Section 1: 8-K (FORM 8-K)
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 31, 2014
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Saul Centers, Inc.
(Exact name of registrant as specified in its charter)
_________________________
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Maryland | | 1-12254 | | 52-1833074 |
(State or Other Jurisdiction of Incorporation) | | (Commission File Number) | | (IRS Employer Identification Number) |
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7501 Wisconsin Avenue, Bethesda, Maryland | | 20814 |
(Address of Principal Executive Offices) | | (Zip Code) |
(301) 986-6200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
_______________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release, dated July 31, 2014, of Saul Centers, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SAUL CENTERS, INC.
By: /s/ Scott V. Schneider
Scott V. Schneider Senior Vice President and Chief Financial Officer
Dated: July 31, 2014
EXHIBIT INDEX
Exhibit Description
No.
99.1 Press Release, dated July 31, 2014, of Saul Centers, Inc.
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Section 2: EX-99.1 (EX-99.1) |
Exhibit 99.1
SAUL CENTERS, INC.
7501 Wisconsin Avenue, Suite 1500, Bethesda, Maryland 20814-6522
(301) 986-6200
Saul Centers, Inc. Reports Second Quarter 2014 Earnings
July 31, 2014, Bethesda, MD.
Saul Centers, Inc. (NYSE: BFS), an equity real estate investment trust ("REIT"), announced its operating results for the quarter ended June 30, 2014 (“2014 Quarter”). Total revenue for the 2014 Quarter increased to $52.3 million from $48.8 million for the quarter ended June 30, 2013 (“2013 Quarter”). Operating income, which is net income before the impact of change in fair value of derivatives, loss on early extinguishment of debt and gains on sales of property and casualty settlements, if any, increased to $14.4 million for the 2014 Quarter from $7.7 million for the 2013 Quarter.
Net income attributable to common stockholders was $12.8 million ($0.62 per diluted share) for the 2014 Quarter compared to $3.4 million ($0.17 per diluted share) for the 2013 Quarter. The increase in net income attributable to common stockholders for the 2014 Quarter was primarily the result of (a) gain on sale of the Giant Center ($6.1 million), (b) depreciation expense recognized in the 2013 Quarter as a result of the reduction in the depreciable life of Van Ness Square ($2.0 million), (c) increased property operating income ($1.8 million), exclusive of the following Seven Corners item, (d) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million) and (e) lower predevelopment expenses related to Park Van Ness ($1.2 million), partially offset by (f) higher noncontrolling interest ($3.3 million).
Same property revenue increased 6.7% and same property operating income increased 8.5% for the 2014 Quarter compared to the 2013 Quarter. Same property operating income equals property revenue minus the sum of (a) property operating expenses, (b) provision for credit losses and (c) real estate taxes and the comparisons exclude the results of properties not in operation for the entirety of the comparable reporting periods. Shopping center same property operating income increased $2.9 million (or 10.3%) primarily due to (a) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million) and (b) increased base rent ($825,000). Mixed-use same property operating income increased $280,000 (or 3.1%) primarily due to higher base rent at 601 Pennsylvania Avenue.
For the six months ended June 30, 2014 (“2014 Period”), total revenue increased to $105.2 million from $98.0 million for the six months ended June 30, 2013 (“2013 Period”). Operating income increased to $27.1 million for the 2014 Period from $11.1 million for the 2013 Period. The increase in operating income was due primarily to (a) additional depreciation expense recognized in the 2013 Period as a result of the reduction in the depreciable life of Van Ness Square ($8.0 million), (b) lower predevelopment expenses related to Park Van Ness ($3.1 million), (c) increased property operating income ($3.1 million), exclusive of the following two Seven Corners items, (d) the impact of a lease termination at Seven Corners ($1.2 million), and (e) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million) partially offset by (f) higher general and administrative expenses ($1.4 million).
Net income attributable to common stockholders was $19.9 million ($0.96 per diluted share) for the 2014 Period compared to a loss of $1.2 million ($0.06 per diluted share) for the 2013 Period. The increase in net income attributable to common stockholders was due primarily to (a) additional depreciation expense recognized in the 2013 Period as a result of the reduction in the depreciable life of Van Ness Square ($8.0 million), (b) gain on sale of the Giant Center ($6.1 million), (c) a charge against common equity in 2013 resulting from the redemption of preferred stock ($5.2 million), (d) lower predevelopment expenses related to Park Van Ness ($3.1 million), (e) increased property operating income ($3.1 million), exclusive of the following two Seven Corners items, (f) the impact of a lease termination at Seven Corners ($1.2 million), (g) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million) and (h) lower preferred stock dividends ($1.2 million) partially offset by (i) higher noncontrolling interest ($7.3 million) and (j) higher general and administrative expenses ($1.4 million).
Same property revenue increased $7.3 million (or 7.5%) and same property operating income increased $5.7 million (or 7.7%) for the 2014 Period compared to the 2013 Period. Shopping center same property operating income increased $4.8 million (or 8.5%) primarily due to (a) the impact of a lease termination at Seven Corners ($1.2 million), (b) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million) and (c) increased base rent ($1.5 million). Mixed-use same property operating income increased $0.9 million (or 5.1%) primarily due to increased base rent.
As of June 30, 2014, 94.2% of the commercial portfolio was leased (not including the apartments at Clarendon Center), compared to 93.6% at June 30, 2013. On a same property basis, 94.2% of the portfolio was leased at June 30, 2014, compared to 93.6% at June 30, 2013. The apartments at Clarendon Center were 100% leased as of June 30, 2014 compared to 98.4% at June 30, 2013.
Funds from operations ("FFO") available to common shareholders (after deducting preferred stock dividends and redemption charges) increased 26.4% to $21.5 million ($0.77 per diluted share) in the 2014 Quarter from $17.0 million ($0.63 per diluted share) in the 2013 Quarter. FFO, a widely accepted non-GAAP financial measure of operating performance for REITs, is defined as net income plus real estate depreciation and amortization, and excluding gains and losses from property dispositions, impairment charges on depreciable real estate assets and extraordinary items. The increase in FFO available to common shareholders for the 2014 Quarter was primarily due to (a) increased property operating income ($1.8 million), exclusive of the following Seven Corners item, (b) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million) and (c) lower predevelopment expenses related to Park Van Ness ($1.2 million).
FFO available to common shareholders (after deducting preferred stock dividends and redemption charges) increased 51.6% to $41.2 million ($1.48 per diluted share) in the 2014 Period from $27.2 million ($1.00 per diluted share) in the 2013 Period. The increase in FFO available to common shareholders for the 2014 Period was primarily attributable to (a) a charge against common equity in the 2013 Period resulting from the redemption of preferred stock ($5.2 million), (b) increased property operating income ($3.1 million), exclusive of the following Seven Corners items, (c) the impact of a lease termination at Seven Corners ($1.2 million), (d) the impact of a bankruptcy settlement and collection related to a former tenant at Seven Corners ($1.6 million), (e) lower predevelopment expenses related to Park Van Ness ($3.1 million) and (f) lower preferred stock dividends ($1.2 million) partially offset by (g) higher general and administrative expenses ($1.4 million).
Saul Centers is a self-managed, self-administered equity REIT headquartered in Bethesda, Maryland, which currently operates and manages a real estate portfolio of 58 properties which includes (a) 49 community and neighborhood shopping centers and six mixed-use properties with approximately 9.3 million square feet of leasable area and (b) three land and development properties. Over 85% of the Saul Centers' property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area.
Contact: Scott Schneider
(301) 986-6220
Saul Centers, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
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| June 30,
2014 | | December 31,
2013 |
| (Unaudited) | | |
Assets | | | |
Real estate investments | | | |
Land | $ | 373,898 |
| | $ | 354,967 |
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Buildings and equipment | 1,102,390 |
| | 1,094,605 |
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Construction in progress | 16,259 |
| | 9,867 |
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| 1,492,547 |
| | 1,459,439 |
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Accumulated depreciation | (380,608 | ) | | (364,663 | ) |
| 1,111,939 |
| | 1,094,776 |
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Cash and cash equivalents | 21,829 |
| | 17,297 |
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Accounts receivable and accrued income, net | 44,114 |
| | 43,884 |
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Deferred leasing costs, net | 26,693 |
| | 26,052 |
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Prepaid expenses, net | 1,634 |
| | 4,047 |
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Deferred debt costs, net | 10,564 |
| | 9,675 |
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Other assets | 10,655 |
| | 2,944 |
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Total assets | $ | 1,227,428 |
| | $ | 1,198,675 |
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Liabilities | | | |
Notes payable | $ | 820,145 |
| | $ | 820,068 |
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Revolving credit facility payable | — |
| | — |
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Dividends and distributions payable | 14,398 |
| | 13,135 |
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Accounts payable, accrued expenses and other liabilities | 24,655 |
| | 20,141 |
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Deferred income | 31,575 |
| | 30,205 |
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Total liabilities | 890,773 |
| | 883,549 |
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Stockholders’ equity | | | |
Preferred stock | 180,000 |
| | 180,000 |
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Common stock | 208 |
| | 206 |
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Additional paid-in capital | 279,243 |
| | 270,428 |
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Accumulated deficit and other comprehensive loss | (171,095 | ) | | (173,956 | ) |
Total Saul Centers, Inc. stockholders’ equity | 288,356 |
| | 276,678 |
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Noncontrolling interest | 48,299 |
| | 38,448 |
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Total stockholders’ equity | 336,655 |
| | 315,126 |
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Total liabilities and stockholders’ equity | $ | 1,227,428 |
| | $ | 1,198,675 |
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Saul Centers, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Revenue | (unaudited) | | (unaudited) |
Base rent | $ | 41,038 |
| | $ | 39,553 |
| | $ | 81,601 |
| | $ | 79,293 |
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Expense recoveries | 7,825 |
| | 7,463 |
| | 16,614 |
| | 15,077 |
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Percentage rent | 453 |
| | 338 |
| | 905 |
| | 938 |
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Other | 2,970 |
| | 1,455 |
| | 6,113 |
| | 2,687 |
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Total revenue | 52,286 |
| | 48,809 |
| | 105,233 |
| | 97,995 |
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Operating expenses | | | | | | | |
Property operating expenses | 6,138 |
| | 6,041 |
| | 13,723 |
| | 11,990 |
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Provision for credit losses | 107 |
| | 285 |
| | 310 |
| | 549 |
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Real estate taxes | 5,584 |
| | 5,433 |
| | 11,037 |
| | 11,196 |
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Interest expense and amortization of deferred debt costs | 11,486 |
| | 11,709 |
| | 22,953 |
| | 23,426 |
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Depreciation and amortization of deferred leasing costs | 10,309 |
| | 12,472 |
| | 20,489 |
| | 28,824 |
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General and administrative | 4,023 |
| | 3,925 |
| | 8,703 |
| | 7,329 |
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Acquisition related costs | 216 |
| | — |
| | 379 |
| | — |
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Predevelopment expenses | — |
| | 1,233 |
| | 503 |
| | 3,582 |
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Total operating expenses | 37,863 |
| | 41,098 |
| | 78,097 |
| | 86,896 |
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Operating income | 14,423 |
| | 7,711 |
| | 27,136 |
| | 11,099 |
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Change in fair value of derivatives | (5 | ) | | 51 |
| | (7 | ) | | 61 |
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Gain on sale of property | 6,069 |
| | — |
| | 6,069 |
| | — |
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Net Income | 20,487 |
| | 7,762 |
| | 33,198 |
| | 11,160 |
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(Income) loss attributable to noncontrolling interests | (4,433 | ) | | (1,168 | ) | | (6,857 | ) | | 418 |
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Net income attributable to Saul Centers, Inc. | 16,054 |
| | 6,594 |
| | 26,341 |
| | 11,578 |
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Preferred stock redemption | — |
| | — |
| | — |
| | (5,228 | ) |
Preferred stock dividends | (3,207 | ) | | (3,207 | ) | | (6,413 | ) | | (7,571 | ) |
Net income (loss) attributable to common stockholders | $ | 12,847 |
| | $ | 3,387 |
| | $ | 19,928 |
| | $ | (1,221 | ) |
Per share net income (loss) attributable to common stockholders | | | | | | | |
Basic and diluted | $ | 0.62 |
| | $ | 0.17 |
| | $ | 0.96 |
| | $ | (0.06 | ) |
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Weighted Average Common Stock: | | | | | | | |
Common stock | 20,717 |
| | 20,301 |
| | 20,670 |
| | 20,224 |
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Effect of dilutive options | 26 |
| | 22 |
| | 32 |
| | 27 |
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Diluted weighted average common stock | 20,743 |
| | 20,323 |
| | 20,702 |
| | 20,251 |
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Reconciliation of net income to FFO attributable to common shareholders (1) |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| (In thousands, except per share amounts) | 2014 | | 2013 | | 2014 | | 2013 |
| | (unaudited) | | (unaudited) |
| Net income | $ | 20,487 |
| | $ | 7,762 |
| | $ | 33,198 |
| | $ | 11,160 |
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| Subtract: | | | | | | | |
| Gain on sale of property | (6,069 | ) | | — |
| | (6,069 | ) | | — |
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| Add: | | | | | | | |
| Real estate depreciation and amortization | 10,309 |
| | 12,472 |
| | 20,489 |
| | 28,824 |
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| FFO | 24,727 |
| | 20,234 |
| | 47,618 |
| | 39,984 |
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| Subtract: | | | | | | | |
| Preferred stock redemption | — |
| | — |
| | — |
| | (5,228 | ) |
| Preferred stock dividends | (3,207 | ) | | (3,207 | ) | | (6,413 | ) | | (7,571 | ) |
| FFO available to common shareholders | $ | 21,520 |
| | $ | 17,027 |
| | $ | 41,205 |
| | $ | 27,185 |
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| Weighted average shares: | | | | | | | |
| Diluted weighted average common stock | 20,743 |
| | 20,323 |
| | 20,702 |
| | 20,251 |
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| Convertible limited partnership units | 7,164 |
| | 6,914 |
| | 7,114 |
| | 6,914 |
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| Average shares and units used to compute FFO per share | 27,907 |
| | 27,237 |
| | 27,816 |
| | 27,165 |
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| FFO per share available to common shareholders | $ | 0.77 |
| | $ | 0.63 |
| | $ | 1.48 |
| | $ | 1.00 |
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(1)
The National Association of Real Estate Investment Trusts (NAREIT) developed FFO as a relative non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. FFO is defined by NAREIT as net income, computed in accordance with GAAP, plus real estate depreciation and amortization, and excluding extraordinary items, impairment charges on depreciable real estate assets and gains or losses from property dispositions. FFO does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs, which is disclosed in the Company’s Consolidated Statements of Cash Flows for the applicable periods. There are no material legal or functional restrictions on the use of FFO. FFO should not be considered as an alternative to net income, its most directly comparable GAAP measure, as an indicator of the Company’s operating performance, or as an alternative to cash flows as a measure of liquidity. Management considers FFO a meaningful supplemental measure of operating performance because it primarily excludes the assumption that the value of the real estate assets diminishes predictably over time (i.e. depreciation), which is contrary to what the Company believes occurs with its assets, and because industry analysts have accepted it as a performance measure. FFO may not be comparable to similarly titled measures employed by other REITs.
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| Reconciliation of net income to same property operating income |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| (In thousands) | 2014 | | 2013 | | 2014 | | 2013 |
| | (unaudited) | | (unaudited) |
| Net income | $ | 20,487 |
| | $ | 7,762 |
| | $ | 33,198 |
| | $ | 11,160 |
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| Add: Interest expense and amortization of deferred debt costs | 11,486 |
| | 11,709 |
| | 22,953 |
| | 23,426 |
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| Add: Depreciation and amortization of deferred leasing costs | 10,309 |
| | 12,472 |
| | 20,489 |
| | 28,824 |
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| Add: General and administrative | 4,023 |
| | 3,925 |
| | 8,703 |
| | 7,329 |
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| Add: Predevelopment expenses | — |
| | 1,233 |
| | 503 |
| | 3,582 |
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| Add: Acquisition related costs | 216 |
| | — |
| | 379 |
| | — |
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| Add (Less): Change in fair value of derivatives | 5 |
| | (51 | ) | | 7 |
| | (61 | ) |
| Less: Gains on sale of property | (6,069 | ) | | — |
| | (6,069 | ) | | — |
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| Less: Interest income | (21 | ) | | (13 | ) | | (35 | ) | | (44 | ) |
| Property operating income | 40,436 |
| | 37,037 |
| | 80,128 |
| | 74,216 |
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| Less: Acquisitions, dispositions and development property | 399 |
| | 150 |
| | 672 |
| | 454 |
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| Total same property operating income | $ | 40,037 |
| | $ | 36,887 |
| | $ | 79,456 |
| | $ | 73,762 |
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| Shopping centers | $ | 30,655 |
| | $ | 27,783 |
| | $ | 60,711 |
| | $ | 55,933 |
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| Mixed-Use properties | 9,382 |
| | 9,104 |
| | 18,745 |
| | 17,829 |
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| Total same property operating income | $ | 40,037 |
| | $ | 36,887 |
| | $ | 79,456 |
| | $ | 73,762 |
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