL
|
|
|
126,446
|
|
|
2005
|
|
|
12.0
|
|
|
|
98
|
%
|
|
|
94
|
%
|
|
Albertsons, Office Depot, Mimis Cafe, Toojays Deli
|
Ravenwood
|
|
Baltimore, MD
|
|
|
93,328
|
|
|
1972 (2006)
|
|
|
8.0
|
|
|
|
91
|
%
|
|
|
93
|
%
|
|
Giant Food, Starbucks
|
11503 Rockville Pike/5541 Nicholson Lane
|
|
Rockville, MD
|
|
|
40,249
|
|
|
2010/2012
|
|
|
3.6
|
|
|
|
70
|
%
|
|
|
100
|
%
|
|
Staples, Casual Male
|
1500 Rockville Pike
|
|
Rockville, MD
|
|
|
52,681
|
|
|
2012
|
|
|
6.7
|
|
|
|
91
|
%
|
|
|
na
|
|
|
Party City
|
Seabreeze Plaza
|
|
Palm Harbor, FL
|
|
|
146,673
|
|
|
2005
|
|
|
18.4
|
|
|
|
97
|
%
|
|
|
95
|
%
|
|
Publix, Earth Origins Health Food, Petco, Planet Fitness, Vision Works
|
Marketplace at Sea Colony
|
|
Bethany Beach, DE
|
|
|
21,677
|
|
|
2008
|
|
|
5.1
|
|
|
|
90
|
%
|
|
|
95
|
%
|
|
Seacoast Realty, Armands Pizza, Candy Kitchen, Turquoise Restaurant
|
Seven Corners
|
|
Falls Church, VA
|
|
|
574,831
|
|
|
1973 (1994-7/07)
|
|
|
31.6
|
|
|
|
100
|
%
|
|
|
91
|
%
|
|
The Home Depot, Shoppers Food & Pharmacy, Michaels Arts & Crafts, Barnes & Noble, Ross Dress For Less, Ski Chalet, G Street Fabrics, Off-Broadway Shoes, JoAnn Fabrics,
Dress Barn, Starbucks, Dogfishhead Ale House, Red Robin Gourmet Burgers, Chipotle, Wendys, Burlington Coat Factory
|
Severna Park Marketplace
|
|
Severna Park, MD
|
|
|
254,174
|
|
|
2011
|
|
|
20.6
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Giant Food, Kohls, Office Depot, A.C. Moore, Goodyear, Chipotle, McDonalds, Jos. A Banks, Radio Shack, Atlanta Bread Company, Five Guys, Unleashed
|
Shops at Fairfax
|
|
Fairfax, VA
|
|
|
68,762
|
|
|
1975 (1993/99)
|
|
|
6.7
|
|
|
|
100
|
%
|
|
|
95
|
%
|
|
Super H Mart
|
Smallwood Village Center
|
|
Waldorf, MD
|
|
|
173,281
|
|
|
2006
|
|
|
25.1
|
|
|
|
70
|
%
|
|
|
68
|
%
|
|
Safeway, CVS Pharmacy, Family Dollar
|
Southdale
|
|
Glen Burnie, MD
|
|
|
484,115
|
|
|
1972 (1986)
|
|
|
39.6
|
|
|
|
93
|
%
|
|
|
83
|
%
|
|
The Home Depot, Food Valu, Michaels Arts & Crafts, Marshalls, PetSmart, Value City Furniture, Athletic Warehouse, Starbucks, Gallo Clothing, Office Depot
|
Southside Plaza
|
|
Richmond, VA
|
|
|
371,761
|
|
|
1972
|
|
|
32.8
|
|
|
|
92
|
%
|
|
|
92
|
%
|
|
Community Supermarket, Maxway, Citi Trends, City of Richmond, McDonalds, Burger King, Kool Smiles, Annas Linens
|
South Dekalb Plaza
|
|
Atlanta, GA
|
|
|
163,418
|
|
|
1976
|
|
|
14.6
|
|
|
|
88
|
%
|
|
|
88
|
%
|
|
Maxway, Big Lots, Emory Clinic, Deal$(Dollar Tree)
|
Thruway
|
|
Winston-Salem, NC
|
|
|
362,547
|
|
|
1972 (1997)
|
|
|
30.5
|
|
|
|
93
|
%
|
|
|
87
|
%
|
|
Harris Teeter, Trader Joes, Stein Mart, Talbots, Hanes Brands, Jos. A Banks, Bonefish Grill, Chicos, Ann Taylor Loft, Coldwater Creek, Rite Aid, FedEx/Kinkos, Plow &
Hearth, New Balance, Aveda Salon, Christies Hallmark, Carters Kids, McDonalds, Chick-Fil-A, Wells Fargo Bank, Francescas Collections, Great Outdoor Provision Company, White House / Black Market
|
Village Center
|
|
Centreville, VA
|
|
|
146,309
|
|
|
1990
|
|
|
17.2
|
|
|
|
99
|
%
|
|
|
90
|
%
|
|
Giant Food, Tuesday Morning, Starbucks, McDonalds, Pet Supplies Plus
|
Westview Village
|
|
Frederick, MD
|
|
|
97,611
|
|
|
2009
|
|
|
10.4
|
|
|
|
85
|
%
|
|
|
57
|
%
|
|
Mimis Cafe, Sleepys, Music & Arts, Firehouse Subs, CiCis Pizza, Café Rio, Regus
|
White Oak
|
|
Silver Spring, MD
|
|
|
480,676
|
|
|
1972 (1993)
|
|
|
28.5
|
|
|
|
100
|
%
|
|
|
99
|
%
|
|
Giant Food, Sears, Walgreens, Radio Shack, Boston Market, Sarku
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shopping Centers
|
|
|
7,877,159
|
|
|
|
|
|
757.1
|
|
|
|
93.4
|
%
|
|
|
91.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Saul Centers, Inc.
Schedule of Current Portfolio Properties
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
Location
|
|
Leasable
Area
(Square
Feet)
|
|
|
Year
Acquired
or
Developed
(Renovated)
|
|
Land
Area
(Acres)
|
|
|
Percentage Leased
(1)
|
|
|
Anchor / Significant
Tenants
|
|
|
|
|
|
Dec-12
|
|
|
Dec-11
|
|
|
Mixed-Use Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avenel Business Park
|
|
Gaithersburg, MD
|
|
|
390,683
|
|
|
1981-2000
|
|
|
37.1
|
|
|
|
83
|
%
|
|
|
80
|
%
|
|
General Services Administration, SeraCare Life Sciences, Bio-Reference Laboratories, Inc, Direct Buy
|
Clarendon Center-North Block
|
|
Arlington, VA
|
|
|
108,387
|
|
|
2010
|
|
|
0.6
|
|
|
|
96
|
%
|
|
|
86
|
%
|
|
Petes New Haven Pizza, AT&T, BGR, Airline Reporting Corporation, Personnel Decisions
|
Clarendon Center-South Block
|
|
Arlington, VA
|
|
|
104,894
|
|
|
2010
|
|
|
1.3
|
|
|
|
44
|
%
|
|
|
68
|
%
|
|
Trader Joes, Circa, Burke Herbert Bank, Cannon Design, Winston Partners, Keppler Speakers Bureau, ECG Management Co., Leadership Institute, Capital One
|
Clarendon Center Residential-South Block (244 units)
|
|
|
|
|
188,671
|
|
|
2010
|
|
|
|
|
|
|
83
|
%
|
|
|
86
|
%
|
|
|
Crosstown Business Center
|
|
Tulsa, OK
|
|
|
197,127
|
|
|
1975 (2000)
|
|
|
22.4
|
|
|
|
77
|
%
|
|
|
87
|
%
|
|
Compass Group, Roxtec, Keystone Automotive, Freedom Express, Direct TV, Auto Panels Plus
|
601 Pennsylvania Ave.
|
|
Washington, DC
|
|
|
226,604
|
|
|
1973 (1986)
|
|
|
1.0
|
|
|
|
95
|
%
|
|
|
95
|
%
|
|
National Gallery of Art, American Assn. of Health Plans, Credit Union National Assn., Southern Company, HQ Global, Freedom Forum, Pharmaceutical Care
Management Assn., Capital Grille
|
Van Ness Square
|
|
Washington, DC
|
|
|
159,411
|
|
|
1973 (1990)
|
|
|
1.4
|
|
|
|
44
|
%
|
|
|
67
|
%
|
|
Office Depot, Pier One
|
Washington Square
|
|
Alexandria, VA
|
|
|
236,376
|
|
|
1975 (2000)
|
|
|
2.0
|
|
|
|
89
|
%
|
|
|
92
|
%
|
|
Vanderweil Engineering, AECOM, Freeman Decorating Services, Tauri Group, Cooper Carry, Bank of America, Marketing General, Alexandria Economic Development, Trader Joes, Fed
Ex/Kinkos, Talbots, Teaism Restaurant, Starbucks, The Business Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mixed-Use Properties
|
|
|
1,612,153
|
|
|
|
|
|
65.8
|
|
|
|
82.8
|
%
(2)
|
|
|
85.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Portfolio
|
|
|
9,489,312
|
|
|
|
|
|
822.9
|
|
|
|
91.7
|
%
(2)
|
|
|
90.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and Development Parcels
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashland Square Phase II
|
|
Manassas, VA
|
|
|
|
|
|
2004
|
|
|
17.3
|
|
|
|
Marketing to grocers and other retail businesses, with a
development timetable yet to be finalized.
|
New Market
|
|
New Market, MD
|
|
|
|
|
|
2005
|
|
|
35.5
|
|
|
|
Parcel will accommodate retail development in excess of
120,000 SF near I-70, east of Frederick, Maryland. A
development timetable has not been
determined.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Development Properties
|
|
|
|
|
|
|
|
|
52.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Percentage leased is a percentage of rentable square feet leased for commercial space and a percentage of units leased for apartments.
|
(2)
|
Total percentage leased is for commercial space only.
|
31
Item 3. Legal Proceedings
In the normal course of business, the Company is involved in litigation, including litigation arising out of the collection of rents, the
enforcement or defense of the priority of its security interests, and the continued development and marketing of certain of its real estate properties. In the opinion of management, litigation that is currently pending should not have a material
adverse impact on the financial condition or future operations of the Company.
Item 4. Mine Safety
Disclosures
Not applicable.
Notes to Consolidated Financial Statements
1.
|
ORGANIZATION, FORMATION, AND BASIS OF PRESENTATION
|
Organization
Saul Centers, Inc. (Saul Centers) was incorporated under the Maryland General Corporation Law on June 10, 1993. Saul Centers operates as a real estate investment trust (a
REIT) under the Internal Revenue Code of 1986, as amended (the Code). The Company is required to annually distribute at least 90% of its REIT taxable income (excluding net capital gains) to its stockholders and meet certain
organizational and other requirements. Saul Centers has made and intends to continue to make regular quarterly distributions to its stockholders. Saul Centers, together with its wholly owned subsidiaries and the limited partnerships of which Saul
Centers or one of its subsidiaries is the sole general partner, are referred to collectively as the Company. B. Francis Saul II serves as Chairman of the Board of Directors and Chief Executive Officer of Saul Centers.
Formation and Structure of Company
Saul Centers was formed to continue and expand the shopping center business previously owned and conducted by the B. F. Saul Real Estate Investment Trust, the B. F. Saul Company and certain other
affiliated entities, each of which is controlled by B. Francis Saul II and his family members (collectively, The Saul Organization). On August 26, 1993, members of The Saul Organization transferred to Saul Holdings Limited
Partnership, a newly formed Maryland limited partnership (the Operating Partnership), and two newly formed subsidiary limited partnerships (the Subsidiary Partnerships, and collectively with the Operating Partnership, the
Partnerships), shopping center and mixed-used properties, and the management functions related to the transferred properties. Since its formation, the Company has developed and purchased additional properties.
The following table lists the properties acquired, developed and/or disposed of by the Company since January 1, 2010.
|
|
|
|
|
|
|
Name of Property
|
|
Location
|
|
Type
|
|
Year of
Acquisition/
Development/
Disposal
|
Acquisitions
|
|
|
|
|
|
|
11503 Rockville Pike
|
|
Rockville, MD
|
|
Shopping Center
|
|
2010
|
Metro Pike Center
|
|
Rockville, MD
|
|
Shopping Center
|
|
2010
|
4469 Connecticut Ave
|
|
Washington, DC
|
|
Mixed-Use
|
|
2011
|
Kentlands Square II
|
|
Gaithersburg, MD
|
|
Shopping Centers
|
|
2011
|
Severna Park MarketPlace
|
|
Severna Park, MD
|
|
Shopping Center
|
|
2011
|
Cranberry Square
|
|
Westminster, MD
|
|
Shopping Center
|
|
2011
|
1500 Rockville Pike
|
|
Rockville, MD
|
|
Shopping Center
|
|
2012
|
5541 Nicholson Lane
|
|
Rockville, MD
|
|
Shopping Center
|
|
2012
|
|
|
|
|
Developments
|
|
|
|
|
|
|
Clarendon Center North
|
|
Arlington, VA
|
|
Mixed-Use
|
|
2010/2011
|
Clarendon Center South
|
|
Arlington, VA
|
|
Mixed-Use
|
|
2010/2011
|
|
|
|
|
Dispositions
|
|
|
|
|
|
|
Lexington
|
|
Lexington, KY
|
|
Shopping Center
|
|
2010
|
West Park
|
|
Oklahoma City, OK
|
|
Shopping Center
|
|
2012
|
Belvedere
|
|
Baltimore, MD
|
|
Shopping Center
|
|
2012
|
As of December 31, 2012, the Companys properties (the Current Portfolio
Properties) consisted of 50 shopping center properties (the Shopping Centers), seven mixed-use properties which are comprised of office, retail and multi-family residential uses (the Mixed-Use Properties) and two
(non-operating) development properties.
F-8
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Basis of Presentation
The accompanying financial statements are presented on the historical cost basis of The Saul Organization because of affiliated ownership and common management and because the assets and liabilities were
the subject of a business combination with the Operating Partnership, the Subsidiary Partnerships and Saul Centers, all newly formed entities with no prior operations.
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Nature of Operations
The Company, which conducts all of its activities through its subsidiaries, the Operating Partnership and Subsidiary Partnerships, engages in the ownership, operation, management, leasing, acquisition,
renovation, expansion, development and financing of community and neighborhood shopping centers and mixed-used properties, primarily in the Washington, DC/Baltimore metropolitan area. Because the properties are located primarily in the Washington,
DC/Baltimore metropolitan area, a disproportionate economic downturn in the local economy would have a greater negative impact on our overall financial performance than on the overall financial performance of a company with a portfolio that is more
geographically diverse. A majority of the Shopping Centers are anchored by several major tenants. As of December 31, 2012, 33 of the Shopping Centers were anchored by a grocery store and offer primarily day-to-day necessities and services. Two
retail tenants, Giant Food (5.0%), a tenant at ten Shopping Centers, and Safeway (2.7%), a tenant at eight Shopping Centers, individually accounted for more than 2.5% of the Companys total revenue for the year ended December 31, 2012.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Saul Centers, its subsidiaries, and the Operating Partnership and Subsidiary Partnerships which are majority owned by Saul
Centers. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates.
Real Estate Investment Properties
The Company purchases real estate investment properties from time to time and records assets acquired and liabilities assumed, including
land, buildings, and intangibles related to in-place leases and customer relationships, based on their fair values. The fair value of buildings generally is determined as if the buildings were vacant upon acquisition and then subsequently leased at
market rental rates and considers the present value of all cash flows expected to be generated by the property including an initial lease up period. From time to time the Company may purchase a property, for future development purposes. The property
may be improved with an existing structure that would be demolished as part of the development. In such cases, the fair value of the building may be determined based only on existing leases and not include estimated cash flows related to future
leases. The Company determines the fair value of above and below market intangibles associated with in-place leases by assessing the net effective rent and remaining term of the lease relative to market terms for similar leases at acquisition taking
into consideration the remaining contractual lease period, renewal periods, and the likelihood of the tenant exercising its renewal options. The fair value of a below market lease component is recorded as deferred income and accreted as additional
lease revenue over the remaining contractual lease period and any renewal option periods included in the valuation analysis. The fair value of above market lease intangibles is recorded as a deferred asset and is amortized as a reduction of lease
revenue over the remaining contractual lease term. The Company determines the fair value of at-market in-place leases considering the cost of acquiring similar leases, the foregone rents associated with the lease-up period and carrying costs
associated with the lease-up period. Intangible assets associated with at-market in-place leases are amortized as additional expense over the remaining contractual lease term. To the extent
F-9
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
customer relationship intangibles are present in an acquisition, the fair values of the intangibles are amortized over the lives of the customer relationships. The Company has never recorded a
customer relationship intangible asset. Acquisition-related transaction costs are expensed as incurred.
If there is an event
or change in circumstance that indicates a potential impairment in the value of a real estate investment property, the Company prepares an analysis to determine whether the carrying value of the real estate investment property exceeds its estimated
fair value. The Company considers both quantitative and qualitative factors including recurring operating losses, significant decreases in occupancy, and significant adverse changes in legal factors and business climate. If impairment indicators are
present, the Company compares the projected cash flows of the property over its remaining useful life, on an undiscounted basis, to the carrying value of that property. The Company assesses its undiscounted projected cash flows based upon estimated
capitalization rates, historic operating results and market conditions that may affect the property. If the carrying value is greater than the undiscounted projected cash flows, the Company would recognize an impairment loss equivalent to an amount
required to adjust the carrying amount to its then estimated fair value. The fair value of any property is sensitive to the actual results of any of the aforementioned estimated factors, either individually or taken as a whole. Should the actual
results differ from managements projections, the valuation could be negatively or positively affected. The Company did not recognize an impairment loss on any of its real estate in 2012, 2011, or 2010.
Interest, real estate taxes, development related salary costs and other carrying costs are capitalized on projects under development and
construction. Once construction is substantially completed and the assets are placed in service, their rental income, real estate tax expense, property operating expenses (consisting of payroll, repairs and maintenance, utilities, insurance and
other property related expenses) and depreciation are included in current operations. Property operating expenses are charged to operations as incurred. Interest expense capitalized totaled $42,000, $1.9 million, and $7.2 million during 2012, 2011,
and 2010, respectively. Commercial development projects are considered substantially complete and available for occupancy upon completion of tenant improvements, but no later than one year from the cessation of major construction activity.
Multi-family residential development projects are considered substantially complete and available for occupancy upon receipt of the certificate of occupancy from the appropriate licensing authority. Substantially completed portions of a project are
accounted for as separate projects.
Depreciation is calculated using the straight-line method and estimated useful lives of
generally between 35 and 50 years for base buildings, or a shorter period if management determines that the building has a shorter useful life, and up to 20 years for certain other improvements that extend the useful lives. Leasehold improvements
expenditures are capitalized when certain criteria are met, including when the Company supervises construction and will own the improvements. Tenant improvements are amortized, over the shorter of the lives of the related leases or the useful life
of the improvement, using the straight-line method. Depreciation expense and amortization of leasehold improvements for the years ended December 31, 2012, 2011, and 2010, was $40.1 million, $35.3 million, and $28.4 million, respectively.
Repairs and maintenance expense totaled $9.3 million, $10.9 million, and $12.0 million for 2012, 2011, and 2010, respectively, and is included in property operating expenses in the accompanying consolidated financial statements.
Deferred Leasing Costs
Deferred leasing costs consist of commissions paid to third-party leasing agents, internal direct costs such as employee compensation and payroll-related fringe benefits directly related to time spent
performing leasing-related activities for successful commercial leases and amounts attributed to in place leases associated with acquired properties. Leasing related activities include evaluating the prospective tenants financial condition,
evaluating and recording guarantees, collateral and other security arrangements, negotiating lease terms, preparing lease documents and closing the transaction. Unamortized deferred costs are charged to expense if the applicable lease is terminated
prior to expiration of the initial lease term. Deferred leasing costs are amortized over the term of the lease or remaining term of acquired leases. Collectively, deferred leasing costs totaled $26.1 million and $25.9 million, net of accumulated
amortization of approximately $16.2 million and $14.7 million, as of December 31, 2012 and 2011, respectively. Amortization expense, included in depreciation and amortization in the consolidated statements of operations, totaled approximately
$5.6 million, $4.8 million, and $3.7 million, for the years ended December 31, 2012, 2011, and 2010, respectively.
F-10
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Construction in Progress
Construction in progress includes preconstruction and development costs of active projects. Preconstruction costs include legal, zoning and permitting costs and other project carrying costs incurred prior
to the commencement of construction. Development costs include direct construction costs and indirect costs incurred subsequent to the start of construction such as architectural, engineering, construction management and carrying costs consisting of
interest, real estate taxes and insurance. Construction in progress totaled $2.3 million and $1.1 million, respectively, as of December 31, 2012 and 2011.
Accounts Receivable and Accrued Income
Accounts receivable primarily
represent amounts currently due from tenants in accordance with the terms of the respective leases. Receivables are reviewed monthly and reserves are established with a charge to current period operations when, in the opinion of management,
collection of the receivable is doubtful. Accounts receivable in the accompanying consolidated financial statements are shown net of an allowance for doubtful accounts of $1.2 million and $671,000, at December 31, 2012 and 2011,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Year ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Beginning Balance
|
|
$
|
671
|
|
|
$
|
898
|
|
|
$
|
1,265
|
|
Provision for Credit Losses
|
|
|
1,160
|
|
|
|
1,883
|
|
|
|
1,337
|
|
Charge-offs
|
|
|
(623
|
)
|
|
|
(2,110
|
)
|
|
|
(1,704
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
1,208
|
|
|
$
|
671
|
|
|
$
|
898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to rents due currently, accounts receivable also includes $34.4 million and $31.0 million, at
December 31, 2012 and 2011, respectively, net of allowance for doubtful accounts totaling $92,000 and $63,000, respectively, representing minimum rental income accrued on a straight-line basis to be paid by tenants over the remaining term of
their respective leases.
Cash and Cash Equivalents
Cash and cash equivalents include short-term investments. Short-term investments include money market accounts and other investments which generally mature within three months, measured from the
acquisition date, and/or are readily convertible to cash. Substantially all of the Companys cash balances at December 31, 2012 are held in non-interest bearing accounts at various banks.
Deferred Debt Costs
Deferred debt costs consist of fees and costs incurred to obtain long-term financing, construction financing and the revolving line of
credit. These fees and costs are being amortized on a straight-line basis over the terms of the respective loans or agreements, which approximates the effective interest method. Deferred debt costs totaled $7.7 million and $7.1 million, net of
accumulated amortization of $3.8 million and $6.9 million at December 31, 2012 and 2011, respectively.
Deferred Income
Deferred income consists of payments received from tenants prior to the time they are earned and recognized by the Company
as revenue, including tenant prepayment of rent for future periods, real estate taxes when the taxing jurisdiction has a fiscal year differing from the calendar year reimbursements specified in the lease agreement and tenant construction work
provided by the Company. In addition, deferred income includes the fair value of certain below market leases.
Derivative Financial
Instruments
The Company may, when appropriate, employ derivative instruments, such as interest-rate swaps, to mitigate the
risk of interest rate fluctuations. The Company does not enter into derivative or other financial
F-11
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
instruments for trading or speculative purposes. Derivative financial instruments are carried at fair value as either assets or liabilities on the consolidated balance sheets. For those
derivative instruments that qualify, the Company may designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge or a cash flow hedge. Derivative instruments that are designated as a hedge are evaluated to ensure
they continue to qualify for hedge accounting. The effective portion of any gain or loss on the hedge instruments is reported as a component of accumulated other comprehensive income (loss) and recognized in earnings within the same line item
associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of the change in fair value of a derivative instrument is immediately recognized in earnings. For
derivative instruments that do not meet the criteria for hedge accounting, or that qualify and are not designated, changes in fair value are immediately recognized in earnings
Discontinued Operations
During 2012, the Company sold its West Park and
Belvedere properties for $2.0 million and $4.0 million and recognized gains of $1.1 million and $3.4 million, respectively. During 2010, the Company sold its Lexington property for $8.1 million and recognized a gain of $3.6 million. The results
of operations of West Park and Belvedere for the years ended December 31, 2012, 2011 and 2010 and of the Lexington property for the year ended December 31, 2010 are included in the statements of operations as Loss from operations of
property sold. The Company has no other discontinued operations.
Revenue Recognition
Rental and interest income are accrued as earned except when doubt exists as to collectability, in which case the accrual is discontinued.
Recognition of rental income commences when control of the space has been given to the tenant. When rental payments due under leases vary from a straight-line basis because of free rent periods or stepped increases, income is recognized on a
straight-line basis. Expense recoveries represent a portion of property operating expenses billed to the tenants, including common area maintenance, real estate taxes and other recoverable costs. Expense recoveries are recognized in the period in
which the expenses are incurred. Rental income based on a tenants revenue (percentage rent) is accrued when a tenant reports sales that exceed a specified breakpoint, pursuant to the terms of their respective leases.
Income Taxes
The
Company made an election to be treated, and intends to continue operating so as to qualify, as a REIT under the Code, commencing with its taxable year ended December 31, 1993. A REIT generally will not be subject to federal income taxation,
provided that distributions to its stockholders equal or exceed its REIT taxable income and complies with certain other requirements. Therefore, no provision has been made for federal income taxes in the accompanying consolidated financial
statements.
As of December 31, 2012, the Company had no material unrecognized tax benefits and there exist no
potentially significant unrecognized tax benefits which are reasonably expected to occur within the next twelve months. The Company recognizes penalties and interest accrued related to unrecognized tax benefits, if any, as general and administrative
expense. No penalties and interest have been accrued in years 2012, 2011, and 2010. The tax basis of the Companys real estate investments was approximately $1.1 billion as of December 31, 2012 and 2011. With few exceptions, the Company is
no longer subject to U.S. federal, state, and local tax examinations by tax authorities for years before 2007.
Stock Based Employee
Compensation, Deferred Compensation and Stock Plan for Directors
The Company uses the fair value method to value and
account for employee stock options. The fair value of options granted is determined at the time of each award using the Black-Scholes model, a widely used method for valuing stock based employee compensation, and the following assumptions:
(1) Expected Volatility determined using the most recent trading history of the Companys common stock (month-end closing prices) corresponding to the average expected term of the options; (2) Average Expected Term of the options is
based on prior exercise history, scheduled vesting and the expiration date; (3) Expected Dividend Yield determined by management after considering the Companys current and historic dividend yield rates, the Companys yield in
relation to other retail REITs and the Companys market yield at the grant date; and (4) a Risk-free Interest Rate based upon the market
F-12
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
yields of US Treasury obligations with maturities corresponding to the average expected term of the options at the grant date. The Company amortizes the value of options granted ratably over the
vesting period and includes the amounts as compensation in general and administrative expenses.
At the annual meeting of the
Companys stockholders in 2004, the stockholders approved the adoption of the 2004 stock plan for the purpose of attracting and retaining executive officers, directors and other key personnel. The 2004 stock plan was subsequently amended by the
Companys stockholders at the 2008 Annual Meeting (the Amended 2004 Plan) and terminates in April 2018. Pursuant to the Amended 2004 Plan, the Compensation Committee established a Deferred Compensation Plan for Directors for the
benefit of its directors and their beneficiaries, which replaced a previous Deferred Compensation and Stock Plan for Directors. A director may make an annual election to defer all or part of his or her directors fees and has the option to have
the fees paid in cash, in shares of common stock or in a combination of cash and shares of common stock upon separation from the Board. If the director elects to have fees paid in stock, fees earned during a calendar quarter are aggregated and
divided by the common stocks closing market price on the first trading day of the following quarter to determine the number of shares to be allocated to the director. As of December 31, 2012, 220,500 shares are in the directors
deferred fee accounts.
The Compensation Committee has also approved an annual award of shares of the Companys common
stock as additional compensation to each director serving on the Board of Directors as of the record date for the Annual Meeting of Stockholders. The shares are awarded as of each Annual Meeting of Shareholders, and their issuance may not be
deferred. Each director was issued 200 shares for each of the years ended December 31, 2012, 2011, and 2010. The shares were valued at the closing stock price on the dates the shares were awarded and included in general and administrative
expenses in the total amounts of $110,000, $109,000, and $101,000, for the years ended December 31, 2012, 2011, and 2010, respectively.
Noncontrolling Interest
Saul Centers is the sole general partner of the Operating Partnership, owning a 74.4% common interest as of December 31, 2012.
Noncontrolling interest in the Operating Partnership is comprised of limited partnership units owned by The Saul Organization. Noncontrolling interest reflected on the accompanying consolidated balance sheets is increased for earnings allocated to
limited partnership interests and distributions reinvested in additional units, and is decreased for limited partner distributions. Noncontrolling interest reflected on the consolidated statements of operations represents earnings allocated to
limited partnership interests held by The Saul Organization.
Per Share Data
Per share data for net income (basic and diluted) is computed using weighted average shares of common stock. Convertible limited
partnership units and employee stock options are the Companys potentially dilutive securities. For all periods presented, the convertible limited partnership units are anti-dilutive. For the years ended December 31, 2012, 2011, and 2010,
certain options are dilutive because the average share price of the Companys common stock exceeded the exercise prices. The treasury stock method was used to measure the effect of the dilution.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Shares in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Weighted average common shares outstanding - Basic
|
|
|
19,649
|
|
|
|
18,888
|
|
|
|
18,267
|
|
Effect of dilutive options
|
|
|
51
|
|
|
|
61
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - Diluted
|
|
|
19,700
|
|
|
|
18,949
|
|
|
|
18,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average share price
|
|
$
|
40.94
|
|
|
$
|
39.39
|
|
|
$
|
40.87
|
|
Legal Contingencies
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, which are generally covered by insurance. Upon determination that a loss is probable to occur
and can be reasonably estimated, the estimated amount of the loss is recorded in the financial statements.
F-13
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Reclassifications
Certain reclassifications have been made to prior year and prior quarter information to conform to the presentation used for the three-months and year ended December 31, 2012.
11503 Rockville Pike
On October 1, 2010, the Company purchased for $15.1 million a retail property located in Rockville, Maryland, and incurred acquisition costs of $0.5 million.
Metro Pike Center
On
December 17, 2010, the Company purchased for $33.6 million (including the assumption of a $16.2 million mortgage loan and a related interest-rate swap with a value of $0.5 million) the Metro Pike Center located in Rockville, Maryland, and
incurred acquisition costs of $0.7 million. As of the date of acquisition, management determined the fair value of the mortgage loan equaled its outstanding balance because the terms of the loan were market terms.
4469 Connecticut Avenue
In February 2011, the Company purchased for $1.6 million 4469 Connecticut Avenue, a one retail space property, currently unleased, located
adjacent to Van Ness Square in northwest Washington, DC and incurred acquisition costs of $74,000.
Kentlands Square II
In September 2011, the Company purchased for $74.5 million Kentlands Square II, a retail property located adjacent to the Companys
Kentlands Square I and Kentlands Place shopping centers in Gaithersburg, Maryland, and incurred acquisition costs of $1.1 million.
Severna
Park MarketPlace
In September 2011, the Company purchased for $61.0 million Severna Park MarketPlace, a retail property
located in Severna Park, Maryland, and incurred acquisition costs of $0.8 million.
Cranberry Square
In September 2011, the Company purchased for $33.0 million Cranberry Square, a retail property located in Westminster, Maryland, and
incurred acquisition costs of $0.5 million.
1500 Rockville Pike
In December 2012, the Company purchased for $22.4 million 1500 Rockville Pike, a retail property located in Rockville, Maryland, and
incurred acquisition costs of $0.6 million.
5541 Nicholson Lane
In December 2012, the Company purchased for $11.7 million 5541 Nicholson Lane, a retail property located in Rockville, Maryland, and
incurred acquisition costs of $0.5 million.
The revenue and expenses of 1500 Rockville Pike and 5541 Nicholson Lane have been
included in the Consolidated Statements of Operations for the period subsequent to acquisition. Revenue and earnings (defined as revenue less the sum of operating expenses, provision for credit losses and real estate taxes, all arising from the
operation of a property) totaled $101,000 and $14,000, respectively, from acquisition through December 31, 2012. The proforma results for the year ended December 31, 2012 and 2011 have been prepared for comparative purposes only and do not
purport to be indicative of the results of operations that would have actually occurred had the transaction taken place on January 1, 2011, or of future results of operations. The following table shows proforma revenue and earnings of the
Company assuming the acquisitions occurred as of January 1, 2011.
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Year ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Revenue
|
|
$
|
191,866
|
|
|
$
|
175,262
|
|
Earnings
|
|
|
144,320
|
|
|
|
129,981
|
|
F-14
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Allocation of Purchase Price of Real Estate Acquired
The Company allocates the purchase price of real estate investment properties to various components, such as land, buildings and
intangibles related to in-place leases and customer relationships, based on their fair values. See Note 2. Summary of Significant Accounting Policies-Real Estate Investment Properties.
During 2012, the Company purchased two properties at an aggregate cost of $34.1 million and incurred acquisition costs of $1.1 million.
Of the total purchase price, $3.8 million was allocated to buildings, $30.4 million was allocated to land, and $0.5 million was allocated to in-place leases and $0.7 million was allocated to below market leases which is included in deferred
income and is being accreted to income over the lives of the underlying leases, which is approximately 3.1 years.
During
2011, the Company purchased four properties at an aggregate cost of $170.1 million, and incurred acquisition costs of $2.5 million. Of the total purchase price, $5.5 million was allocated to below market leases which is included in deferred income
and is being accreted to income over the lives of the underlying leases, or approximately 10.9 years, and $28,000 was allocated to above market leases, which is included as a deferred asset in accounts receivable and is being amortized against
income over the lives of the underlying leases, which is approximately 4.1 years.
The allocation of the purchase prices for
Severna Park MarketPlace, Kentlands Square II, and Cranberry Square to the acquired assets and liabilities based on their fair values was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kentlands
Square II
|
|
|
Severna Park
MarketPlace
|
|
|
Cranberry
Square
|
|
|
Three Property
Total
|
|
Land
|
|
$
|
20,500
|
|
|
$
|
12,700
|
|
|
$
|
6,700
|
|
|
$
|
39,900
|
|
Buildings
|
|
|
51,973
|
|
|
|
50,554
|
|
|
|
24,878
|
|
|
|
127,405
|
|
In-Place Leases
|
|
|
2,697
|
|
|
|
2,433
|
|
|
|
1,499
|
|
|
|
6,629
|
|
Above Market Rents
|
|
|
6
|
|
|
|
4
|
|
|
|
18
|
|
|
|
28
|
|
Below Market Rents
|
|
|
(676
|
)
|
|
|
(4,691
|
)
|
|
|
(95
|
)
|
|
|
(5,462
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Purchase Price
|
|
$
|
74,500
|
|
|
$
|
61,000
|
|
|
$
|
33,000
|
|
|
$
|
168,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The gross carrying amount of lease intangible assets included in deferred leasing costs as of
December 31, 2012 and 2011 was $21.9 million and $21.4 million, respectively, and accumulated amortization was $14.7 million and $12.7 million, respectively. Amortization expense totaled $2.0 million, $1.3 million and $747,000, for the
years ended December 31, 2012, 2011, and 2010, respectively. The gross carrying amount of below market lease intangible liabilities included in deferred income as of December 31, 2012 and 2011 was $24.8 million and $24.1 million,
respectively, and accumulated amortization was $8.3 million and $6.7 million, respectively. Accretion income totaled $1.6 million, $1.2 million, and $1.1 million, for the years ended December 31, 2012, 2011, and 2010, respectively. The gross
carrying amount of above market lease intangible assets included in accounts receivable as of December 31, 2012 and 2011 was $1.0 million and $1.0 million, respectively, and accumulated amortization was $930,000 and $870,000, respectively.
Amortization expense totaled $60,000, $62,000, and $62,000, for the years ended December 31, 2012, 2011, and 2010, respectively.
F-15
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
As of December 31, 2012, scheduled amortization of intangible assets and deferred
income related to in place leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Lease
acquisition
costs
|
|
|
Above
market
leases
|
|
|
Below
market
leases
|
|
2013
|
|
$
|
1,957
|
|
|
$
|
45
|
|
|
$
|
1,694
|
|
2014
|
|
|
1,066
|
|
|
|
21
|
|
|
|
1,482
|
|
2015
|
|
|
721
|
|
|
|
3
|
|
|
|
1,182
|
|
2016
|
|
|
566
|
|
|
|
1
|
|
|
|
1,116
|
|
2017
|
|
|
517
|
|
|
|
|
|
|
|
1,095
|
|
Thereafter
|
|
|
2,403
|
|
|
|
|
|
|
|
9,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,230
|
|
|
$
|
70
|
|
|
$
|
16,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
NONCONTROLLING INTEREST - HOLDERS OF CONVERTIBLE LIMITED PARTNERSHIP UNITS IN THE OPERATING PARTNERSHIP
|
The Saul Organization holds a 25.6% limited partnership interest in the Operating Partnership represented by 6,914,000
limited partnership units, as of December 31, 2012. The units are convertible into shares of Saul Centers common stock, at the option of the unit holder, on a one-for-one basis provided that, in accordance with the Saul Centers, Inc.
Articles of Incorporation, the rights may not be exercised at any time that The Saul Organization beneficially owns, directly or indirectly, in the aggregate more than 39.9% of the value of the outstanding common stock and preferred stock of Saul
Centers (the Equity Securities). As of December 31, 2012, 987,000 units were eligible for conversion.
The
impact of The Saul Organizations 25.6% limited partnership interest in the Operating Partnership is reflected as Noncontrolling Interest in the accompanying consolidated financial statements. Fully converted partnership units and diluted
weighted average shares outstanding for the years ended December 31, 2012, 2011, and 2010, were 26,613,900, 24,739,700, and 23,793,000, respectively.
5.
|
MORTGAGE NOTES PAYABLE, REVOLVING CREDIT FACILITY, INTEREST EXPENSE AND AMORTIZATION OF DEFERRED DEBT COSTS
|
At December 31, 2012, outstanding debt totaled $827.8 million, of which $774.9 million was fixed rate debt
and $52.9 million was variable rate debt. The Companys outstanding debt totaled $831.9 million at December 31, 2011, of which $808.8 million was fixed rate debt and $23.1 million was variable rate debt. At December 31, 2012, the
Company had a $175.0 million unsecured revolving credit facility, which can be used for working capital, property acquisitions or development projects, under which $38.0 million was outstanding. The revolving credit facility matures on May 20,
2016, and may be extended by the Company for one additional year subject to the Companys satisfaction of certain conditions. Saul Centers and certain consolidated subsidiaries of the Operating Partnership have guaranteed the payment
obligations of the Operating Partnership under the revolving credit facility. Letters of credit may be issued under the revolving credit facility. On December 31, 2012, approximately $136.8 million was available under the line and
approximately $224,000 was committed for letters of credit. The interest rate under the facility is based on the Companys leverage and is the sum of LIBOR and a margin ranging from 160 basis points to 250 basis points. As of December 31,
2012, the margin was 1.90%.
Saul Centers is a guarantor of the revolving credit facility, of which the Operating Partnership
is the borrower. Saul Centers is also the guarantor of 50% of the Northrock bank term loan (approximately $7.5 million of the $14.9 million outstanding at December 31, 2012). The fixed-rate notes payable are all non-recourse debt except for
$3.9 million of the Great Falls Center mortgage, 25% of the Metro Pike Center loan (approximately $3.9 million of the $15.7 million outstanding at December 31, 2012), and $27.6 million of the Clarendon Center mortgage which will be
eliminated upon the achievement of certain leasing and debt service covenants which are guaranteed by Saul Centers.
F-16
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
On June 29, 2010, the Company closed on a new 10-year mortgage loan in the amount
of $45.6 million, secured by Thruway. The loan matures July 1, 2020, bears interest at a variable rate equal to the sum of one-month LIBOR and 260 basis points. In conjunction with the financing, the Company entered into an interest rate
swap agreement with a $45.6 million notional amount to manage the interest rate risk associated with the above $45.6 million of variable-rate mortgage debt. The swap agreement was effective June 29, 2010, terminates on July 1, 2020 and
effectively fixes the interest rate on the mortgage debt at 5.83%. The Company has designated this agreement as a cash flow hedge for accounting purposes. The Company, therefore, will recognize interest expense on the variable-rate debt at the
effective fixed rate of 5.83%. The Company tests the hedge for effectiveness on a quarterly basis. On a combined basis, the loan and the interest-rate swap require equal monthly principal and interest payments of $289,081, based upon an assumed
interest rate of 5.83% and a 25-year principal amortization, and requires a final principal payment of approximately $34.8 million at maturity.
Immediately prior to the refinancing, Thruway was one of nine properties securing debt included in a collateralized mortgage-backed security (CMBS) with an outstanding balance of $108.3 million, an
interest rate of 7.67% and due to mature October 2012. In order to release Thruway, the Company defeased $30.2 million of the outstanding balance at a cost of approximately $4.4 million, using proceeds from the new mortgage financing.
On August 24, 2010, the Company entered into an amendment to its Northrock construction loan to provide an option to extend the loan
for two years. The extension is available at the Companys option subject to notice to the bank, and to a principal repayment in an amount required to cause property operating income to meet certain debt service coverage levels.
On December 9, 2010, the Company closed on a new 15-year, fixed-rate mortgage loan in the amount of $17.0 million secured by
Ravenwood. The loan matures January 2026, requires monthly interest and principal payments of $111,409 based upon a fixed interest rate of 6.18% and a 25-year principal amortization and requires a final principal payment of approximately $10.1
million at maturity.
Immediately prior to the refinancing, Ravenwood was one of eight remaining properties securing debt
included in a CMBS with an outstanding balance of $76.3 million, an interest rate of 7.67% and due to mature October 2012. In order to release Ravenwood, the Company defeased $7.8 million of the outstanding balance at a cost of approximately
$900,000, using proceeds from the new mortgage financing.
On December 17, 2010, the Company purchased Metro Pike Center,
a 62,000 square foot retail property located in Rockville, Maryland. In conjunction with the acquisition, the Company assumed a mortgage loan with a principal balance of $16.2 million. The loan matures June 30, 2013, bears interest at a
variable rate equal to the sum of one-month LIBOR and 245 basis points. In conjunction with the loan assumption, the Company assumed a corresponding interest rate swap agreement with a $16.2 million notional amount to manage the interest rate risk
associated with the variable-rate mortgage debt. The swap agreement was effective at closing, terminates on June 30, 2013 and effectively fixes the interest rate on the mortgage debt at 4.67%. Although the swap is an effective hedge of the
loan, the Company elected not to designate this agreement as a hedge for accounting purposes. Interest expense on the loan is recognized at its variable interest rate. The swap agreement is carried at its fair value with changes in fair value
recognized in change in fair value of derivatives in the Consolidated Statements of Operations as they occur. On a combined basis, the loan and the interest-rate swap require interest-only payments of $62,925, based upon an assumed interest rate of
4.67% until August 1, 2011, followed by equal monthly payments of $86,000 based upon a 25-year amortization schedule and a final payment of $15.6 million at loan maturity.
On March 23, 2011, the Company closed on a 15-year non-recourse mortgage loan in the amount of $125.0 million, secured by
Clarendon Center. The loan matures April 5, 2026, bears interest at a fixed rate of 5.31%, requires equal monthly principal and interest payments of $753,491, based upon a 25-year principal amortization, and requires a final principal payment
of approximately $70.5 million at maturity. Proceeds from the loan were used to repay $104.2 million outstanding on the Clarendon Center construction loan.
On September 23, 2011, the Company closed on a 15-year non-recourse mortgage loan in the amount of $38.0 million, secured by Severna Park MarketPlace. The loan matures October 1, 2026, bears
interest at a fixed rate of 4.30%, requires equal monthly principal and interest payments of $206,926, based upon a 25-year principal amortization, and requires a final principal payment of approximately $20.3 million at maturity. Proceeds from the
loan were used to purchase Severna Park MarketPlace.
F-17
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Also on September 23, 2011, the Company closed on two six-month bridge financing
loans in the total amount of $60.0 million, secured by Kentlands Square II and Cranberry Square. Proceeds from the loans were used to purchase Kentlands Square II and Cranberry Square.
On October 5, 2011, the Company closed on a new 15-year non-recourse mortgage loan in the amount of $43.0 million, secured by
Kentlands Square II. The loan matures November 5, 2026, bears interest at a fixed rate of 4.53%, requires equal monthly principal and interest payments of $239,741, based upon a 25-year principal amortization, and requires a final principal
payment of approximately $23.3 million at maturity. Proceeds from the loan were used to repay the $40.0 million bridge financing used to acquire Kentlands Square II.
On November 6, 2011, the Company closed on a new 15-year non-recourse mortgage loan in the amount of $20.0 million, secured by Cranberry Square. The loan matures December 1, 2026, bears interest
at a fixed rate of 4.70%, requires equal monthly principal and interest payments of $113,449, based upon a 25-year principal amortization, and requires a final principal payment of approximately $10.9 million at maturity. Proceeds from the loan were
used to repay the $20.0 million bridge financing used to acquire Cranberry Square.
On April 11, 2012, the Company closed
on a 15-year non-recourse mortgage loan in the amount of $73.0 million secured by Seven Corners shopping center. The loan matures in May 2027, bears interest at a fixed rate of 5.84%, requires equal monthly principal and interest payments
totaling $463,226 based upon a 25-year amortization schedule and a final payment of $42.5 million at maturity. Proceeds from the loan were used to pay-off the $63 million remaining balance of existing debt secured by Seven Corners and six other
shopping center properties, which was scheduled to mature in October 2012, and to provide cash of approximately $10 million.
On April 26, 2012, the Company substituted the White Oak shopping center for Van Ness Square as collateral for one of its existing
mortgage loans which allowed the Company to analyze the feasibility of repositioning Van Ness Square. The terms of the original loan, including its 8.11% interest rate, are unchanged and, in conjunction with the collateral substitution, the Company
borrowed an additional $10.5 million, also secured by White Oak. The new borrowing requires equal monthly payments based upon a fixed 4.90% interest rate and 25-year amortization schedule, and will mature in July 2024, conterminously with the
original loan. The consolidated loan requires equal monthly payments based upon a blended fixed interest rate of 7.0% and will require a final payment of $18.5 million at maturity.
On May 21, 2012, the Company replaced its existing unsecured revolving credit facility with a new $175.0 million facility that
expires on May 20, 2016. The facility, which provides working capital and funds for acquisitions, certain developments, redevelopments and letters of credit, may be extended for one year, at the Companys option, subject to the satisfaction of
certain conditions. Loans under the facility bear interest at a rate equal to the sum of LIBOR and a margin, based on the Companys leverage ratio, ranging from 160 basis points to 250 basis points. Based on the leverage ratio of December 31,
2012, the margin was 190 basis points.
F-18
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
The following is a summary of notes payable as of December 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes Payable
|
|
December 31,
|
|
|
Interest
|
|
|
Scheduled
|
|
(Dollars in thousands)
|
|
2012
|
|
|
2011
|
|
|
Rate *
|
|
|
Maturity *
|
|
Fixed rate mortgages:
|
|
$
|
|
(a)
|
|
$
|
64,844
|
|
|
|
7.67
|
%
|
|
|
Oct-2012
|
|
|
|
|
|
(b)
|
|
|
10,244
|
|
|
|
6.12
|
%
|
|
|
Jan-2013
|
|
|
|
|
|
(c)
|
|
|
24,598
|
|
|
|
7.88
|
%
|
|
|
Jan-2013
|
|
|
|
|
15,750
|
(d)
|
|
|
16,032
|
|
|
|
4.67
|
%
|
|
|
Jun-2013
|
|
|
|
|
6,936
|
(e)
|
|
|
7,203
|
|
|
|
5.77
|
%
|
|
|
Jul-2013
|
|
|
|
|
13,875
|
(f)
|
|
|
14,335
|
|
|
|
5.40
|
%
|
|
|
May-2014
|
|
|
|
|
16,798
|
(g)
|
|
|
17,415
|
|
|
|
7.45
|
%
|
|
|
Jun-2015
|
|
|
|
|
34,373
|
(h)
|
|
|
35,435
|
|
|
|
6.01
|
%
|
|
|
Feb-2018
|
|
|
|
|
38,388
|
(i)
|
|
|
39,757
|
|
|
|
5.88
|
%
|
|
|
Jan-2019
|
|
|
|
|
12,418
|
(j)
|
|
|
12,860
|
|
|
|
5.76
|
%
|
|
|
May-2019
|
|
|
|
|
17,145
|
(k)
|
|
|
17,755
|
|
|
|
5.62
|
%
|
|
|
Jul-2019
|
|
|
|
|
17,040
|
(l)
|
|
|
17,627
|
|
|
|
5.79
|
%
|
|
|
Sep-2019
|
|
|
|
|
15,176
|
(m)
|
|
|
15,713
|
|
|
|
5.22
|
%
|
|
|
Jan-2020
|
|
|
|
|
11,421
|
(n)
|
|
|
11,670
|
|
|
|
5.60
|
%
|
|
|
May-2020
|
|
|
|
|
10,288
|
(o)
|
|
|
10,636
|
|
|
|
5.30
|
%
|
|
|
Jun-2020
|
|
|
|
|
43,424
|
(p)
|
|
|
44,333
|
|
|
|
5.83
|
%
|
|
|
Jul-2020
|
|
|
|
|
8,934
|
(q)
|
|
|
9,204
|
|
|
|
5.81
|
%
|
|
|
Feb-2021
|
|
|
|
|
6,359
|
(r)
|
|
|
6,477
|
|
|
|
6.01
|
%
|
|
|
Aug-2021
|
|
|
|
|
36,699
|
(s)
|
|
|
37,377
|
|
|
|
5.62
|
%
|
|
|
Jun-2022
|
|
|
|
|
11,129
|
(t)
|
|
|
11,317
|
|
|
|
6.08
|
%
|
|
|
Sep-2022
|
|
|
|
|
11,989
|
(u)
|
|
|
12,172
|
|
|
|
6.43
|
%
|
|
|
Apr-2023
|
|
|
|
|
16,247
|
(v)
|
|
|
16,858
|
|
|
|
6.28
|
%
|
|
|
Feb-2024
|
|
|
|
|
17,469
|
(w)
|
|
|
17,791
|
|
|
|
7.35
|
%
|
|
|
Jun-2024
|
|
|
|
|
15,140
|
(x)
|
|
|
15,409
|
|
|
|
7.60
|
%
|
|
|
Jun-2024
|
|
|
|
|
26,635
|
(y)
|
|
|
16,494
|
|
|
|
7.02
|
%
|
|
|
Jul-2024
|
|
|
|
|
31,709
|
(z)
|
|
|
32,281
|
|
|
|
7.45
|
%
|
|
|
Jul-2024
|
|
|
|
|
31,490
|
(aa)
|
|
|
32,044
|
|
|
|
7.30
|
%
|
|
|
Jan-2025
|
|
|
|
|
16,419
|
(bb)
|
|
|
16,731
|
|
|
|
6.18
|
%
|
|
|
Jan-2026
|
|
|
|
|
120,822
|
(cc)
|
|
|
123,372
|
|
|
|
5.31
|
%
|
|
|
Apr-2026
|
|
|
|
|
36,986
|
(dd)
|
|
|
37,858
|
|
|
|
4.30
|
%
|
|
|
Oct-2026
|
|
|
|
|
41,970
|
(ee)
|
|
|
42,923
|
|
|
|
4.53
|
%
|
|
|
Nov-2026
|
|
|
|
|
19,569
|
(ff)
|
|
|
20,000
|
|
|
|
4.70
|
%
|
|
|
Dec-2026
|
|
|
|
|
72,233
|
(gg)
|
|
|
|
|
|
|
5.84
|
%
|
|
|
May-2027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed rate
|
|
|
774,831
|
|
|
|
808,765
|
|
|
|
5.82
|
%
|
|
|
10.0 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving credit facility
|
|
|
38,000
|
(hh)
|
|
|
8,000
|
|
|
|
LIBOR + 1.90
|
%
|
|
|
May-2016
|
|
Northrock bank term loan
|
|
|
14,945
|
(ii)
|
|
|
15,106
|
|
|
|
LIBOR + 3.00
|
%
|
|
|
May-2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total variable rate
|
|
|
52,945
|
|
|
|
23,106
|
|
|
|
2.80
|
%
|
|
|
3.4 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
$
|
827,776
|
|
|
$
|
831,871
|
|
|
|
5.77
|
%
|
|
|
9.7 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Interest rate and scheduled maturity data presented as of December 31, 2012. Totals computed using weighted averages.
|
F-19
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
(a)
|
The loan was collateralized by seven shopping centers (Seven Corners, White Oak, Hampshire Langley, Great Eastern, Southside Plaza, Belvedere and Giant) and required
equal monthly principal and interest payments of $734,000 based upon a 25-year amortization schedule and a final payment of $62.0 million at loan maturity. The loan was repaid in full in 2012.
|
(b)
|
The loan was collateralized by Smallwood Village Center and required equal monthly principal and interest payments of $71,000 based upon a 30-year amortization
schedule and a final payment of $10.1 million at loan maturity. The loan was repaid in full in 2012.
|
(c)
|
The loan was collateralized by 601 Pennsylvania Avenue and required equal monthly principal and interest payments of $294,000 based upon a 25-year amortization
schedule and a final payment of $23.0 million at loan maturity. The loan was repaid in full in 2012.
|
(d)
|
The loan, together with a corresponding interest-rate swap, was assumed with the December 17, 2010 acquisition of, and is collateralized by, Metro Pike Center.
On a combined basis, the loan and the swap required interest only payments of $63,000 until August 1, 2011, then equal monthly payments of $86,000 based upon a 25-year amortization schedule and a final payment of $15.6 million at loan maturity.
Principal of $282,000 was amortized during 2012.
|
(e)
|
The loan is collateralized by Cruse MarketPlace and requires equal monthly principal and interest payments of $56,000 based upon an amortization schedule of
approximately 24 years and a final payment of $6.8 million at loan maturity. Principal of $267,000 was amortized during 2012.
|
(f)
|
The loan is collateralized by Seabreeze Plaza and requires equal monthly principal and interest payments totaling $102,000 based upon a weighted average 26-year
amortization schedule and a final payment of $13.3 million is due at loan maturity. Principal of $460,000 was amortized during 2012.
|
(g)
|
The loan is collateralized by Shops at Fairfax and Boulevard shopping centers and requires equal monthly principal and interest payments totaling $156,000 based upon
a weighted average 23-year amortization schedule and a final payment of $15.2 million is due at loan maturity. Principal of $617,000 was amortized during 2012.
|
(h)
|
The loan is collateralized by Washington Square and requires equal monthly principal and interest payments of $264,000 based upon a 27.5-year amortization schedule
and a final payment of $28.0 million at loan maturity. Principal of $1.1 million was amortized during 2012.
|
(i)
|
The loan is collateralized by three shopping centers, Broadlands Village, The Glen and Kentlands Square I, and requires equal monthly principal and interest payments
of $306,000 based upon a 25-year amortization schedule and a final payment of $28.4 million at loan maturity. Principal of $1.4 million was amortized during 2012.
|
(j)
|
The loan is collateralized by Olde Forte Village and requires equal monthly principal and interest payments of $98,000 based upon a 25-year amortization schedule and
a final payment of $9.0 million at loan maturity. Principal of $442,000 was amortized during 2012.
|
(k)
|
The loan is collateralized by Countryside and requires equal monthly principal and interest payments of $133,000 based upon a 25-year amortization schedule and a
final payment of $12.3 million at loan maturity. Principal of $610,000 was amortized during 2012.
|
(l)
|
The loan is collateralized by Briggs Chaney MarketPlace and requires equal monthly principal and interest payments of $133,000 based upon a 25-year amortization
schedule and a final payment of $12.2 million at loan maturity. Principal of $587,000 was amortized during 2012.
|
(m)
|
The loan is collateralized by Shops at Monocacy and requires equal monthly principal and interest payments of $112,000 based upon a 25-year amortization schedule and
a final payment of $10.6 million at loan maturity. Principal of $537,000 was amortized during 2012.
|
(n)
|
The loan is collateralized by Boca Valley Plaza and requires equal monthly principal and interest payments of $75,000 based upon a 30-year amortization schedule and
a final payment of $9.1 million at loan maturity. Principal of $249,000 was amortized during 2012.
|
(o)
|
The loan is collateralized by Palm Springs Center and requires equal monthly principal and interest payments of $75,000 based upon a 25-year amortization schedule
and a final payment of $7.1 million at loan maturity. Principal of $348,000 was amortized during 2012.
|
F-20
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
(p)
|
The loan and a corresponding interest-rate swap closed on June 29, 2010 and are collateralized by Thruway. On a combined basis, the loan and the interest-rate
swap require equal monthly principal and interest payments of $289,000 based upon a 25-year amortization schedule and a final payment of $34.8 million at loan maturity. Principal of $909,000 was amortized during 2012.
|
(q)
|
The loan is collateralized by Jamestown Place and requires equal monthly principal and interest payments of $66,000 based upon a 25-year amortization schedule and a
final payment of $6.1 million at loan maturity. Principal of $270,000 was amortized during 2012.
|
(r)
|
The loan is collateralized by Hunt Club Corners and requires equal monthly principal and interest payments of $42,000 based upon a 30-year amortization schedule and
a final payment of $5.0 million, at loan maturity. Principal of $118,000 was amortized during 2012.
|
(s)
|
The loan is collateralized by Lansdowne Town Center and requires monthly principal and interest payments of $230,000 based on a 30-year amortization schedule and a
final payment of $28.2 million at loan maturity. Principal of $678,000 was amortized during 2012.
|
(t)
|
The loan is collateralized by Orchard Park and requires equal monthly principal and interest payments of $73,000 based upon a 30-year amortization schedule and a
final payment of $8.6 million at loan maturity. Principal of $188,000 was amortized during 2012.
|
(u)
|
The loan is collateralized by BJs Wholesale and requires equal monthly principal and interest payments of $80,000 based upon a 30-year amortization schedule
and a final payment of $9.3 million at loan maturity. Principal of $183,000 was amortized during 2012.
|
(v)
|
The loan is collateralized by Great Falls shopping center. The loan consists of three notes which require equal monthly principal and interest payments of $138,000
based upon a weighted average 26-year amortization schedule and a final payment of $6.3 million at maturity. Principal of $611,000 was amortized during 2012.
|
(w)
|
The loan is collateralized by Leesburg Pike and requires equal monthly principal and interest payments of $135,000 based upon a 25-year amortization schedule and a
final payment of $11.5 million at loan maturity. Principal of $322,000 was amortized during 2012.
|
(x)
|
The loan is collateralized by Village Center and requires equal monthly principal and interest payments of $119,000 based upon a 25-year amortization schedule and a
final payment of $10.1 million at loan maturity. Principal of $269,000 was amortized during 2012.
|
(y)
|
The loan is collateralized by White Oak and requires equal monthly principal and interest payments of $193,000 based upon a 24.4 year weighted amortization schedule
and a final payment of $18.5 million at loan maturity. The loan was previously collateralized by Van Ness Square. During 2012, the Company substituted White Oak as the collateral and borrowed an additional $10.5 million. Principal of $359,000 was
amortized during 2012.
|
(z)
|
The loan is collateralized by Avenel Business Park and requires equal monthly principal and interest payments of $246,000 based upon a 25-year amortization schedule
and a final payment of $20.9 million at loan maturity. Principal of $572,000 was amortized during 2012.
|
(aa)
|
The loan is collateralized by Ashburn Village and requires equal monthly principal and interest payments of $240,000 based upon a 25-year amortization schedule and a
final payment of $20.5 million at loan maturity. Principal of $554,000 was amortized during 2012.
|
(bb)
|
The loan is collateralized by Ravenwood and requires equal monthly principal and interest payments of $111,000 based upon a 25-year amortization schedule and a final
payment of $10.1 million at loan maturity. Principal of $312,000 was amortized during 2012.
|
(cc)
|
The loan is collateralized by Clarendon Center and requires equal monthly principal and interest payments of $753,000 based upon a 25-year amortization schedule and
a final payment of $70.5 million at loan maturity. Principal of $2.6 million was amortized during 2012.
|
(dd)
|
The loan is collateralized by Severna Park MarketPlace and requires equal monthly principal and interest payments of $207,000 based upon a 25-year amortization
schedule and a final payment of $20.3 million at loan maturity. Principal of $872,000 was amortized during 2012.
|
F-21
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
(ee)
|
The loan is collateralized by Kentlands Square II and requires equal monthly principal and interest payments of $240,000 based upon a 25-year amortization schedule
and a final payment of $23.1 million at loan maturity. Principal of $953,000 was amortized during 2012.
|
(ff)
|
The loan is collateralized by Cranberry Square and requires equal monthly principal and interest payments of $113,000 based upon a 25-year amortization schedule and
a final payment of $10.9 million at loan maturity. Principal of $431,000 was amortized during 2012.
|
(gg)
|
The loan in the original amount of $73.0 million closed in May 2012, is collateralized by Seven Corners and requires equal monthly principal and interest payments of
$463,200 based upon a 25-year amortization schedule and a final payment of $42.3 million at loan maturity. Principal of $767,000 was amortized during 2012.
|
(hh)
|
The loan is a $175.0 million unsecured revolving credit facility. Interest accrues at a rate equal to the sum of one-month LIBOR plus a spread of 1.90%. The line may
be extended at the Companys option for one year with payment of a fee of 0.20%. Monthly payments, if required, are interest only and vary depending upon the amount outstanding and the applicable interest rate for any given month.
|
(ii)
|
The loan is collateralized by Northrock and requires monthly principal and interest payments of $13,409 and a final payment of $14.9 million at maturity. Principal
of $161,000 was amortized during 2012.
|
The carrying value of the properties collateralizing the mortgage
notes payable totaled $916.1 million and $997.5 million, as of December 31, 2012 and 2011, respectively. The Companys credit facility requires the Company and its subsidiaries to maintain certain financial covenants, which are
summarized below. The Company was in compliance as of December 31, 2012.
|
|
|
maintain tangible net worth, as defined in the loan agreement, of at least $503.3 million plus 80% of the Companys net equity proceeds
received after May 2012.
|
|
|
|
limit the amount of debt as a percentage of gross asset value, as defined in the loan agreement, to less than 60% (leverage ratio);
|
|
|
|
limit the amount of debt so that interest coverage will exceed 2.0x on a trailing four-quarter basis (interest expense coverage);
|
|
|
|
limit the amount of debt so that interest, scheduled principal amortization and preferred dividend coverage exceeds 1.3x on a trailing four-quarter
basis (fixed charge coverage); and
|
|
|
|
limit the amount of variable rate debt and debt with initial loan terms of less than five years to no more than 40% of total debt.
|
Mortgage notes payable at December 31, 2012 and 2011, totaling $51.0 million and $99.4 million,
respectively, are guaranteed by members of The Saul Organization. As of December 31, 2012, the scheduled maturities of all debt including scheduled principal amortization for years ended December 31, are as follows:
Debt Maturity Schedule
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Balloon
Payments
|
|
|
Scheduled
Principal
Amortization
|
|
|
Total
|
|
2013
|
|
$
|
37,305
|
|
|
$
|
19,212
|
|
|
$
|
56,517
|
|
2014
|
|
|
13,218
|
|
|
|
19,677
|
|
|
|
32,895
|
|
2015
|
|
|
15,077
|
|
|
|
20,209
|
|
|
|
35,286
|
|
2016
|
|
|
38,000
|
(a)
|
|
|
21,058
|
|
|
|
59,058
|
|
2017
|
|
|
|
|
|
|
22,311
|
|
|
|
22,311
|
|
Thereafter
|
|
|
472,892
|
|
|
|
148,817
|
|
|
|
621,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
576,492
|
|
|
$
|
251,284
|
|
|
$
|
827,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes $38 million outstanding under the line of credit.
|
F-22
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Interest Expense and Amortization of Deferred Debt Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Year ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Interest incurred
|
|
$
|
48,010
|
|
|
$
|
45,673
|
|
|
$
|
40,528
|
|
Amortization of deferred debt costs
|
|
|
1,576
|
|
|
|
1,547
|
|
|
|
1,467
|
|
Capitalized interest
|
|
|
(42
|
)
|
|
|
(1,896
|
)
|
|
|
(7,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49,544
|
|
|
$
|
45,324
|
|
|
$
|
34,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred debt costs capitalized in 2012 totaled $2.2 million. No deferred debt costs were capitalized
during 2011 and 2010.
Lease income includes primarily base rent arising from noncancelable leases. Base rent (including straight-line rent)
for the years ended December 31, 2012, 2011, and 2010, amounted to $152.8 million, $138.4 million, and $126.2 million, respectively. Future contractual payments under noncancelable leases for years ended December 31 (which exclude the
effect of straight-line rents), are as follows:
|
|
|
|
|
(in thousands)
|
|
|
|
2013
|
|
$
|
146,293
|
|
2014
|
|
|
123,137
|
|
2015
|
|
|
104,558
|
|
2016
|
|
|
87,335
|
|
2017
|
|
|
70,306
|
|
Thereafter
|
|
|
310,790
|
|
|
|
|
|
|
|
|
$
|
842,419
|
|
|
|
|
|
|
The majority of the leases provide for rental increases and expense recoveries based on fixed annual
increases or increases in the Consumer Price Index and increases in operating expenses. The expense recoveries generally are payable in equal installments throughout the year based on estimates, with adjustments made in the succeeding year. Expense
recoveries for the years ended December 31, 2012, 2011, and 2010, amounted to $30.4 million, $28.4 million, and $29.5 million, respectively. In addition, certain retail leases provide for percentage rent based on sales in excess of the
minimum specified in the tenants lease. Percentage rent amounted to $1.5 million, $1.5 million, and $1.5 million, for the years ended December 31, 2012, 2011, and 2010, respectively.
7.
|
LONG-TERM LEASE OBLIGATIONS
|
Certain properties are subject to noncancelable long-term leases which apply to land underlying the Shopping Centers.
Certain of the leases provide for periodic adjustments of the base annual rent and require the payment of real estate taxes on the underlying land. The leases will expire between 2058 and 2068. Reflected in the accompanying consolidated financial
statements is minimum ground rent expense of $176,000, $173,000, and $169,000, for the years ended December 31, 2012, 2011, and 2010, respectively. The future minimum rental commitments under these ground leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ending December 31,
|
|
|
|
|
|
|
|
(In thousands)
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
Thereafter
|
|
|
Total
|
|
Beacon Center
|
|
$
|
60
|
|
|
$
|
60
|
|
|
$
|
60
|
|
|
$
|
60
|
|
|
$
|
60
|
|
|
$
|
2,660
|
|
|
$
|
2,960
|
|
Olney
|
|
|
56
|
|
|
|
56
|
|
|
|
56
|
|
|
|
56
|
|
|
|
56
|
|
|
|
3,873
|
|
|
|
4,153
|
|
Southdale
|
|
|
60
|
|
|
|
60
|
|
|
|
60
|
|
|
|
60
|
|
|
|
60
|
|
|
|
3,005
|
|
|
|
3,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
176
|
|
|
$
|
176
|
|
|
$
|
176
|
|
|
$
|
176
|
|
|
$
|
176
|
|
|
$
|
9,538
|
|
|
$
|
10,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
In addition to the above, Flagship Center consists of two developed out parcels that are
part of a larger adjacent community shopping center formerly owned by The Saul Organization and sold to an affiliate of a tenant in 1991. The Company has a 90-year ground leasehold interest which commenced in September 1991 with a minimum rent of
one dollar per year. Countryside shopping center was acquired in February, 2004. Because of certain land use considerations, approximately 3.4% of the underlying land is held under a 99-year ground lease. The lease requires the Company to pay
minimum rent of one dollar per year as well as its pro-rata share of the real estate taxes.
The Companys corporate
headquarters space is leased by a member of The Saul Organization. The lease commenced in March 2002 was extended in 2012 for five years, and provides for base rent increases of 3% per year, with payment of a pro-rata share of operating
expenses over a base year amount. The Company and The Saul Organization entered into a Shared Services Agreement whereby each party pays an allocation of total rental payments based on a percentage proportionate to the number of employees employed
by each party. The Companys rent expense for the years ended December 31, 2012, 2011, and 2010 was $850,000, $945,000, and $893,000, respectively. Expenses arising from the lease are included in general and administrative expense (see
Note 9 Related Party Transactions).
8.
|
STOCKHOLDERS EQUITY AND NONCONTROLLING INTEREST
|
The Consolidated Statements of Operations for the years ended December 31, 2012, 2011, and 2010 reflect
noncontrolling interest of $6.4 million, $3.6 million, and $6.4 million, respectively, representing The Saul Organizations share of the net income for the year.
In November 2003, the Company sold 4,000,000 depositary shares, each representing 1/100th of a share of 8% Series A Cumulative Redeemable Preferred Stock. The depositary shares are redeemable, in whole or
in part at the Companys option, from time to time, at $25.00 per share. The depositary shares pay an annual dividend of $2.00 per share, equivalent to 8% of the $25.00 per share liquidation preference. The Series A preferred stock has no
stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if
the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.
In March 2008, the Company sold 3,173,115 depositary shares, each representing 1/100th of a share of 9% Series B Cumulative Redeemable Preferred Stock. The depositary shares may be redeemed at the
Companys option, on or after March 15, 2013, in whole or in part, at $25.00 per share. The depositary shares pay an annual dividend of $2.25 per share, equivalent to 9% of the $25.00 per share liquidation preference. The Series B
preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company. Investors in the depositary shares generally have no voting rights, but will have
limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive) and in certain other events.
In September 2011, in connection with the acquisition of three shopping centers, the Company and the Operating Partnership issued to members of The Saul Organization 186,968 shares of the Companys
common stock, par value $0.01 per share (Shares) and 1,497,814 units of limited partnership interests in the Operating Partnership (Units) with an aggregate value of $55.8 million. The price of the Shares and Units was equal
to the average closing prices of the Companys common stock listed on the New York Stock Exchange for the five trading days ending with the trading day immediately preceding the date of closing of the property acquisition.
9.
|
RELATED PARTY TRANSACTIONS
|
The Chairman and Chief Executive Officer, the President, the Executive Vice President-Real Estate and the Senior Vice
President-Chief Accounting Officer of the Company are also officers of various members of The Saul Organization and their management time is shared with The Saul Organization. Their annual compensation is fixed by the Compensation Committee of the
Board of Directors, with the exception of the Senior Vice President-Chief Accounting Officer whose share of annual compensation allocated to the Company is determined by the shared services agreement (described below).
F-24
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
The Company participates in a multiemployer 401K plan with entities in The Saul
Organization which covers those full-time employees who meet the requirements as specified in the plan. Company contributions, which are included in general and administrative expense or property operating expenses in the consolidated statements of
operations, at the discretionary amount of up to six percent of the employees cash compensation, subject to certain limits, were $379,000, $378,000, and $358,000, for 2012, 2011, and 2010, respectively. All amounts deferred by employees and
the Company are fully vested.
The Company also participates in a multiemployer nonqualified deferred compensation plan with
entities in The Saul Organization which covers those full-time employees who meet the requirements as specified in the plan. According to the plan, which can be modified or discontinued at any time, participating employees defer 2% of their
compensation in excess of a specified amount. For the years ended December 31, 2012, 2011, and 2010, the Company contributed three times the amount deferred by employees. The Companys expense, included in general and administrative
expense, totaled $238,000, $231,000, and $213,000, for the years ended December 31, 2012, 2011, and 2010, respectively. All amounts deferred by employees and the Company are fully vested. The cumulative unfunded liability under this plan was
$2.2 million and $1.9 million, at December 31, 2012 and 2011, respectively, and is included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets.
The Company has entered into a shared services agreement (the Agreement) with The Saul Organization that provides for the
sharing of certain personnel and ancillary functions such as computer hardware, software, and support services and certain direct and indirect administrative personnel. The method for determining the cost of the shared services is provided for in
the Agreement and is based upon head count, estimates of usage or estimates of time incurred, as applicable. Senior management has determined that the final allocations of shared costs are reasonable. The terms of the Agreement and the payments made
thereunder are reviewed annually by the Audit Committee of the Board of Directors, which consists entirely of independent directors. Billings by The Saul Organization for the Companys share of these ancillary costs and expenses for the years
ended December 31, 2012, 2011, and 2010, which included rental expense for the Companys headquarters lease (see Note 7. Long Term Lease Obligations), totaled $6.0 million, $6.1 million, and $6.5 million, respectively. The amounts are
expensed when incurred and are primarily reported as general and administrative expenses or capitalized to specific development projects in these consolidated financial statements. As of December 31, 2012 and 2011, accounts payable, accrued
expenses and other liabilities included $499,000 and $560,000, respectively, representing billings due to The Saul Organization for the Companys share of these ancillary costs and expenses.
The B. F. Saul Insurance Agency of Maryland, Inc., a subsidiary of the B. F. Saul Company and a member of the Saul Organization, is a
general insurance agency that receives commissions and counter-signature fees in connection with the Companys insurance program. Such commissions and fees amounted to approximately $372,000, $341,000, and $324,000, for the years ended
December 31, 2012, 2011, and 2010, respectively.
Effective as of September 4, 2012, the Company entered into a
consulting agreement with B. F. Saul III, the Companys former president, whereby Mr. Saul III will provide certain consulting services to the Company as an independent contractor. Under the consulting agreement, Mr. Saul III will be
paid at a rate of $60,000 per month. The consulting agreement includes certain noncompete, nonsolicitation and nondisclosure covenants, and has a term of up to two years, although the consulting agreement is terminable by the Company at any time.
During 2012, such consulting fees totaled $225,000.
The Company established a stock option plan in 1993 (the 1993 Plan) for the purpose of attracting and
retaining executive officers and other key personnel. The 1993 Plan provides for grants of options to purchase up to 400,000 shares of common stock. The 1993 Plan authorizes the Compensation Committee of the Board of Directors to grant options at an
exercise price which may not be less than the market value of the common stock on the date the option is granted. On May 23, 2003, the Compensation Committee granted options to purchase a total of 220,000 shares (80,000 shares from incentive
stock options and 140,000 shares from nonqualified stock options) to six Company officers (the 2003 Options). Following the grant of the 2003 Options, no additional shares remained for issuance under the 1993 Plan. The 2003 Options
vested 25% per year over four years and have a term of ten years, subject to earlier expiration upon termination of employment. The exercise price of $24.91 per share was the closing market price of the Companys common stock on the date
of the award.
F-25
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
At the annual meeting of the Companys stockholders in 2004, the stockholders
approved the adoption of the 2004 stock plan for the purpose of attracting and retaining executive officers, directors and other key personnel. The 2004 stock plan was subsequently amended by the Companys stockholders at the 2008 Annual
Meeting (the Amended 2004 Plan). The Amended 2004 Plan, which terminates in April 2018, provides for grants of options to purchase up to 1,000,000 shares of common stock as well as grants of up to 200,000 shares of common stock to
directors. The Amended 2004 Plan authorizes the Compensation Committee of the Board of Directors to grant options at an exercise price which may not be less than the market value of the common stock on the date the option is granted.
Effective April 26, 2004, the Compensation Committee granted options to purchase a total of 152,500 shares (27,500 shares from
incentive stock options and 125,000 shares from nonqualified stock options) to eleven Company officers and to the twelve Company directors (the 2004 Options), which expire on April 25, 2014. The officers 2004 Options vested
25% per year over four years and are subject to early expiration upon termination of employment. The directors options were immediately exercisable. The exercise price of $25.78 per share was the closing market price of the Companys
common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2004 Options to be $360,000, of which $293,000 and $67,000 were the values assigned to the officer options and director options,
respectively. Because the directors options vested immediately, the entire $67,000 was expensed as of the date of grant. The expense of the officers options was recognized as compensation expense monthly during the four years the options
vested.
Effective May 6, 2005, the Compensation Committee granted options to purchase a total of 162,500 shares (35,500
shares from incentive stock options and 127,000 shares from nonqualified stock options) to twelve Company officers and to twelve Company directors (the 2005 Options), which expire on May 5, 2015. The officers 2005 Options
vested 25% per year over four years and are subject to early expiration upon termination of employment. The directors options were immediately exercisable. The exercise price of $33.22 per share was the closing market price of the
Companys common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2005 Options to be $484,500, of which $413,400 and $71,100 were the values assigned to the officer options and
director options, respectively. Because the directors options vested immediately, the entire $71,100 was expensed as of the date of grant. The expense of the officers options was recognized as compensation expense monthly during the four
years the options vested.
Effective May 1, 2006, the Compensation Committee granted options to purchase a total of
30,000 shares (all nonqualified stock options) to twelve Company directors (the 2006 Options), which were immediately exercisable and expire on April 30, 2016. The exercise price of $40.35 per share was the closing market price of
the Companys common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2006 Options to be $143,400. Because the directors options vested immediately, the entire $143,400 was
expensed as of the date of grant. No options were granted to the Companys officers in 2006.
Effective April 27,
2007, the Compensation Committee granted options to purchase a total of 165,000 shares (27,560 shares from incentive stock options and 137,440 shares from nonqualified stock options) to thirteen Company officers and twelve Company Directors (the
2007 options), which expire on April 26, 2017. The officers 2007 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors options were immediately
exercisable. The exercise price of $54.17 per share was the closing market price of the Companys common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2007 Options to be $1.5
million, of which $1.3 million and $285,300 were the values assigned to the officer options and director options, respectively. Because the directors options vested immediately, the entire $285,300 was expensed as of the date of grant. The
expense for the officers options was recognized as compensation expense monthly during the four years the options vested.
Effective April 25, 2008, the Compensation Committee granted options to purchase a total of 30,000 shares (all nonqualified stock
options) to twelve Company directors (the 2008 Options), which were immediately exercisable and expire on April 24, 2018. The exercise price of $50.15 per share was the closing market price of the Companys common stock on the
date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2008 Options to be $254,700. Because the directors options vest immediately, the entire $254,700 was expensed as of the date of grant. No
options were granted to the Companys officers in 2008.
F-26
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Effective April 24, 2009, the Compensation Committee granted options to purchase a
total of 32,500 shares (all nonqualified stock options) to thirteen Company directors (the 2009 Options), which were immediately exercisable and expire on April 23, 2019. The exercise price of $32.68 per share was the closing market
price of the Companys common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2009 Options to be $222,950. Because the directors options vested immediately, the entire
$222,950 was expensed as of the date of grant. No options were granted to the Companys officers in 2009.
Effective
May 7, 2010, the Compensation Committee granted options to purchase a total of 32,500 shares (all nonqualified stock options) to thirteen Company directors (the 2010 Options), which were immediately exercisable and expire on
May 6, 2020. The exercise price of $38.76 per share was the closing market price of the Companys common stock on the date of the award. Using the Black-Scholes model, the Company determined the total fair value of the 2010 Options to be
$287,950. Because the directors options vested immediately, the entire $287,950 was expensed as of the date of grant. No options were granted to the Companys officers in 2010.
Effective May 13, 2011, the Compensation Committee granted options to purchase a total of 195,000 shares (65,300 shares from
incentive stock options and 129,700 shares from nonqualified stock options) to 15 Company officers and 13 Company Directors (the 2011 options), which expire on May 12, 2021. The officers 2011 Options vest 25% per year
over four years and are subject to early expiration upon termination of employment. The directors 2011 options were immediately exercisable. The exercise price of $41.82 per share was the closing market price of the Companys common stock
on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2011 Options to be $1.6 million, of which $1.3 million and $297,000 were assigned to the officer options and director options, respectively.
Because the directors options vested immediately, the entire $297,000 was expensed as of the date of grant. The expense for the officers options is being recognized as compensation expense monthly during the four years the options vest.
Effective May 4, 2012, the Compensation Committee granted options to purchase a total of 277,500 shares (26,157 shares
from incentive stock options and 251,343 shares from nonqualified stock options) to 15 Company officers and 14 Company Directors (the 2012 options), which expire on May 3, 2022. The officers 2012 Options vest 25% per year
over four years and are subject to early expiration upon termination of employment. The directors 2012 options were immediately exercisable. The exercise price of $39.29 per share was the closing market price of the Companys common stock
on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2012 Options to be $1.7 million, of which $1.44 million and $244,000 were assigned to the officer options and director options, respectively.
Because the directors options vested immediately, the entire $244,000 was expensed as of the date of grant. The expense for the officers options is being recognized as compensation expense monthly during the four years the options vest.
F-27
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
The following table summarizes the amount and activity of each grant, the total value and variables used
in the computation and the amount expensed and included in general and administrative expense in the Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors
|
|
Grant date
|
|
04/26/2004
|
|
|
05/06/2005
|
|
|
05/01/2006
|
|
|
04/27/2007
|
|
|
04/25/2008
|
|
|
04/24/2009
|
|
|
05/07/2010
|
|
|
05/13/2011
|
|
|
05/04/2012
|
|
|
Subtotals
|
|
Total grant
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
32,500
|
|
|
|
32,500
|
|
|
|
32,500
|
|
|
|
35,000
|
|
|
|
282,500
|
|
Vested
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
32,500
|
|
|
|
32,500
|
|
|
|
32,500
|
|
|
|
35,000
|
|
|
|
282,500
|
|
Exercised
|
|
|
21,200
|
|
|
|
17,500
|
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
2,500
|
|
|
|
2,500
|
|
|
|
2,500
|
|
|
|
58,700
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
|
|
|
|
2,500
|
|
|
|
2,500
|
|
|
|
|
|
|
|
17,500
|
|
Exercisable at December 31, 2012
|
|
|
8,800
|
|
|
|
12,500
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
22,500
|
|
|
|
27,500
|
|
|
|
27,500
|
|
|
|
32,500
|
|
|
|
206,300
|
|
Remaining unexercised
|
|
|
8,800
|
|
|
|
12,500
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
22,500
|
|
|
|
27,500
|
|
|
|
27,500
|
|
|
|
32,500
|
|
|
|
206,300
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price
|
|
$
|
25.78
|
|
|
$
|
33.22
|
|
|
$
|
40.35
|
|
|
$
|
54.17
|
|
|
$
|
50.15
|
|
|
$
|
32.68
|
|
|
$
|
38.76
|
|
|
$
|
41.82
|
|
|
$
|
39.29
|
|
|
|
|
|
Volatility
|
|
|
0.183
|
|
|
|
0.198
|
|
|
|
0.206
|
|
|
|
0.225
|
|
|
|
0.237
|
|
|
|
0.344
|
|
|
|
0.369
|
|
|
|
0.358
|
|
|
|
0.348
|
|
|
|
|
|
Expected life (years)
|
|
|
5.0
|
|
|
|
10.0
|
|
|
|
9.0
|
|
|
|
8.0
|
|
|
|
7.0
|
|
|
|
6.0
|
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
|
|
Assumed yield
|
|
|
5.75
|
%
|
|
|
6.91
|
%
|
|
|
5.93
|
%
|
|
|
4.39
|
%
|
|
|
4.09
|
%
|
|
|
4.54
|
%
|
|
|
4.23
|
%
|
|
|
4.16
|
%
|
|
|
4.61
|
%
|
|
|
|
|
Risk-free rate
|
|
|
3.57
|
%
|
|
|
4.28
|
%
|
|
|
5.11
|
%
|
|
|
4.65
|
%
|
|
|
3.49
|
%
|
|
|
2.19
|
%
|
|
|
2.17
|
%
|
|
|
1.86
|
%
|
|
|
0.78
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value at grant date
|
|
$
|
66,600
|
|
|
$
|
71,100
|
|
|
$
|
143,400
|
|
|
$
|
285,300
|
|
|
$
|
254,700
|
|
|
$
|
222,950
|
|
|
$
|
287,950
|
|
|
$
|
297,375
|
|
|
$
|
244,388
|
|
|
$
|
1,873,763
|
|
Forfeited options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expensed in previous years
|
|
|
66,600
|
|
|
|
71,100
|
|
|
|
143,400
|
|
|
|
285,300
|
|
|
|
254,700
|
|
|
|
222,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,044,050
|
|
Expensed in 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
287,950
|
|
|
|
|
|
|
|
|
|
|
|
287,950
|
|
Expensed in 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
297,375
|
|
|
|
|
|
|
|
297,375
|
|
Expensed in 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244,388
|
|
|
|
244,388
|
|
Future expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers
|
|
|
|
|
|
|
|
Grant date
|
|
05/23/2003
|
|
|
04/26/2004
|
|
|
05/06/2005
|
|
|
04/27/2007
|
|
|
05/13/2011
|
|
|
05/04/2012
|
|
|
|
|
|
Subtotals
|
|
|
|
|
|
Grand Totals
|
|
Total grant
|
|
|
220,000
|
|
|
|
122,500
|
|
|
|
132,500
|
|
|
|
135,000
|
|
|
|
162,500
|
|
|
|
242,500
|
|
|
|
|
|
|
|
1,015,000
|
|
|
|
|
|
|
|
1,297,500
|
|
Vested
|
|
|
212,500
|
|
|
|
115,000
|
|
|
|
118,750
|
|
|
|
67,500
|
|
|
|
40,625
|
|
|
|
|
|
|
|
|
|
|
|
554,375
|
|
|
|
|
|
|
|
836,875
|
|
Exercised
|
|
|
211,585
|
|
|
|
91,250
|
|
|
|
66,375
|
|
|
|
|
|
|
|
13,750
|
|
|
|
|
|
|
|
|
|
|
|
382,960
|
|
|
|
|
|
|
|
441,660
|
|
Forfeited
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
13,750
|
|
|
|
67,500
|
|
|
|
41,250
|
|
|
|
130,000
|
|
|
|
|
|
|
|
267,500
|
|
|
|
|
|
|
|
285,000
|
|
Exercisable at December 31, 2012
|
|
|
915
|
|
|
|
23,750
|
|
|
|
52,375
|
|
|
|
67,500
|
|
|
|
26,875
|
|
|
|
|
|
|
|
|
|
|
|
171,415
|
|
|
|
|
|
|
|
377,715
|
|
Remaining unexercised
|
|
|
915
|
|
|
|
23,750
|
|
|
|
52,375
|
|
|
|
67,500
|
|
|
|
107,500
|
|
|
|
112,500
|
|
|
|
|
|
|
|
364,540
|
|
|
|
|
|
|
|
570,840
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price
|
|
$
|
24.91
|
|
|
$
|
25.78
|
|
|
$
|
33.22
|
|
|
$
|
54.17
|
|
|
$
|
41.82
|
|
|
$
|
39.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
|
0.175
|
|
|
|
0.183
|
|
|
|
0.207
|
|
|
|
0.233
|
|
|
|
0.330
|
|
|
|
0.315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected life (years)
|
|
|
7.0
|
|
|
|
7.0
|
|
|
|
8.0
|
|
|
|
6.5
|
|
|
|
8.0
|
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed yield
|
|
|
7.00
|
%
|
|
|
5.75
|
%
|
|
|
6.37
|
%
|
|
|
4.13
|
%
|
|
|
4.81
|
%
|
|
|
5.28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free rate
|
|
|
4.00
|
%
|
|
|
4.05
|
%
|
|
|
4.15
|
%
|
|
|
4.61
|
%
|
|
|
2.75
|
%
|
|
|
1.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value at grant date
|
|
$
|
332,200
|
|
|
$
|
292,775
|
|
|
$
|
413,400
|
|
|
$
|
1,258,848
|
|
|
$
|
1,277,794
|
|
|
$
|
1,442,148
|
|
|
|
|
|
|
$
|
5,017,165
|
|
|
|
|
|
|
$
|
6,890,928
|
|
Forfeited options
|
|
|
11,325
|
|
|
|
17,925
|
|
|
|
35,100
|
|
|
|
|
|
|
|
252,300
|
|
|
|
813,800
|
|
|
|
|
|
|
|
1,130,450
|
|
|
|
|
|
|
|
1,130,450
|
|
Expensed in previous years
|
|
|
320,875
|
|
|
|
274,850
|
|
|
|
378,300
|
|
|
|
839,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,813,270
|
|
|
|
|
|
|
|
2,857,320
|
|
Expensed in 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
314,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
314,712
|
|
|
|
|
|
|
|
602,662
|
|
Expensed in 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,891
|
|
|
|
186,347
|
|
|
|
|
|
|
|
|
|
|
|
291,238
|
|
|
|
|
|
|
|
588,613
|
|
Expensed in 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270,391
|
|
|
|
104,724
|
|
|
|
|
|
|
|
375,115
|
|
|
|
|
|
|
|
619,503
|
|
Future expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
568,756
|
|
|
|
523,624
|
|
|
|
|
|
|
|
1,092,380
|
|
|
|
|
|
|
|
1,092,380
|
|
Weighted average term of remaining future expense
|
|
|
|
2.9 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-28
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
The table below summarizes the option activity for the years 2012, 2011, and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding at January 1
|
|
|
674,585
|
|
|
$
|
40.40
|
|
|
|
532,881
|
|
|
$
|
39.12
|
|
|
|
609,253
|
|
|
$
|
36.71
|
|
Granted
|
|
|
277,500
|
|
|
|
39.29
|
|
|
|
195,000
|
|
|
|
41.82
|
|
|
|
32,500
|
|
|
|
38.76
|
|
Exercised
|
|
|
(149,995
|
)
|
|
|
31.03
|
|
|
|
(40,796
|
)
|
|
|
29.03
|
|
|
|
(108,872
|
)
|
|
|
25.52
|
|
Expired/Forfeited
|
|
|
(231,250
|
)
|
|
|
43.56
|
|
|
|
(12,500
|
)
|
|
|
45.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding December 31
|
|
|
570,840
|
|
|
|
41.04
|
|
|
|
674,585
|
|
|
|
40.40
|
|
|
|
532,881
|
|
|
|
39.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31
|
|
|
377,715
|
|
|
|
41.41
|
|
|
|
512,085
|
|
|
|
39.96
|
|
|
|
502,256
|
|
|
|
38.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The intrinsic value of options exercised in 2012, 2011, and 2010, was $1.6 million, $688,000, and
$2.0 million, respectively. The intrinsic value of options outstanding and exercisable at year end 2012 was $2.2 million and $1.7 million, respectively. The intrinsic value measures the difference between the options exercise price
and the closing share price quoted by the New York Stock Exchange as of the date of measurement. The date of exercise was the measurement date for shares exercised during the period. At December 31, 2012, the final trading day of calendar 2012,
the closing price of $42.79 per share was used for the calculation of aggregate intrinsic value of options outstanding and exercisable at that date. Options having an exercise price in excess of the December 31, 2012 closing price have no
intrinsic value. The weighted average remaining contractual life of the Companys exercisable and outstanding options at December 31, 2012 are 5.0 and 6.4 years, respectively.
Gain on casualty settlement in 2012 reflects insurance proceeds received in excess of the carrying value of assets
damaged during a hail storm at French Market in 2012. Gain on casualty settlement in 2011 and 2010 reflects the excess of insurance proceeds over the carrying value of assets damaged during a severe hail storm at French Market. The insurance
proceeds funded substantially all of the restoration of the damaged property.
12.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are
reasonable estimates of their fair value. The aggregate fair value of the notes payable with fixed-rate payment terms was determined using Level 3 data in a discounted cash flow approach, which is based upon managements estimate of borrowing
rates and loan terms currently available to the Company for fixed rate financing, and assuming long term interest rates of approximately 4.0% and 4.30%, would be approximately $848.1 million and $889.2 million, as of December 31, 2012 and 2011,
respectively, compared to the carrying value of $774.8 million and $808.8 million at December 31, 2012 and 2011, respectively. A change in any of the significant inputs may lead to a change in the Companys fair value measurement of its
debt.
Effective June 30, 2011, the Company determined that one of its interest-rate swap arrangements was a highly
effective hedge of the cash flows under one of its variable-rate mortgage loans and designated the swap as a cash flow hedge of that mortgage. The swap is carried at fair value with changes in fair value recognized either in income or comprehensive
income depending on the effectiveness of the swap. The following chart summarizes the changes in fair value of the Companys swaps for the indicated periods.
F-29
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Year ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Increase (decrease) in fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in earnings
|
|
$
|
36
|
|
|
$
|
(1,332
|
)
|
|
$
|
|
|
Recognized in other comprehensive income
|
|
|
(932
|
)
|
|
|
(3,195
|
)
|
|
|
(543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(896
|
)
|
|
$
|
(4,527
|
)
|
|
$
|
(543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company carries its interest rate swaps at fair value. The Company has determined the majority of the
inputs used to value its derivative fall within Level 2 of the fair value hierarchy with the exception of the impact of counter-party risk, which was determined using Level 3 inputs and are not significant. Derivative instruments are classified
within Level 2 of the fair value hierarchy because their values are determined using third-party pricing models which contain inputs that are derived from observable market data. Where possible, the values produced by the pricing models are verified
by the market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measure of volatility, and correlations of such inputs. The swap agreements terminate on June 30, 2013
and July 1, 2020. As of December 31, 2012, the fair value of the interest-rate swaps was approximately $5.9 million and is included in Accounts payable, accrued expenses and other liabilities in the consolidated balance sheets.
The decrease in value from inception of the swap designated as a cash flow hedge is reflected in Other Comprehensive Income in the Consolidated Statements of Comprehensive Income.
13.
|
COMMITMENTS AND CONTINGENCIES
|
Neither the Company nor the Current Portfolio Properties are subject to any material litigation, nor, to
managements knowledge, is any material litigation currently threatened against the Company, other than routine litigation and administrative proceedings arising in the ordinary course of business. Management believes that these items,
individually or in the aggregate, will not have a material adverse impact on the Company or the Current Portfolio Properties.
In December 1995, the Company established a Dividend Reinvestment and Stock Purchase Plan (the Plan), to
allow its stockholders and holders of limited partnership interests an opportunity to buy additional shares of common stock by reinvesting all or a portion of their dividends or distributions. The Plan provides for investing in newly issued shares
of common stock at a 3% discount from market price without payment of any brokerage commissions, service charges or other expenses. All expenses of the Plan are paid by the Company. The Operating Partnership also maintains a similar dividend
reinvestment plan that mirrors the Plan, which allows holders of limited partnership interests the opportunity to buy either additional limited partnership units or common stock shares of the Company.
The Company paid common stock distributions of $1.44 per share, $1.44 per share, and $1.44 per share, during 2012, 2011, and 2010,
respectively, and Series A preferred stock dividends of $2.00 per depositary share and Series B preferred stock dividends of $2.25 per share during each of the years in the period ended December 31, 2012. Of the common stock dividends paid,
$0.95 per share, $0.72 per share, and $1.008 per share, represented ordinary dividend income and $0.49 per share, $0.72 per share, and $0.432 per share represented return of capital to the shareholders. All of the preferred stock dividends paid were
considered ordinary dividend income.
F-30
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
The following summarizes distributions paid during the years ended December 31,
2012, 2011, and 2010, and includes activity in the Plan as well as limited partnership units issued from the reinvestment of unit distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Distributions to
|
|
|
Dividend Reinvestments
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
Preferred
Stockholders
|
|
|
Common
Stockholders
|
|
|
Limited
Partnership
Unitholders
|
|
|
Common
Stock Shs
Issued
|
|
|
Discounted
Share Price
|
|
|
|
|
|
|
|
Distributions during 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31
|
|
$
|
3,785
|
|
|
$
|
7,121
|
|
|
$
|
2,489
|
|
|
|
141,960
|
|
|
$
|
42.23
|
|
July 31
|
|
|
3,785
|
|
|
|
7,063
|
|
|
|
2,489
|
|
|
|
144,881
|
|
|
|
40.43
|
|
April 30
|
|
|
3,785
|
|
|
|
7,005
|
|
|
|
2,489
|
|
|
|
145,118
|
|
|
|
38.93
|
|
January 31
|
|
|
3,785
|
|
|
|
6,946
|
|
|
|
2,489
|
|
|
|
163,429
|
|
|
|
34.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2012
|
|
$
|
15,140
|
|
|
$
|
28,135
|
|
|
$
|
9,956
|
|
|
|
595,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions during 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31
|
|
$
|
3,785
|
|
|
$
|
6,867
|
|
|
$
|
2,489
|
|
|
|
160,589
|
|
|
$
|
34.82
|
|
July 31
|
|
|
3,785
|
|
|
|
6,772
|
|
|
|
1,950
|
|
|
|
125,973
|
|
|
|
38.30
|
|
April 30
|
|
|
3,785
|
|
|
|
6,730
|
|
|
|
1,950
|
|
|
|
111,592
|
|
|
|
42.49
|
|
January 31
|
|
|
3,785
|
|
|
|
6,693
|
|
|
|
1,950
|
|
|
|
100,094
|
|
|
|
45.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2011
|
|
$
|
15,140
|
|
|
$
|
27,062
|
|
|
$
|
8,339
|
|
|
|
498,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions during 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31
|
|
$
|
3,785
|
|
|
$
|
6,608
|
|
|
$
|
1,950
|
|
|
|
114,854
|
|
|
$
|
41.14
|
|
July 31
|
|
|
3,785
|
|
|
|
6,567
|
|
|
|
1,950
|
|
|
|
107,932
|
|
|
|
41.27
|
|
April 30
|
|
|
3,785
|
|
|
|
6,525
|
|
|
|
1,950
|
|
|
|
103,496
|
|
|
|
39.07
|
|
January 31
|
|
|
3,785
|
|
|
|
6,486
|
|
|
|
1,950
|
|
|
|
100,565
|
|
|
|
34.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2010
|
|
$
|
15,140
|
|
|
$
|
26,186
|
|
|
$
|
7,800
|
|
|
|
426,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In December 2012, the Board of Directors of the Company authorized a distribution of $0.36 per common
share payable in January 2013, to holders of record on January 17, 2013. As a result, $7.2 million was paid to common shareholders on January 31, 2013. Also, $2.5 million was paid to limited partnership unitholders on January 31, 2013
($0.36 per Operating Partnership unit). The Board of Directors authorized preferred stock dividends of $0.50 per Series A depositary share, to holders of record on January 7, 2013 and $0.5625 per Series B depositary share to holders of record
on January 7, 2013. As a result, $3.8 million was paid to preferred shareholders on January 15, 2013. These amounts are reflected as a reduction of stockholders equity in the case of common stock and preferred stock dividends and
noncontrolling interest deductions in the case of limited partner distributions and are included in dividends and distributions payable in the accompanying consolidated financial statements.
F-31
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
15.
|
INTERIM RESULTS (Unaudited)
|
The following summary presents the results of operations of the Company for the quarterly periods of calendar years
2012 and 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts)
|
|
2012
|
|
|
|
1st Quarter
|
|
|
2nd Quarter
|
|
|
3rd Quarter
|
|
|
4th Quarter
|
|
Revenue
|
|
$
|
46,989
|
|
|
$
|
47,373
|
|
|
$
|
47,443
|
|
|
$
|
48,287
|
|
Operating income before loss on early extinguishment of debt, gain on casualty settlement, acquisition costs, discontinued
operations and noncontrolling interest
|
|
|
9,318
|
|
|
|
9,598
|
|
|
|
8,160
|
|
|
|
9,149
|
|
Gain on sales of properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,510
|
|
Net income attributable to Saul Centers, Inc.
|
|
|
7,864
|
|
|
|
8,079
|
|
|
|
7,948
|
|
|
|
9,483
|
|
Net income available to common shareholders.
|
|
|
4,079
|
|
|
|
4,294
|
|
|
|
4,163
|
|
|
|
5,698
|
|
Net income available to common shareholders per share (diluted)
|
|
|
0.21
|
|
|
|
0.22
|
|
|
|
0.21
|
|
|
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
1st Quarter
|
|
|
2nd Quarter
|
|
|
3rd Quarter
|
|
|
4th Quarter
|
|
Revenue
|
|
$
|
41,608
|
|
|
$
|
42,666
|
|
|
$
|
42,756
|
|
|
$
|
46,848
|
|
Operating income before loss on early extinguishment of debt, gain on casualty settlement, acquisition costs, discontinued
operations and noncontrolling interest
|
|
|
8,340
|
|
|
|
8,247
|
|
|
|
8,636
|
|
|
|
8,747
|
|
Net income attributable to Saul Centers, Inc.
|
|
|
7,309
|
|
|
|
6,398
|
|
|
|
5,504
|
|
|
|
7,522
|
|
Net income available to common shareholders.
|
|
|
3,524
|
|
|
|
2,613
|
|
|
|
1,719
|
|
|
|
3,737
|
|
Net income available to common shareholders per share (diluted)
|
|
|
0.19
|
|
|
|
0.14
|
|
|
|
0.09
|
|
|
|
0.19
|
|
The Company has two reportable business segments: Shopping Centers and Mixed-Use Properties. The accounting policies of
the segments are the same as those described in the summary of significant accounting policies (see Note 2). The Company evaluates performance based upon income and cash flows from real estate for the combined properties in each segment. All of our
properties within each segment generate similar types of revenues and expenses related to tenant rent, reimbursements and operating expenses. Although services are provided to a range of tenants, the types of services provided to them are similar
within each segment. The properties in each portfolio have similar economic characteristics and the nature of the products and services provided to our tenants and the method to distribute such services are consistent throughout the portfolio.
Certain reclassifications have been made to prior year information to conform to the 2012 presentation.
F-32
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Shopping
|
|
|
Mixed-Use
|
|
|
Corporate
|
|
|
Consolidated
|
|
As of or for the year ended December 31, 2012
|
|
Centers
|
|
|
Properties
|
|
|
and Other
|
|
|
Totals
|
|
Real estate rental operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
137,647
|
|
|
$
|
52,309
|
|
|
$
|
136
|
|
|
$
|
190,092
|
|
Expenses
|
|
|
(30,139
|
)
|
|
|
(17,131
|
)
|
|
|
|
|
|
|
(47,270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from real estate
|
|
|
107,508
|
|
|
|
35,178
|
|
|
|
136
|
|
|
|
142,822
|
|
Interest expense & amortization of deferred debt costs
|
|
|
|
|
|
|
|
|
|
|
(49,544
|
)
|
|
|
(49,544
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
(14,274
|
)
|
|
|
(14,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
107,508
|
|
|
|
35,178
|
|
|
|
(63,682
|
)
|
|
|
79,004
|
|
Depreciation and amortization of deferred leasing costs
|
|
|
(25,667
|
)
|
|
|
(14,445
|
)
|
|
|
|
|
|
|
(40,112
|
)
|
Predevelopment expense
|
|
|
|
|
|
|
(2,667
|
)
|
|
|
|
|
|
|
(2,667
|
)
|
Acquisition related costs
|
|
|
(1,129
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,129
|
)
|
Change in fair value of derivatives
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
36
|
|
Gain on casualty settlement
|
|
|
219
|
|
|
|
|
|
|
|
|
|
|
|
219
|
|
Loss from operations of property sold
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
(81
|
)
|
Gain on property dispositions
|
|
|
4,510
|
|
|
|
|
|
|
|
|
|
|
|
4,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
85,360
|
|
|
$
|
18,066
|
|
|
$
|
(63,646
|
)
|
|
$
|
39,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital investment
|
|
$
|
46,353
|
|
|
$
|
8,290
|
|
|
$
|
|
|
|
$
|
54,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
894,027
|
|
|
$
|
301,355
|
|
|
$
|
11,927
|
|
|
$
|
1,207,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the year ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate rental operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
127,767
|
|
|
$
|
46,035
|
|
|
$
|
76
|
|
|
$
|
173,878
|
|
Expenses
|
|
|
(30,372
|
)
|
|
|
(14,658
|
)
|
|
|
|
|
|
|
(45,030
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from real estate
|
|
|
97,395
|
|
|
|
31,377
|
|
|
|
76
|
|
|
|
128,848
|
|
Interest expense & amortization of deferred debt costs
|
|
|
|
|
|
|
|
|
|
|
(45,324
|
)
|
|
|
(45,324
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
(14,256
|
)
|
|
|
(14,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
97,395
|
|
|
|
31,377
|
|
|
|
(59,504
|
)
|
|
|
69,268
|
|
Depreciation and amortization of deferred leasing costs
|
|
|
(23,077
|
)
|
|
|
(12,221
|
)
|
|
|
|
|
|
|
(35,298
|
)
|
Decrease in fair value of derivatives
|
|
|
|
|
|
|
|
|
|
|
(1,332
|
)
|
|
|
(1,332
|
)
|
Acquisition related costs
|
|
|
(2,534
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,534
|
)
|
Loss from operations of property sold
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
(55
|
)
|
Gain on casualty settlement
|
|
|
245
|
|
|
|
|
|
|
|
|
|
|
|
245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
71,974
|
|
|
$
|
19,156
|
|
|
$
|
(60,836
|
)
|
|
$
|
30,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital investment
|
|
$
|
177,958
|
|
|
$
|
24,546
|
|
|
$
|
|
|
|
$
|
202,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
871,409
|
|
|
$
|
308,053
|
|
|
$
|
13,107
|
|
|
$
|
1,192,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the year ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate rental operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
125,015
|
|
|
$
|
38,060
|
|
|
$
|
33
|
|
|
$
|
163,108
|
|
Expenses
|
|
|
(29,923
|
)
|
|
|
(12,052
|
)
|
|
|
|
|
|
|
(41,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from real estate
|
|
|
95,092
|
|
|
|
26,008
|
|
|
|
33
|
|
|
|
121,133
|
|
Interest expense & amortization of deferred debt costs
|
|
|
|
|
|
|
|
|
|
|
(34,799
|
)
|
|
|
(34,799
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
(13,968
|
)
|
|
|
(13,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
95,092
|
|
|
|
26,008
|
|
|
|
(48,734
|
)
|
|
|
72,366
|
|
Depreciation and amortization of deferred leasing costs
|
|
|
(20,491
|
)
|
|
|
(7,888
|
)
|
|
|
|
|
|
|
(28,379
|
)
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
(5,405
|
)
|
|
|
(5,405
|
)
|
Acquisition related costs
|
|
|
(1,179
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,179
|
)
|
Gain on casualty settlement
|
|
|
2,475
|
|
|
|
|
|
|
|
|
|
|
|
2,475
|
|
Loss from operations of property sold
|
|
|
(284
|
)
|
|
|
|
|
|
|
|
|
|
|
(284
|
)
|
Gain on property sale
|
|
|
3,591
|
|
|
|
|
|
|
|
|
|
|
|
3,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
79,204
|
|
|
$
|
18,120
|
|
|
$
|
(54,139
|
)
|
|
$
|
43,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital investment
|
|
$
|
29,253
|
|
|
$
|
68,986
|
|
|
$
|
|
|
|
$
|
98,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
704,624
|
|
|
$
|
294,791
|
|
|
$
|
14,473
|
|
|
$
|
1,013,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
On January 31, 2013, the Company issued a notice to redeem 60% of the depositary shares related to the 8% Series A
Cumulative Redeemable Preferred Stock at a price of $25.00 per depositary share, plus accrued dividends. The depositary shares were redeemed pro-rata on March 2, 2013.
On February 12, 2013, the Company sold, in an underwritten public offering, 5.6 million depositary shares, each representing 1/100th of a share of 6.875% Series C Cumulative Redeemable Preferred
Stock, providing net cash proceeds of approximately $134.8 million. The depositary shares may be redeemed at the Companys option, in whole or in part, at the $25.00 liquidation preference plus accrued but unpaid dividends on or after February
12, 2018. The depositary shares pay an annual dividend of $1.71875 per share, equivalent to 6.875% of the $25.00 liquidation preference. The first dividend is scheduled to be paid on April 15, 2013 and covers the period from February 12,
2013 through March 31, 2013. The Series C preferred stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not convertible into any other securities of the Company except in connection with certain
changes of control or delisting events. Investors in the depositary shares generally have no voting rights, but will have limited voting rights if the Company fails to pay dividends for six or more quarters (whether or not declared or consecutive)
and in certain other events.
On February 12, 2013, the Company issued a notice to redeem all of the outstanding
depositary shares related to the 9% Series B Cumulative Redeemable Preferred Stock at a price of $25.00 per depositary share, plus accrued dividends. The redemption date is March 15, 2013.
On February 27, 2013, the Company closed on a three-year $15.6 million mortgage loan secured by Metro Pike Center. The loan matures
in 2016, bears interest at a variable rate equal to the sum of one-month LIBOR and 165 basis points, requires monthly principal and interest payments based on a 25-year amortization schedule and a final payment of $14.7 million at maturity. The loan
may be extended for up to two years. Proceeds were used to pay-off the $15.9 million remaining balance of existing debt secured by Metro Pike Center, and to extinguish the related swap agreement, which were scheduled to mature in June 2013.
On February 27, 2013, the Company closed on a three-year $15.0 million mortgage loan secured by Northrock. The loan
matures in 2016, bears interest at a variable rate equal to the sum of one-month LIBOR and 165 basis points, requires monthly principal and interest payments based on a 25-year amortization schedule and a final payment of $14.2 million at maturity.
The loan may be extended for up to two years. Proceeds were used to pay-off the $15.0 million remaining balance of existing debt secured by Northrock, which was scheduled to mature in May 2013.
The Company recently completed negotiation of lease termination agreements with the tenants of Van Ness Square and expects the building
will be vacant on or about April 30, 2013. Costs incurred related to those termination arrangements are being amortized to expense using the straight-line method over the remaining terms of the leases. In addition, the remaining lives of
(a) straight line rent recognition and (b) the building, have been adjusted to end on April 30, 2013.
F-34
Schedule III
SAUL CENTERS, INC.
Real Estate and Accumulated Depreciation
December 31, 2012
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Capitalized
|
|
|
Basis at Close of Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
Subsequent
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Improvements
|
|
Book Value
|
|
|
|
Initial
|
|
|
to
|
|
|
|
|
|
and
|
|
|
Leasehold
|
|
|
|
|
|
Accumulated
|
|
|
Book
|
|
|
Related
|
|
|
Date of
|
|
Date
|
|
Depreciable
|
|
Of Mortgaged
|
|
|
|
Basis
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Interests
|
|
|
Total
|
|
|
Depreciation
|
|
|
Value
|
|
|
Debt
|
|
|
Construction
|
|
Acquired
|
|
Lives in Years
|
|
Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping Centers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashburn Village, Ashburn, VA
|
|
$
|
11,431
|
|
|
$
|
19,357
|
|
|
$
|
6,764
|
|
|
$
|
24,024
|
|
|
$
|
|
|
|
$
|
30,788
|
|
|
$
|
9,522
|
|
|
$
|
21,266
|
|
|
$
|
31,490
|
|
|
1994 & 2000-6
|
|
3/94
|
|
40
|
|
|
21,266
|
|
Ashland Square Phase I, Manassas, VA
|
|
|
73
|
|
|
|
3,918
|
|
|
|
73
|
|
|
|
3,918
|
|
|
|
|
|
|
|
3,991
|
|
|
|
118
|
|
|
|
3,873
|
|
|
|
|
|
|
2007
|
|
12/04
|
|
20
|
|
|
|
|
Beacon Center, Alexandria, VA
|
|
|
1,493
|
|
|
|
18,158
|
|
|
|
|
|
|
|
18,557
|
|
|
|
1,094
|
|
|
|
19,651
|
|
|
|
11,637
|
|
|
|
8,014
|
|
|
|
|
|
|
1960 & 1974
|
|
1/72
|
|
40 & 50
|
|
|
|
|
BJs Wholesale Club, Alexandria, VA
|
|
|
22,623
|
|
|
|
|
|
|
|
22,623
|
|
|
|
|
|
|
|
|
|
|
|
22,623
|
|
|
|
|
|
|
|
22,623
|
|
|
|
11,989
|
|
|
|
|
3/08
|
|
|
|
|
22,623
|
|
Boca Valley Plaza, Boca Raton, FL
|
|
|
16,720
|
|
|
|
702
|
|
|
|
5,735
|
|
|
|
11,687
|
|
|
|
|
|
|
|
17,422
|
|
|
|
2,747
|
|
|
|
14,675
|
|
|
|
11,421
|
|
|
|
|
2/04
|
|
40
|
|
|
14,675
|
|
Boulevard, Fairfax, VA
|
|
|
4,883
|
|
|
|
4,746
|
|
|
|
3,687
|
|
|
|
5,942
|
|
|
|
|
|
|
|
9,629
|
|
|
|
1,927
|
|
|
|
7,702
|
|
|
|
6,719
|
|
|
1969, 1999 & 2009
|
|
4/94
|
|
40
|
|
|
7,702
|
|
Briggs Chaney MarketPlace, Silver Spring, MD
|
|
|
27,037
|
|
|
|
2,899
|
|
|
|
9,789
|
|
|
|
20,147
|
|
|
|
|
|
|
|
29,936
|
|
|
|
4,862
|
|
|
|
25,074
|
|
|
|
17,040
|
|
|
|
|
4/04
|
|
40
|
|
|
25,074
|
|
Broadlands Village, Ashburn, VA
|
|
|
5,316
|
|
|
|
25,058
|
|
|
|
5,300
|
|
|
|
25,074
|
|
|
|
|
|
|
|
30,374
|
|
|
|
6,794
|
|
|
|
23,580
|
|
|
|
20,407
|
|
|
2002-3, 2004 & 2006
|
|
3/02
|
|
40 & 50
|
|
|
23,580
|
|
Countryside, Sterling, VA
|
|
|
28,912
|
|
|
|
1,597
|
|
|
|
7,532
|
|
|
|
22,977
|
|
|
|
|
|
|
|
30,509
|
|
|
|
5,200
|
|
|
|
25,309
|
|
|
|
17,145
|
|
|
|
|
2/04
|
|
40
|
|
|
25,309
|
|
Cranberry Square, Westminster, MD
|
|
|
31,578
|
|
|
|
100
|
|
|
|
6,700
|
|
|
|
24,978
|
|
|
|
|
|
|
|
31,678
|
|
|
|
778
|
|
|
|
30,900
|
|
|
|
19,569
|
|
|
|
|
9/11
|
|
40
|
|
|
30,900
|
|
Cruse MarketPlace, Cumming, GA
|
|
|
12,226
|
|
|
|
101
|
|
|
|
3,920
|
|
|
|
8,407
|
|
|
|
|
|
|
|
12,327
|
|
|
|
1,888
|
|
|
|
10,439
|
|
|
|
6,936
|
|
|
|
|
3/04
|
|
40
|
|
|
10,439
|
|
Flagship Center, Rockville, MD
|
|
|
160
|
|
|
|
9
|
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
169
|
|
|
|
|
|
|
|
169
|
|
|
|
|
|
|
1972
|
|
1/72
|
|
|
|
|
|
|
French Market, Oklahoma City, OK
|
|
|
5,781
|
|
|
|
12,357
|
|
|
|
1,118
|
|
|
|
17,020
|
|
|
|
|
|
|
|
18,138
|
|
|
|
8,959
|
|
|
|
9,179
|
|
|
|
|
|
|
1972 & 1998
|
|
3/74
|
|
50
|
|
|
|
|
Germantown, Germantown, MD
|
|
|
3,576
|
|
|
|
742
|
|
|
|
2,034
|
|
|
|
2,284
|
|
|
|
|
|
|
|
4,318
|
|
|
|
1,254
|
|
|
|
3,064
|
|
|
|
|
|
|
1990
|
|
8/93
|
|
40
|
|
|
|
|
Giant, Baltimore, MD
|
|
|
998
|
|
|
|
559
|
|
|
|
422
|
|
|
|
1,135
|
|
|
|
|
|
|
|
1,557
|
|
|
|
996
|
|
|
|
561
|
|
|
|
|
|
|
1959
|
|
1/72
|
|
40
|
|
|
|
|
The Glen, Lake Ridge, VA
|
|
|
12,918
|
|
|
|
7,221
|
|
|
|
5,299
|
|
|
|
14,840
|
|
|
|
|
|
|
|
20,139
|
|
|
|
6,107
|
|
|
|
14,032
|
|
|
|
9,820
|
|
|
1993 & 2005
|
|
6/94
|
|
40
|
|
|
14,032
|
|
Great Eastern, District Heights, MD
|
|
|
4,993
|
|
|
|
10,632
|
|
|
|
3,785
|
|
|
|
11,840
|
|
|
|
|
|
|
|
15,625
|
|
|
|
7,099
|
|
|
|
8,526
|
|
|
|
|
|
|
1958 & 1960
|
|
1/72
|
|
40
|
|
|
|
|
Great Falls Center, Great Falls, VA
|
|
|
41,750
|
|
|
|
2,185
|
|
|
|
14,766
|
|
|
|
29,169
|
|
|
|
|
|
|
|
43,935
|
|
|
|
3,282
|
|
|
|
40,653
|
|
|
|
16,247
|
|
|
|
|
3/08
|
|
40
|
|
|
40,653
|
|
Hampshire Langley, Takoma, MD
|
|
|
3,159
|
|
|
|
3,310
|
|
|
|
1,856
|
|
|
|
4,613
|
|
|
|
|
|
|
|
6,469
|
|
|
|
3,101
|
|
|
|
3,368
|
|
|
|
|
|
|
1960
|
|
1/72
|
|
40
|
|
|
|
|
Hunt Club Corners, Apopka, FL
|
|
|
12,584
|
|
|
|
1,759
|
|
|
|
3,948
|
|
|
|
10,395
|
|
|
|
|
|
|
|
14,343
|
|
|
|
1,870
|
|
|
|
12,473
|
|
|
|
6,359
|
|
|
|
|
6/06
|
|
40
|
|
|
12,473
|
|
Jamestown Place, Altamonte Springs, FL
|
|
|
14,055
|
|
|
|
744
|
|
|
|
4,455
|
|
|
|
10,344
|
|
|
|
|
|
|
|
14,799
|
|
|
|
1,916
|
|
|
|
12,883
|
|
|
|
8,934
|
|
|
|
|
11/05
|
|
40
|
|
|
12,883
|
|
Kentlands Square I, Gaithersburg, MD
|
|
|
14,379
|
|
|
|
104
|
|
|
|
5,006
|
|
|
|
9,477
|
|
|
|
|
|
|
|
14,483
|
|
|
|
2,475
|
|
|
|
12,008
|
|
|
|
8,161
|
|
|
2002
|
|
9/02
|
|
40
|
|
|
12,008
|
|
Kentlands Square II, Gaithersburg, MD
|
|
|
72,473
|
|
|
|
5
|
|
|
|
20,500
|
|
|
|
51,978
|
|
|
|
|
|
|
|
72,478
|
|
|
|
1,624
|
|
|
|
70,854
|
|
|
|
41,970
|
|
|
|
|
9/11
|
|
40
|
|
|
70,854
|
|
Kentlands Place, Gaithersburg, MD
|
|
|
1,425
|
|
|
|
7,120
|
|
|
|
1,425
|
|
|
|
7,120
|
|
|
|
|
|
|
|
8,545
|
|
|
|
2,234
|
|
|
|
6,311
|
|
|
|
|
|
|
2005
|
|
1/04
|
|
50
|
|
|
|
|
Lansdowne Town Center, Leesburg, VA
|
|
|
6,545
|
|
|
|
35,778
|
|
|
|
6,546
|
|
|
|
35,777
|
|
|
|
|
|
|
|
42,323
|
|
|
|
7,766
|
|
|
|
34,557
|
|
|
|
36,699
|
|
|
2006
|
|
11/02
|
|
50
|
|
|
34,557
|
|
Leesburg Pike, Baileys Crossroads, VA
|
|
|
2,418
|
|
|
|
6,099
|
|
|
|
1,132
|
|
|
|
7,385
|
|
|
|
|
|
|
|
8,517
|
|
|
|
5,362
|
|
|
|
3,155
|
|
|
|
17,469
|
|
|
1965
|
|
2/66
|
|
40
|
|
|
3,155
|
|
Lumberton Plaza, Lumberton, NJ
|
|
|
4,400
|
|
|
|
10,361
|
|
|
|
950
|
|
|
|
13,811
|
|
|
|
|
|
|
|
14,761
|
|
|
|
11,334
|
|
|
|
3,427
|
|
|
|
|
|
|
1975
|
|
12/75
|
|
40
|
|
|
|
|
Metro Pike Center, Rockville, MD
|
|
|
33,123
|
|
|
|
432
|
|
|
|
26,064
|
|
|
|
7,491
|
|
|
|
|
|
|
|
33,555
|
|
|
|
373
|
|
|
|
33,182
|
|
|
|
15,750
|
|
|
|
|
12/10
|
|
40
|
|
|
33,182
|
|
Shops at Monocacy, Frederick, MD
|
|
|
9,541
|
|
|
|
13,656
|
|
|
|
9,260
|
|
|
|
13,937
|
|
|
|
|
|
|
|
23,197
|
|
|
|
3,470
|
|
|
|
19,727
|
|
|
|
15,176
|
|
|
2003-4
|
|
11/03
|
|
50
|
|
|
19,727
|
|
Northrock, Warrington, VA
|
|
|
12,686
|
|
|
|
14,560
|
|
|
|
12,686
|
|
|
|
14,560
|
|
|
|
|
|
|
|
27,246
|
|
|
|
1,337
|
|
|
|
25,909
|
|
|
|
14,945
|
|
|
2009
|
|
01/08
|
|
50
|
|
|
25,909
|
|
Olde Forte Village, Ft. Washington, MD
|
|
|
15,933
|
|
|
|
6,537
|
|
|
|
5,409
|
|
|
|
17,061
|
|
|
|
|
|
|
|
22,470
|
|
|
|
4,525
|
|
|
|
17,945
|
|
|
|
12,418
|
|
|
2003-4
|
|
07/03
|
|
40
|
|
|
17,945
|
|
Olney, Olney, MD
|
|
|
1,884
|
|
|
|
1,670
|
|
|
|
|
|
|
|
3,554
|
|
|
|
|
|
|
|
3,554
|
|
|
|
2,970
|
|
|
|
584
|
|
|
|
|
|
|
1972
|
|
11/75
|
|
40
|
|
|
|
|
Orchard Park, Dunwoody, GA
|
|
|
19,377
|
|
|
|
383
|
|
|
|
7,751
|
|
|
|
12,009
|
|
|
|
|
|
|
|
19,760
|
|
|
|
1,659
|
|
|
|
18,101
|
|
|
|
11,129
|
|
|
|
|
7/07
|
|
40
|
|
|
18,101
|
|
Palm Springs Center, Altamonte Springs, FL
|
|
|
18,365
|
|
|
|
308
|
|
|
|
5,739
|
|
|
|
12,934
|
|
|
|
|
|
|
|
18,673
|
|
|
|
2,519
|
|
|
|
16,154
|
|
|
|
10,288
|
|
|
|
|
3/05
|
|
40
|
|
|
16,154
|
|
F-35
Schedule III
SAUL CENTERS, INC.
Real Estate and Accumulated Depreciation
December 31, 2012
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Capitalized
|
|
|
Basis at Close of Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
Subsequent
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Improvements
|
|
Book Value
|
|
|
|
Initial
|
|
|
to
|
|
|
|
|
|
and
|
|
|
Leasehold
|
|
|
|
|
|
Accumulated
|
|
|
Book
|
|
|
Related
|
|
|
Date of
|
|
Date
|
|
Depreciable
|
|
Of Mortgaged
|
|
|
|
Basis
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Interests
|
|
|
Total
|
|
|
Depreciation
|
|
|
Value
|
|
|
Debt
|
|
|
Construction
|
|
Acquired
|
|
Lives in Years
|
|
Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ravenwood, Baltimore, MD
|
|
|
1,245
|
|
|
|
4,192
|
|
|
|
703
|
|
|
|
4,734
|
|
|
|
|
|
|
|
5,437
|
|
|
|
2,517
|
|
|
|
2,920
|
|
|
|
16,419
|
|
|
1959 & 2006
|
|
1/72
|
|
40
|
|
|
2,920
|
|
11503 Rockville Pike/5541 Nicholson Lane, Rockville, MD
|
|
|
14,861
|
|
|
|
11,700
|
|
|
|
22,113
|
|
|
|
4,448
|
|
|
|
|
|
|
|
26,561
|
|
|
|
250
|
|
|
|
26,311
|
|
|
|
|
|
|
|
|
10/10
12/12
|
|
40
|
|
|
|
|
1500 Rockville Pike, Rockville, MD
|
|
|
|
|
|
|
22,547
|
|
|
|
18,729
|
|
|
|
3,818
|
|
|
|
|
|
|
|
22,547
|
|
|
|
|
|
|
|
22,547
|
|
|
|
|
|
|
|
|
12/12
|
|
5
|
|
|
|
|
Seabreeze Plaza, Palm Harbor, FL
|
|
|
24,526
|
|
|
|
1,193
|
|
|
|
8,665
|
|
|
|
17,054
|
|
|
|
|
|
|
|
25,719
|
|
|
|
3,057
|
|
|
|
22,663
|
|
|
|
13,875
|
|
|
|
|
11/05
|
|
40
|
|
|
22,663
|
|
Sea Colony (Market Place at), Bethany Beach, DE
|
|
|
2,920
|
|
|
|
27
|
|
|
|
1,146
|
|
|
|
1,800
|
|
|
|
|
|
|
|
2,947
|
|
|
|
221
|
|
|
|
2,726
|
|
|
|
|
|
|
|
|
3/08
|
|
40
|
|
|
|
|
Seven Corners, Falls Church, VA
|
|
|
4,848
|
|
|
|
43,454
|
|
|
|
4,913
|
|
|
|
43,389
|
|
|
|
|
|
|
|
48,302
|
|
|
|
23,216
|
|
|
|
25,086
|
|
|
|
72,233
|
|
|
1956 & 1997
|
|
7/73
|
|
40
|
|
|
25,086
|
|
Severna Park Marketplace, Severna Park, MD
|
|
|
63,254
|
|
|
|
|
|
|
|
12,700
|
|
|
|
50,554
|
|
|
|
|
|
|
|
63,254
|
|
|
|
1,580
|
|
|
|
61,674
|
|
|
|
36,986
|
|
|
|
|
9/11
|
|
40
|
|
|
61,674
|
|
Shops at Fairfax, Fairfax, VA
|
|
|
2,708
|
|
|
|
9,263
|
|
|
|
992
|
|
|
|
10,979
|
|
|
|
|
|
|
|
11,971
|
|
|
|
6,031
|
|
|
|
5,940
|
|
|
|
10,079
|
|
|
1975 & 1999
|
|
6/75
|
|
50
|
|
|
5,940
|
|
Smallwood Village Center, Waldorf, MD
|
|
|
17,819
|
|
|
|
7,552
|
|
|
|
6,402
|
|
|
|
18,969
|
|
|
|
|
|
|
|
25,371
|
|
|
|
3,544
|
|
|
|
21,827
|
|
|
|
|
|
|
|
|
1/06
|
|
40
|
|
|
|
|
Southdale, Glen Burnie, MD
|
|
|
3,650
|
|
|
|
20,264
|
|
|
|
|
|
|
|
23,292
|
|
|
|
622
|
|
|
|
23,914
|
|
|
|
19,896
|
|
|
|
4,018
|
|
|
|
|
|
|
1962 & 1986
|
|
1/72
|
|
40
|
|
|
|
|
Southside Plaza, Richmond, VA
|
|
|
6,728
|
|
|
|
8,591
|
|
|
|
1,878
|
|
|
|
13,441
|
|
|
|
|
|
|
|
15,319
|
|
|
|
10,176
|
|
|
|
5,143
|
|
|
|
|
|
|
1958
|
|
1/72
|
|
40
|
|
|
|
|
South Dekalb Plaza, Atlanta, GA
|
|
|
2,474
|
|
|
|
3,768
|
|
|
|
703
|
|
|
|
5,539
|
|
|
|
|
|
|
|
6,242
|
|
|
|
3,818
|
|
|
|
2,424
|
|
|
|
|
|
|
1970
|
|
2/76
|
|
40
|
|
|
|
|
Thruway, Winston-Salem, NC
|
|
|
4,778
|
|
|
|
22,289
|
|
|
|
5,496
|
|
|
|
21,466
|
|
|
|
105
|
|
|
|
27,067
|
|
|
|
11,964
|
|
|
|
15,103
|
|
|
|
43,424
|
|
|
1955 & 1965
|
|
5/72
|
|
40
|
|
|
15,103
|
|
Village Center, Centreville, VA
|
|
|
16,502
|
|
|
|
1,666
|
|
|
|
7,851
|
|
|
|
10,317
|
|
|
|
|
|
|
|
18,168
|
|
|
|
5,230
|
|
|
|
12,938
|
|
|
|
15,140
|
|
|
1990
|
|
8/93
|
|
40
|
|
|
12,938
|
|
Westview Village, Frederick, MD
|
|
|
5,146
|
|
|
|
20,866
|
|
|
|
5,153
|
|
|
|
20,859
|
|
|
|
|
|
|
|
26,012
|
|
|
|
2,129
|
|
|
|
23,883
|
|
|
|
|
|
|
2009
|
|
11/07
|
|
50
|
|
|
|
|
White Oak, Silver Spring, MD
|
|
|
6,277
|
|
|
|
5,112
|
|
|
|
4,649
|
|
|
|
6,740
|
|
|
|
|
|
|
|
11,389
|
|
|
|
5,484
|
|
|
|
5,905
|
|
|
|
26,635
|
|
|
1958 & 1967
|
|
1/72
|
|
40
|
|
|
5,905
|
|
Other Buildings / Improvements
|
|
|
|
|
|
|
98
|
|
|
|
|
|
|
|
98
|
|
|
|
|
|
|
|
98
|
|
|
|
70
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shopping Centers
|
|
|
652,551
|
|
|
|
395,746
|
|
|
|
314,536
|
|
|
|
731,940
|
|
|
|
1,821
|
|
|
|
1,048,297
|
|
|
|
226,889
|
|
|
|
821,408
|
|
|
|
602,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mixed-Use Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avenel Business Park, Gaithersburg, MD
|
|
|
21,459
|
|
|
|
25,176
|
|
|
|
3,755
|
|
|
|
42,880
|
|
|
|
|
|
|
|
46,635
|
|
|
|
29,723
|
|
|
|
16,912
|
|
|
|
31,709
|
|
|
1984, 1986,
|
|
12/84, 8/85,
|
|
35 & 40
|
|
|
16,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1990, 1998
|
|
2/86, 4/98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
& 2000
|
|
& 10/2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clarendon Center, Arlington, VA (1)
|
|
|
12,753
|
|
|
|
184,830
|
|
|
|
16,287
|
|
|
|
181,296
|
|
|
|
|
|
|
|
197,583
|
|
|
|
10,035
|
|
|
|
187,548
|
|
|
|
120,822
|
|
|
2010
|
|
7/73, 1/96 & 4/02
|
|
|
|
|
187,548
|
|
Crosstown Business Center, Tulsa, OK
|
|
|
3,454
|
|
|
|
6,213
|
|
|
|
604
|
|
|
|
9,063
|
|
|
|
|
|
|
|
9,667
|
|
|
|
6,328
|
|
|
|
3,339
|
|
|
|
|
|
|
1974
|
|
10/75
|
|
40
|
|
|
|
|
601 Pennsylvania Ave., Washington, DC
|
|
|
5,479
|
|
|
|
58,815
|
|
|
|
5,667
|
|
|
|
58,627
|
|
|
|
|
|
|
|
64,294
|
|
|
|
42,419
|
|
|
|
21,875
|
|
|
|
|
|
|
1986
|
|
7/73
|
|
35
|
|
|
|
|
Van Ness Square, Washington, DC
|
|
|
2,412
|
|
|
|
30,874
|
|
|
|
2,242
|
|
|
|
31,044
|
|
|
|
|
|
|
|
33,286
|
|
|
|
21,444
|
|
|
|
11,842
|
|
|
|
|
|
|
1990
|
|
07/73
2/11
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington Square, Alexandria, VA
|
|
|
2,034
|
|
|
|
50,580
|
|
|
|
544
|
|
|
|
52,070
|
|
|
|
|
|
|
|
52,614
|
|
|
|
16,466
|
|
|
|
36,148
|
|
|
|
34,373
|
|
|
1952 & 2000
|
|
7/73
|
|
50
|
|
|
36,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mixed-Use Properties
|
|
|
47,591
|
|
|
|
356,488
|
|
|
|
29,099
|
|
|
|
374,980
|
|
|
|
|
|
|
|
404,079
|
|
|
|
126,415
|
|
|
|
277,664
|
|
|
|
186,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashland Square Phase II, Manassas, VA
|
|
|
6,338
|
|
|
|
4,979
|
|
|
|
7,908
|
|
|
|
3,409
|
|
|
|
|
|
|
|
11,317
|
|
|
|
|
|
|
|
11,317
|
|
|
|
|
|
|
|
|
12/04
|
|
|
|
|
|
|
New Market, New Market, MD
|
|
|
2,088
|
|
|
|
286
|
|
|
|
2,338
|
|
|
|
36
|
|
|
|
|
|
|
|
2,374
|
|
|
|
|
|
|
|
2,374
|
|
|
|
|
|
|
|
|
9/05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Development Land
|
|
|
8,426
|
|
|
|
5,265
|
|
|
|
10,246
|
|
|
|
3,445
|
|
|
|
|
|
|
|
13,691
|
|
|
|
|
|
|
|
13,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
708,568
|
|
|
$
|
757,500
|
|
|
$
|
353,881
|
|
|
$
|
1,110,365
|
|
|
$
|
1,821
|
|
|
$
|
1,466,068
|
|
|
$
|
353,305
|
|
|
$
|
1,112,763
|
|
|
$
|
789,776
|
|
|
|
|
|
|
|
|
|
906,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes the North and South Blocks and Residential
|
F-36
Schedule III
SAUL CENTERS, INC.
Real Estate and Accumulated Depreciation
December 31, 2012
Depreciation and amortization related to the real estate
investments reflected in the statements of operations is calculated over the estimated useful lives of the assets as follows:
|
|
|
Base building
|
|
Generally 35 - 50 years or a shorter period if management determines that
|
|
|
the building has a shorter useful life.
|
Building components
|
|
Up to 20 years
|
Tenant improvements
|
|
The shorter of the term of the lease or the useful life
|
|
|
of the improvements
|
The aggregate remaining net basis of the real estate investments for federal income tax purposes was approximately
$1,142,503,000
at December 31, 2012. Depreciation and amortization are provided on the declining balance and straight-line methods over the estimated useful lives of the assets.
The changes in total real estate investments and related accumulated depreciation for each of the years in the three year period ended December 31, 2012 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Total real estate investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
$
|
1,417,845
|
|
|
$
|
1,224,036
|
|
|
$
|
1,111,224
|
|
Acquisitions
|
|
|
34,247
|
|
|
|
168,905
|
|
|
|
47,984
|
|
Improvements
|
|
|
23,095
|
|
|
|
25,955
|
|
|
|
74,031
|
|
Retirements
|
|
|
(9,119
|
)
|
|
|
(1,051
|
)
|
|
|
(9,203
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
1,466,068
|
|
|
$
|
1,417,845
|
|
|
$
|
1,224,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
$
|
326,397
|
|
|
$
|
296,786
|
|
|
$
|
276,310
|
|
Depreciation expense
|
|
|
33,986
|
|
|
|
30,555
|
|
|
|
24,839
|
|
Retirements
|
|
|
(7,078
|
)
|
|
|
(944
|
)
|
|
|
(4,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
353,305
|
|
|
$
|
326,397
|
|
|
$
|
296,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-37