Notes to Consolidated Financial Statements
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1.
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ORGANIZATION, FORMATION, AND BASIS OF PRESENTATION
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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 "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 significant properties acquired, developed and/or disposed of by the Company since January 1,
2014
.
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Name of Property
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Location
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Type
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Year of
Acquisition/
Development/
Disposal
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Acquisitions
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1580 Rockville Pike
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Rockville, Maryland
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Shopping Center
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January 2014
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1582 Rockville Pike
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Rockville, Maryland
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Shopping Center
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April 2014
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750 N. Glebe Road*
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Arlington, Virginia
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Shopping Center
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August 2014
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730 N. Glebe Road*
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Arlington, Virginia
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Shopping Center
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December 2014
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1584 Rockville Pike
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Rockville, Maryland
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Shopping Center
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December 2014
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726 N. Glebe Road*
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Arlington, Virginia
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Shopping Center
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September 2015
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700 N. Glebe Road
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Arlington, Virginia
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Development
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August 2016
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Developments
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Park Van Ness
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Washington, DC
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Mixed-Use
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2013-2016
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Dispositions
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Giant Center
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Milford Mill, Maryland
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Shopping Center
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April 2014
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Crosstown Business Center
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Tulsa, Oklahoma
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Mixed-Use
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December 2016
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*As of August 2016, these properties were removed from operations and reclassified to development.
As of
December 31, 2016
, the Company’s properties (the “Current Portfolio Properties”) consisted of
49
shopping center properties (the “Shopping Centers”),
six
mixed-use properties, which are comprised of office, retail and multi-family residential uses (the “Mixed-Use Properties”) and
three
(non-operating) development properties.
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.
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2.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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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, 2016
,
29
of the Shopping Centers were anchored by a grocery store and offer primarily day-to-day necessities and services. The number of grocery-anchored centers excludes the Briggs Chaney Plaza and Broadlands Village shopping centers, where Safeway ceased operations during the quarter ended June 30, 2016, but whose leases remain in full force and effect.
Three
retail tenants, Giant Food (
4.3%
), a tenant at
nine
Shopping Centers, Capital One Bank (
2.8%
), a tenant at
20
properties, and
Albertson's/Safeway (
2.6%
), a tenant at
nine
Shopping Centers, individually accounted for
2.5%
or more of the Company’s total revenue for the year ended
December 31, 2016
.
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.
The Operating Partnership is a variable interest entity ("VIE") of the Company because the limited partners do not have substantive kick-out or participating rights. The Company is the primary beneficiary of the Operating Partnership because it has the power to direct the activities of the Operating Partnership and the rights to absorb
74.3%
of the net income of the Operating Partnership. Because the Operating Partnership was already consolidated into the financial statements of the Company, the identification of it as a VIE has no impact on the consolidated financial statements of the Company.
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. In
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
certain circumstances, such as if the building is vacant and the Company intends to demolish the building in the near term, the entire purchase price will be allocated to land.
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. If the fair value of the below market lease intangible includes fair value associated with a renewal option, such amounts are not accreted until the renewal option is exercised. If the renewal option is not exercised the value is recognized at that time. 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 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 either (a) expensed as incurred when related to business combinations or (b) capitalized to land and/or building when related to asset acquisitions.
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 management’s projections, the valuation could be negatively or positively affected. The Company did not recognize an impairment loss on any of its real estate in
2016
,
2015
, or
2014
.
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
$2.5 million
,
$2.2 million
, and $
0.7 million
during
2016
,
2015
, and
2014
, 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, which is included in Depreciation and amortization of deferred leasing costs in the Consolidated Statements of Operations, for the years ended
December 31, 2016
,
2015
, and
2014
, was
$38.7 million
,
$37.7 million
, and
$35.9 million
, respectively.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Repairs and maintenance expense totaled
$11.8 million
,
$11.6 million
, and
$11.9 million
for
2016
,
2015
, and
2014
, 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 and are amortized, using the straight-line method, over the term of the lease or the remaining term of an acquired lease. Leasing related activities include evaluating the prospective tenant’s 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. Collectively, deferred leasing costs totaled
$26.0 million
and
$26.9 million
, net of accumulated amortization of approximately
$30.4 million
and
$26.6 million
, as of
December 31, 2016
and
2015
, respectively. Amortization expense, which is included in Depreciation and amortization of deferred leasing costs in the Consolidated Statements of Operations, totaled approximately
$5.7 million
,
$5.6 million
, and
$5.3 million
, for the years ended
December 31, 2016
,
2015
, and
2014
, respectively.
Construction in Progress
Construction in progress includes preconstruction and development costs of active projects. Preconstruction costs include legal, zoning and permitting costs and other project carrying costs incurred prior to the commencement of construction. Development costs include direct construction costs and indirect costs incurred subsequent to the start of construction such as architectural, engineering, construction management and carrying costs consisting of interest, real estate taxes and insurance. The following table shows the components of construction in progress.
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December 31,
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(in thousands)
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2016
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2015
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Park Van Ness
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$
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—
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$
|
77,245
|
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N. Glebe Road
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58,147
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|
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—
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Other
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5,423
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6,271
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Total
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$
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63,570
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$
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83,516
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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
$2.0 million
and
$1.3 million
, at
December 31, 2016
and
2015
, respectively.
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(In thousands)
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Year ended December 31,
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|
2016
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2015
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2014
|
Beginning Balance
|
$
|
1,263
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|
|
$
|
677
|
|
|
$
|
572
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|
Provision for Credit Losses
|
1,494
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|
|
915
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|
|
680
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Charge-offs
|
(799
|
)
|
|
(329
|
)
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(575
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)
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Ending Balance
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$
|
1,958
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$
|
1,263
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$
|
677
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In addition to rents due currently, accounts receivable also includes
$43.1 million
and
$41.4 million
, at
December 31, 2016
and
2015
, respectively, net of allowance for doubtful accounts totaling
$0.5 million
and
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
$0.5 million
, respectively, representing minimum rental income accrued on a straight-line basis to be paid by tenants over the remaining term of their respective leases.
Assets Held for Sale
The Company considers properties to be assets held for sale when all of the following criteria are met:
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•
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management commits to a plan to sell a property;
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•
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it is unlikely that the disposal plan will be significantly modified or discontinued;
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•
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the property is available for immediate sale in its present condition;
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•
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actions required to complete the sale of the property have been initiated;
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•
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sale of the property is probable and the Company expects the completed sale will occur within
one
year; and
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•
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the property is actively being marketed for sale at a price that is reasonable given its current market value.
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The Company must make a determination as to the point in time that it is probable that a sale will be consummated, which generally occurs when an executed sales contract has no contingencies and the prospective buyer has significant funds at risk to ensure performance. Upon designation as an asset held for sale, the Company records the carrying value of each property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and ceases depreciation. As of December 31, 2015, the Company has classified as held-for-sale
one
operating property, comprising
197,100
square feet of gross leasable area. The book value of this property, which is included in Other Assets, was
$3.4 million
, net of accumulated depreciation of
$7.0 million
, which does not exceed its estimated fair value, less costs to sell, and liabilities were
$0.2 million
. The asset was sold in 2016.
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 Company’s cash balances at
December 31, 2016
are held in non-interest bearing accounts at various banks. From time to time the Company may maintain deposits with financial institutions in amounts in excess of federally insured limits. The Company has not experienced any losses on such deposits and believes it is not exposed to any significant credit risk on those deposits.
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
$7.5 million
and
$8.7 million
, net of accumulated amortization of
$7.3 million
and
$6.2 million
at
December 31, 2016
and
2015
, 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 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
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
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.
Revenue Recognition
Rental and interest income are accrued as earned. 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 tenant’s 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, 2016
, 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
2016
,
2015
, and
2014
. The tax basis of the Company’s real estate investments was approximately
$1.3 billion
and
$1.1 billion
as of
December 31, 2016
and
2015
, respectively. With few exceptions, the Company is no longer subject to U.S. federal, state, and local tax examinations by tax authorities for years before 2013.
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 Company’s 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 Company’s current and historic dividend yield rates, the Company’s yield in relation to other retail REITs and the Company’s market yield at the grant date; and (4) a Risk-free Interest Rate based upon the market 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.
The Company has a stock plan, which was originally approved in 2004, amended in 2008 and 2013 and which expires in 2023, for the purpose of attracting and retaining executive officers, directors and other key personnel (the "Stock Plan"). Pursuant to the Stock 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 director’s 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
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
paid in stock, fees earned during a calendar quarter are aggregated and divided by the common stock’s 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, 2016
, the directors’ deferred fee accounts comprise
246,800
shares.
The Compensation Committee has also approved an annual award of shares of the Company’s 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, 2016
,
2015
, and
2014
. 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
$150,100
,
$143,000
, and
$112,900
, for the years ended
December 31, 2016
,
2015
, and
2014
, respectively.
Noncontrolling Interest
Saul Centers is the sole general partner of the Operating Partnership, owning a
74.3%
common interest as of
December 31, 2016
. 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 Company’s potentially dilutive securities. For all periods presented, the convertible limited partnership units are anti-dilutive. The treasury stock method was used to measure the effect of the dilution.
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December 31,
|
(Shares in thousands)
|
2016
|
|
2015
|
|
2014
|
Weighted average common shares outstanding - Basic
|
21,505
|
|
|
21,127
|
|
|
20,772
|
|
Effect of dilutive options
|
110
|
|
|
69
|
|
|
49
|
|
Weighted average common shares outstanding - Diluted
|
21,615
|
|
|
21,196
|
|
|
20,821
|
|
Average share price
|
$
|
58.96
|
|
|
$
|
53.38
|
|
|
$
|
49.09
|
|
Non-dilutive options
|
129
|
|
|
111
|
|
|
107
|
|
Years non-dilutive options were issued
|
2007, 2015, and 2016
|
|
2007 and 2015
|
|
2007 and 2008
|
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.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Recently Issued Accounting Standards
In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property Plant and Equipment (Topic 360)” (“ASU 2014-08”). ASU 2014-08 changes the requirements for reporting discontinued operations such that disposals of components of an entity will be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations. ASU 2014-08 also requires additional disclosures about discontinued operations. ASU 2014-08 is effective for annual periods beginning after December 15, 2014, and interim periods within those years and early adoption is permitted. The Company retrospectively adopted ASU 2014-08 on April 15, 2014. The adoption of ASU 2014-08 did not have a material impact on the Company’s financial condition or results of operations.
In May 2014, the FASB issued ASU No. 2014-09 titled “Revenue from Contracts with Customers” and subsequently issued several related ASUs (collectively “ASU 2014-09”). ASU 2014-09 will replace most existing revenue recognition guidance and will require an entity to recognize the amount of revenue which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 is effective for annual periods beginning after December 15, 2017, and interim periods within those years and early adoption is not permitted. ASU 2014-09 must be applied retrospectively by either restating prior periods or by recognizing the cumulative effect as of the first date of application. We have not yet selected a transition method and are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation” ("ASU 2015-02"). ASU 2015-02 modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. ASU 2015-02 is effective for annual periods beginning after December 15, 2015, and interim periods within those years. The adoption of ASU 2015-02 effective January 1, 2016, resulted in the Operating Partnership being classified as a variable interest entity. Because the Operating Partnership was already consolidated into the financial statements, adoption had no impact on the Company’s consolidated financial statements or disclosures.
In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest” (“ASU 2015-03”). ASU 2015-03 simplifies the presentation of debt issuance costs and will require an entity to deduct transaction costs from the carrying value of the related financial liability and not record those transaction costs as a separate asset. Recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. ASU 2015-03 is effective for annual periods beginning after December 15, 2015, and interim periods within those years, and must be applied retrospectively by adjusting the balance sheet of each individual period presented. The Company retrospectively adopted ASU 2015-03 effective January 1, 2016. As a result of the adoption of ASU 2015-03, the Company no longer reports its net deferred debt costs as an asset and instead reports those amounts as reduction of the carrying value of the associated debt.
In February 2016, the FASB issued ASU 2016-02, ‘‘Leases’’ (“ASU 2016-02”). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, interim periods within those years, and requires a modified retrospective transition approach for all leases existing at the date of initial application, with an option to use certain practical expedients for those existing leases. We are evaluating the impact that ASU 2016-02 will have on our consolidated financial statements and related disclosures.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation" ("ASU 2016-09"). ASU 2016-09 simplifies the accounting for several aspects of share-based payments including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those years. The transition method varies based on the specific amendment. The Company does not believe that the adoption of ASU 2016-09 will have a material impact on our consolidated financial statements or related disclosures.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses" ("ASU 2016-13"). ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of information to support credit loss estimates. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those years. We are evaluating the impact that ASU 2016-13 will have on our consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU 2017-01, "Clarifying the Definition of a Business" ("ASU 2017-01"). ASU 2017-01 provides that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. ASU 2017-01 is effective prospectively for annual periods beginning after December 15, 2017, and interim periods within those years. Early application is permitted for transactions for which the acquisition date occurs before the effective date provided the transaction has not been reported in the financial statements. The Company expects to adopt ASU 2017-01 during the first quarter of 2017, the effect of which, for asset acquisitions, will be (a) the capitalization of acquisition costs, instead of expense, and (b) recordation of acquired assets and assessment liabilities at relative fair value, instead of fair value.
Reclassifications
Certain reclassifications have been made to prior years to conform to the presentation used for year ended
December 31, 2016
.
1580, 1582 and 1584 Rockville Pike
In January 2014, the Company purchased for
$8.0 million
1580 Rockville Pike
and incurred acquisition costs of
$0.2 million
. In April 2014, the Company purchased for
$11.0 million
1582 Rockville Pike
and incurred acquisition costs of
$0.2 million
. In December 2014, the company purchased for
$6.2 million
1584 Rockville Pike
and incurred acquisition costs of
$0.2 million
. These retail properties are contiguous with each other and the Company's property at 1500 Rockville Pike and are located in Rockville, Maryland.
700, 726, 730 and 750 N. Glebe Road
In August 2014, the Company purchased for
$40.0 million
,
750 N. Glebe Road
and incurred acquisition costs of
$0.4 million
. In December 2014, the Company purchased for
$2.8 million
730 N. Glebe Road
and incurred acquisition costs of
$40,400
. In September 2015, the Company purchased for
$4.0 million
726 N. Glebe Road
and incurred acquisition costs of
$0.1 million
. In
August 2016
, the Company purchased for
$7.2 million
, including acquisition costs,
700 N. Glebe Road
. These properties are contiguous and are located in Arlington, Virginia.
Westview pad
In
February 2015
, the Company purchased for
$0.9 million
including acquisition costs, a
1.1
acre retail pad site in Frederick, Maryland, which is contiguous with and an expansion of the Company's other Westview asset.
Thruway pad
In
August 2016
, the Company purchased for
$3.1 million
, a retail pad site with an occupied bank building in
Winston Salem, North Carolina
, and incurred acquisition costs of
$60,000
. The property is contiguous with and an expansion of the Company's Thruway asset.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Beacon Center
In the fourth quarter of 2016, the Company purchased for
$22.5 million
the land underlying Beacon Center. The land was previously leased by the Company with an annual rent of approximately
$60,000
. The purchase price was funded in part by an
$11.25 million
increase to the existing mortgage collateralized by Beacon Center and in part by the Company’s revolving credit facility.
Southdale
In the fourth quarter of 2016, the Company purchased for
$15.0 million
the land underlying Southdale. The land was previously leased by the Company with an annual rent of approximately
$60,000
. The purchase price was funded by the Company’s revolving credit facility.
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 2016, the Company purchased
two
properties at an aggregate cost of
$10.3 million
, and incurred acquisition costs totaling
$60,400
. The purchase price was allocated to the assets acquired and liabilities assumed based on their fair value as shown in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
700 N. Glebe Road
|
|
Thruway Pad
|
|
Total
|
Land
|
$
|
7,236
|
|
|
$
|
2,196
|
|
|
$
|
9,432
|
|
Buildings
|
—
|
|
|
874
|
|
|
874
|
|
In-place Leases
|
—
|
|
|
93
|
|
|
93
|
|
Above Market Rent
|
—
|
|
|
—
|
|
|
—
|
|
Below Market Rent
|
—
|
|
|
(63
|
)
|
|
(63
|
)
|
Total Purchase Price
|
$
|
7,236
|
|
|
$
|
3,100
|
|
|
$
|
10,336
|
|
|
|
|
|
|
|
During 2015, the Company purchased
one
property, 726 N. Glebe Road, at a cost of
$4.0 million
and incurred acquisition costs of
$0.1 million
. Of the total purchase price,
$3.9 million
was allocated to land and
$0.1 million
was allocated to building. No amounts were allocated to in-place, above-market or below-market leases.
During 2014, the Company purchased
five
properties at an aggregate cost of
$68.0 million
, and incurred acquisition costs of
$0.9 million
. The purchase prices were allocated to the assets acquired and liabilities assumed based on their fair value as shown in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
1580
Rockville Pike
|
|
1582
Rockville Pike
|
|
750 N.
Glebe Road
|
|
730 N.
Glebe Road
|
|
1584
Rockville Pike
|
|
Total
|
Land
|
$
|
9,600
|
|
|
$
|
9,742
|
|
|
$
|
38,224
|
|
|
$
|
2,683
|
|
|
$
|
5,798
|
|
|
$
|
66,047
|
|
Buildings
|
2,200
|
|
|
828
|
|
|
1,327
|
|
|
78
|
|
|
440
|
|
|
4,873
|
|
In-place Leases
|
513
|
|
|
849
|
|
|
449
|
|
|
39
|
|
|
249
|
|
|
2,099
|
|
Above Market Rent
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Below Market Rent
|
(4,313
|
)
|
|
(419
|
)
|
|
—
|
|
|
—
|
|
|
(337
|
)
|
|
(5,069
|
)
|
Total Purchase Price
|
$
|
8,000
|
|
|
$
|
11,000
|
|
|
$
|
40,000
|
|
|
$
|
2,800
|
|
|
$
|
6,150
|
|
|
$
|
67,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The gross carrying amount of lease intangible assets included in deferred leasing costs as of
December 31, 2016
and
2015
was
$24.1 million
and
$24.0 million
, respectively, and accumulated amortization was
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
$20.5 million
and
$19.2 million
, respectively. Amortization expense totaled
$1.2 million
,
$1.3 million
and
$1.3 million
, for the years ended
December 31, 2016
,
2015
, and
2014
, respectively. The gross carrying amount of below market lease intangible liabilities included in deferred income as of
December 31, 2016
and
2015
was
$29.9 million
and
$29.9 million
, respectively, and accumulated amortization was
$15.5 million
and
$13.7 million
, respectively. Accretion income totaled
$1.8 million
,
$1.8 million
, and
$1.9 million
, for the years ended
December 31, 2016
,
2015
, and
2014
, respectively. The gross carrying amount of above market lease intangible assets included in accounts receivable as of
December 31, 2016
and
2015
was
$1.0 million
and
$1.0 million
, respectively, and accumulated amortization was
$999,700
and
$998,200
, respectively. Amortization expense totaled
$1,500
,
$1,500
and
$22,500
, for the years ended
December 31, 2016
,
2015
and
2014
, respectively. The remaining weighted-average amortization period as of December 31, 2016 is
3.5
years,
1.0
year, and
5.9
years for lease acquisition costs, above market leases and below market leases, respectively.
As of
December 31, 2016
, 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
|
2017
|
$
|
762
|
|
|
$
|
1
|
|
|
$
|
1,677
|
|
2018
|
708
|
|
|
1
|
|
|
1,618
|
|
2019
|
537
|
|
|
—
|
|
|
1,481
|
|
2020
|
419
|
|
|
—
|
|
|
1,399
|
|
2021
|
384
|
|
|
—
|
|
|
1,375
|
|
Thereafter
|
840
|
|
|
—
|
|
|
6,887
|
|
Total
|
$
|
3,650
|
|
|
$
|
2
|
|
|
$
|
14,437
|
|
|
|
4.
|
NONCONTROLLING INTERESTS - HOLDERS OF CONVERTIBLE LIMITED PARTNERSHIP UNITS IN THE OPERATING PARTNERSHIP
|
The Saul Organization holds a
25.7%
limited partnership interest in the Operating Partnership represented by
7,430,516
limited partnership units, as of
December 31, 2016
. 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, 2016
, approximately
530,000
units were eligible for conversion.
The impact of the Saul Organization’s
25.7%
limited partnership interest in the Operating Partnership is reflected as Noncontrolling Interests in the accompanying consolidated financial statements. Fully converted partnership units and diluted weighted average shares outstanding for the years ended
December 31, 2016
,
2015
, and
2014
, were
28,989,900
,
28,449,400
, and
27,977,500
, respectively.
|
|
5.
|
MORTGAGE NOTES PAYABLE, REVOLVING CREDIT FACILITY, INTEREST EXPENSE AND AMORTIZATION OF DEFERRED DEBT COSTS
|
At
December 31, 2016
, the principal amount of outstanding debt totaled
$907.8 million
, of which
$844.3 million
was fixed rate debt and
$63.5 million
was variable rate debt. The principal amount of the Company’s outstanding debt totaled
$875.2 million
at
December 31, 2015
, of which
$832.4 million
was fixed rate debt and
$42.8 million
was variable rate debt. At
December 31, 2016
, the Company had a
$275.0 million
unsecured revolving credit facility, which can be used for working capital, property acquisitions or development projects. The revolving credit facility matures on June 23, 2018, and may be extended by the Company for
one
additional year subject to the Company’s 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, 2016
, based on the value of the Company's unencumbered properties, approximately
$225.6 million
was available under the line,
$49.0 million
was
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
outstanding and approximately
$448,000
was committed for letters of credit. The interest rate under the facility is variable and equals the sum of one-month LIBOR and a margin that is based on the Company’s leverage ratio and which can range from
145
basis points to
200
basis points. As of
December 31, 2016
, the margin was
145
basis points.
Saul Centers is a guarantor of the revolving credit facility, of which the Operating Partnership is the borrower, the Metro Pike Center bank loan (approximately
$7.8 million
of the
$14.5 million
outstanding at
December 31, 2016
) and all of the Park Van Ness construction-to-permanent loan. All other notes payable are non-recourse.
On June 24, 2014, the Company amended and restated its revolving credit facility. The unsecured revolving credit facility, which can be used for working capital, property acquisitions, development projects or letters of credit was increased to
$275.0 million
. The revolving credit facility matures on
June 23, 2018
, and may be extended by the Company for
one
additional year subject to the Company’s 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. The interest rate under the facility is variable and equals the sum of
one-month LIBOR
and a margin that is based on the Company’s leverage ratio, and which can range from
145
basis points to
200
basis points.
On
March 3, 2015
, the Company closed on a
15
-year, non-recourse
$30.0 million
mortgage loan secured by Shops at Fairfax and Boulevard. The loan matures in
2030
, bears interest at a fixed rate of
3.69%
, requires monthly principal and interest payments totaling
$153,300
based on a
25
-year amortization schedule and requires a final payment of
$15.5 million
at maturity. Proceeds were used to repay in full the
$15.2 million
remaining balance of existing debt secured by Shops at Fairfax and Boulevard and to reduce outstanding borrowings under the revolving credit facility.
On
April 1, 2015
, the Company closed on a
15
-year, non-recourse
$16.0 million
mortgage loan secured by Northrock. The loan matures in
2030
, bears interest at a fixed rate of
3.99%
, requires monthly principal and interest payments totaling
$84,400
based on a
25
-year amortization schedule and requires a final payment of
$8.4 million
at maturity. Proceeds were used to repay in full the
$14.5 million
remaining balance of existing debt secured by Northrock.
In November 2016, the existing loan secured by Beacon Center was increased by
$11.25 million
. The interest rate, amortization period and maturity date did not change; the required monthly payment was increased to
$268,500
. Proceeds were used to partially fund the purchase of the ground which underlies Beacon Center.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
The following is a summary of notes payable as of
December 31, 2016
and
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes Payable
|
December 31,
|
|
Interest
|
|
Scheduled
|
(Dollars in thousands)
|
2016
|
|
|
|
2015
|
|
Rate *
|
|
Maturity *
|
Fixed rate mortgages:
|
$
|
29,428
|
|
|
(a)
|
|
$
|
30,778
|
|
|
6.01
|
%
|
|
Feb-2018
|
|
32,036
|
|
|
(b)
|
|
33,766
|
|
|
5.88
|
%
|
|
Jan-2019
|
|
10,372
|
|
|
(c)
|
|
10,928
|
|
|
5.76
|
%
|
|
May-2019
|
|
14,335
|
|
|
(d)
|
|
15,098
|
|
|
5.62
|
%
|
|
Jul-2019
|
|
14,325
|
|
|
(e)
|
|
15,064
|
|
|
5.79
|
%
|
|
Sep-2019
|
|
12,725
|
|
|
(f)
|
|
13,387
|
|
|
5.22
|
%
|
|
Jan-2020
|
|
10,277
|
|
|
(g)
|
|
10,587
|
|
|
5.60
|
%
|
|
May-2020
|
|
8,697
|
|
|
(h)
|
|
9,127
|
|
|
5.30
|
%
|
|
Jun-2020
|
|
39,213
|
|
|
(i)
|
|
40,360
|
|
|
5.83
|
%
|
|
Jul-2020
|
|
7,685
|
|
|
(j)
|
|
8,025
|
|
|
5.81
|
%
|
|
Feb-2021
|
|
5,808
|
|
|
(k)
|
|
5,959
|
|
|
6.01
|
%
|
|
Aug-2021
|
|
33,571
|
|
|
(l)
|
|
34,420
|
|
|
5.62
|
%
|
|
Jun-2022
|
|
10,253
|
|
|
(m)
|
|
10,492
|
|
|
6.08
|
%
|
|
Sep-2022
|
|
11,129
|
|
|
(n)
|
|
11,365
|
|
|
6.43
|
%
|
|
Apr-2023
|
|
13,401
|
|
|
(o)
|
|
14,177
|
|
|
6.28
|
%
|
|
Feb-2024
|
|
15,917
|
|
|
(p)
|
|
16,348
|
|
|
7.35
|
%
|
|
Jun-2024
|
|
13,832
|
|
|
(q)
|
|
14,197
|
|
|
7.60
|
%
|
|
Jun-2024
|
|
24,504
|
|
|
(r)
|
|
25,088
|
|
|
7.02
|
%
|
|
Jul-2024
|
|
28,945
|
|
|
(s)
|
|
29,714
|
|
|
7.45
|
%
|
|
Jul-2024
|
|
28,822
|
|
|
(t)
|
|
29,564
|
|
|
7.30
|
%
|
|
Jan-2025
|
|
14,961
|
|
|
(u)
|
|
15,360
|
|
|
6.18
|
%
|
|
Jan-2026
|
|
109,144
|
|
|
(v)
|
|
112,299
|
|
|
5.31
|
%
|
|
Apr-2026
|
|
33,097
|
|
|
(w)
|
|
34,133
|
|
|
4.30
|
%
|
|
Oct-2026
|
|
37,701
|
|
|
(x)
|
|
38,842
|
|
|
4.53
|
%
|
|
Nov-2026
|
|
17,630
|
|
|
(y)
|
|
18,150
|
|
|
4.70
|
%
|
|
Dec-2026
|
|
66,210
|
|
|
(z)
|
|
67,850
|
|
|
5.84
|
%
|
|
May-2027
|
|
16,352
|
|
|
(aa)
|
|
16,826
|
|
|
4.04
|
%
|
|
Apr-2028
|
|
41,753
|
|
|
(bb)
|
|
31,844
|
|
|
3.51
|
%
|
|
Jun-2028
|
|
16,543
|
|
|
(cc)
|
|
17,011
|
|
|
3.99
|
%
|
|
Sep-2028
|
|
28,679
|
|
|
(dd)
|
|
29,444
|
|
|
3.69
|
%
|
|
Mar-2030
|
|
15,357
|
|
|
(ee)
|
|
15,748
|
|
|
3.99
|
%
|
|
Apr-2030
|
|
70,144
|
|
|
(ff)
|
|
45,208
|
|
|
4.88
|
%
|
|
Sep-2032
|
|
11,446
|
|
|
(gg)
|
|
11,282
|
|
|
8.00
|
%
|
|
Apr-2034
|
Total fixed rate
|
844,292
|
|
|
|
|
832,441
|
|
|
5.48
|
%
|
|
8.5 Years
|
Variable rate loans:
|
|
|
|
|
|
|
|
|
|
|
49,000
|
|
|
(hh)
|
|
28,000
|
|
|
LIBOR + 1.45
|
%
|
|
Jun-2018
|
|
14,482
|
|
|
(ii)
|
|
14,801
|
|
|
LIBOR + 1.65
|
%
|
|
Feb-2018
|
Total variable rate
|
$
|
63,482
|
|
|
|
|
$
|
42,801
|
|
|
2.22
|
%
|
|
1.3 Years
|
Total notes payable
|
$
|
907,774
|
|
|
|
|
$
|
875,242
|
|
|
5.25
|
%
|
|
8.0 Years
|
|
|
*
|
Interest rate and scheduled maturity data presented as of
December 31, 2016
. Totals computed using weighted averages. Amounts shown are principal amounts and have not been reduced by any deferred debt issuance costs.
|
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
|
|
(a)
|
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
$1.4 million
was amortized during
2016
.
|
|
|
(b)
|
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
$1.7 million
was amortized during
2016
.
|
|
|
(c)
|
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
$556,000
was amortized during
2016
.
|
|
|
(d)
|
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
$763,000
was amortized during
2016
.
|
|
|
(e)
|
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
$739,000
was amortized during
2016
.
|
|
|
(f)
|
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
$662,000
was amortized during
2016
.
|
|
|
(g)
|
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
$310,000
was amortized during
2016
.
|
|
|
(h)
|
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
$430,000
was amortized during
2016
.
|
|
|
(i)
|
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
$1,147,000
was amortized during
2016
.
|
|
|
(j)
|
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
$340,000
was amortized during
2016
.
|
|
|
(k)
|
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
$151,000
was amortized during
2016
.
|
|
|
(l)
|
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
$849,000
was amortized during
2016
.
|
|
|
(m)
|
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
$239,000
was amortized during
2016
.
|
|
|
(n)
|
The loan is collateralized by BJ’s 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
$236,000
was amortized during
2016
.
|
|
|
(o)
|
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
$776,000
was amortized during
2016
.
|
|
|
(p)
|
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
$431,000
was amortized during
2016
.
|
|
|
(q)
|
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
$365,000
was amortized during
2016
.
|
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
|
|
(r)
|
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
$584,000
was amortized during
2016
.
|
|
|
(s)
|
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
$769,000
was amortized during
2016
.
|
|
|
(t)
|
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
$742,000
was amortized during
2016
.
|
|
|
(u)
|
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
$399,000
was amortized during
2016
.
|
|
|
(v)
|
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
$3.2 million
was amortized during
2016
.
|
|
|
(w)
|
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
$1,036,000
was amortized during
2016
.
|
|
|
(x)
|
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
$1,141,000
was amortized during
2016
.
|
|
|
(y)
|
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
$520,000
was amortized during
2016
.
|
|
|
(z)
|
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
$1.6 million
was amortized during
2016
.
|
|
|
(aa)
|
The loan is collateralized by Hampshire Langley and requires equal monthly principal and interest payments of
$95,400
based upon a
25
-year amortization schedule and a final payment of
$9.5 million
at loan maturity. Principal of
$474,000
was amortized in
2016
.
|
|
|
(bb)
|
The loan is collateralized by Beacon Center and requires equal monthly principal and interest payments of
$268,500
based upon a
20
-year amortization schedule and a final payment of
$17.1 million
at loan maturity. Principal of
$1.3 million
was amortized in
2016
.
|
|
|
(cc)
|
The loan is collateralized by Seabreeze Plaza and requires equal monthly principal and interest payments of
$94,900
based upon a
25
-year amortization schedule and a final payment of
$9.5 million
at loan maturity. Principal of
$468,000
was amortized in
2016
.
|
|
|
(dd)
|
The loan is collateralized by Shops at Fairfax and Boulevard shopping centers and requires equal monthly principal and interest payments totaling
$153,300
based upon a
25
-year amortization schedule and a final payment of
$15.5 million
at maturity. Principal of
$765,000
was amortized in
2016
.
|
(ee) The loan is collateralized by Northrock and requires equal monthly principal and interest payments totaling
$84,400
based upon a
25
-year amortization schedule and a final payment of
$8.4 million
at maturity. Principal of
$391,000
was amortized in
2016
.
|
|
(ff)
|
The loan is a
$71.6 million
construction-to-permanent facility that is collateralized by and will finance a portion of the construction costs of Park Van Ness. During the construction period, interest will be funded by the loan. After conversion to a permanent loan, monthly principal and interest payments totaling
$413,500
will be required based upon a
25
-year amortization schedule. A final payment of
$39.6 million
will be due at maturity.
|
|
|
(gg)
|
The Company entered into a sale-leaseback transaction with its Olney property and is accounting for that transaction as a secured financing. The arrangement requires monthly payments of
$60,400
which increase by
1.5%
on May 1, 2015, and every May 1 thereafter. The arrangement provides for a final payment of
$14.7 million
and has an implicit interest rate of
8.0%
. Negative amortization in
2016
totaled
$164,000
.
|
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
|
|
(hh)
|
The loan is a
$275.0 million
unsecured revolving credit facility. Interest accrues at a rate equal to the sum of one-month LIBOR plus a spread of
145
basis points. The line may be extended at the Company’s option for
one
year with payment of a fee of
0.15%
.
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 Metro Pike Center and requires monthly principal and interest payments of approximately
$48,000
and a final payment of
$14.2 million
at loan maturity. Principal of
$319,000
was amortized during
2016
.
|
The carrying value of the properties collateralizing the mortgage notes payable totaled
$957.2 million
and
$856.8 million
, as of
December 31, 2016
and
2015
, respectively. The Company’s 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, 2016
.
|
|
•
|
maintain tangible net worth, as defined in the loan agreement, of at least
$542.1 million
plus
80%
of the Company’s net equity proceeds received after March 2014;
|
|
|
•
|
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
2.0
x on a trailing four-quarter basis (interest expense coverage); and
|
|
|
•
|
limit the amount of debt so that interest, scheduled principal amortization and preferred dividend coverage exceeds
1.3
x on a trailing four-quarter basis (fixed charge coverage).
|
Mortgage notes payable at each of
December 31, 2016
and
2015
, totaling
$51.0 million
, are guaranteed by members of the Saul Organization. As of
December 31, 2016
, the scheduled maturities of all debt including scheduled principal amortization for years ended December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Balloon
Payments
|
|
Scheduled
Principal
Amortization
|
|
Total
|
2017
|
$
|
—
|
|
|
$
|
26,418
|
|
|
$
|
26,418
|
|
2018
|
90,865
|
|
(a)
|
26,394
|
|
|
117,259
|
|
2019
|
60,793
|
|
|
25,037
|
|
|
85,830
|
|
2020
|
61,163
|
|
|
22,331
|
|
|
83,494
|
|
2021
|
11,011
|
|
|
21,859
|
|
|
32,870
|
|
Thereafter
|
452,142
|
|
|
109,761
|
|
|
561,903
|
|
Principal amount
|
$
|
675,974
|
|
|
$
|
231,800
|
|
|
907,774
|
|
Unamortized deferred debt costs
|
|
|
|
|
7,485
|
|
Net
|
|
|
|
|
$
|
900,289
|
|
(a) Includes
$49.0 million
outstanding under the line of credit.
The components of interest expense are set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Interest incurred
|
$
|
46,867
|
|
|
$
|
45,898
|
|
|
$
|
45,396
|
|
Amortization of deferred debt costs
|
1,343
|
|
|
1,433
|
|
|
1,327
|
|
Capitalized interest
|
(2,527
|
)
|
|
(2,166
|
)
|
|
(689
|
)
|
Total
|
$
|
45,683
|
|
|
$
|
45,165
|
|
|
$
|
46,034
|
|
Deferred debt costs capitalized during the years ending
December 31, 2016
,
2015
and
2014
totaled
$0.1 million
,
$0.3 million
and
$1.3 million
, respectively.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
Lease income includes primarily base rent arising from noncancelable leases. Base rent (including straight-line rent) for the years ended
December 31, 2016
,
2015
, and
2014
, amounted to
$172.4 million
,
$168.3 million
, and
$164.6 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)
|
|
2017
|
$
|
154,489
|
|
2018
|
138,724
|
|
2019
|
117,135
|
|
2020
|
97,155
|
|
2021
|
78,248
|
|
Thereafter
|
245,218
|
|
|
$
|
830,969
|
|
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, 2016
,
2015
, and
2014
, amounted to
$34.3 million
,
$32.9 million
, and
$32.1 million
, respectively. In addition, certain retail leases provide for percentage rent based on sales in excess of the minimum specified in the tenant’s lease. Percentage rent amounted to
$1.4 million
,
$1.6 million
, and
$1.5 million
, for the years ended
December 31, 2016
,
2015
, and
2014
, respectively.
|
|
7.
|
LONG-TERM LEASE OBLIGATIONS
|
During 2016, the Company purchased the land underlying Beacon Center and Southdale - See Note 3. As a result, at December 31, 2016,
one
remaining property is subject to a noncancelable long-term lease which applies to land underlying the Shopping Center. The lease provides for periodic adjustments of the base annual rent and requires the payment of real estate taxes on the underlying land. The lease expires in 2068. Reflected in the accompanying consolidated financial statements is minimum ground rent expense of
$159,000
,
$176,000
, and
$176,000
, for the years ended
December 31, 2016
,
2015
, and
2014
, respectively. The future minimum rental commitments under this ground lease are as follows:
|
|
|
|
|
(in thousands)
|
|
2017
|
$
|
56
|
|
2018
|
56
|
|
2019
|
57
|
|
2020
|
62
|
|
2021
|
62
|
|
Thereafter
|
3,636
|
|
|
$
|
3,929
|
|
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 Company’s corporate headquarters space is leased by a member of the Saul Organization. The lease commenced in March 2002, and was extended to March 2017. A lease extension is being finalized which will
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
extend the term for March 2022. 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 Company’s rent expense for the years ended
December 31, 2016
,
2015
, and
2014
was
$843,300
,
$904,900
, and
$840,800
, 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, 2016
,
2015
, and
2014
reflect noncontrolling interest of
$11.4 million
,
$10.5 million
, and
$11.0 million
, respectively, representing the Saul Organization’s 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 "Series A Stock"). The depositary shares were redeemable, in whole or in part at the Company’s option, from time to time, at
$25.00
per share. The depositary shares paid an annual dividend of
$2.00
per share, equivalent to
8%
of the
$25.00
per share liquidation preference. The Series A preferred stock had no stated maturity, was not subject to any sinking fund or mandatory redemption and was not convertible into any other securities of the Company. Investors in the depositary shares generally had no voting rights, but would have had limited voting rights if the Company failed to pay dividends for
six
or more quarters (whether or not declared or consecutive) and in certain other events. In March 2013, the Company redeemed
60%
of its then-outstanding Series A Stock. In December 2014, the Company redeemed the remaining outstanding Series A Stock. Costs associated with the redemptions were charged against accumulated deficit in the respective periods.
On February 12, 2013, the Company sold, in an underwritten public offering,
5.6 million
depositary shares, each representing
1/100
th of a share of
6.875% Series C Cumulative Redeemable Preferred Stock
("Series C Stock"), and received net cash proceeds of approximately
$135.2 million
. The depositary shares may be redeemed on or after
February 12, 2018
at the Company’s option, in whole or in part, at the
$25.00
liquidation preference plus accrued but unpaid dividends. 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 was paid on
April 15, 2013
and covered the period from
February 12, 2013
through
March 31, 2013
. The Series C 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
November 12, 2014
, the Company sold, in an underwritten public offering,
1.6 million
depositary shares of Series C Stock and received net cash proceeds of approximately
$39.3 million
(the "Additional Series C Stock"). The terms of Additional Series C Stock are identical to the Series C Stock.
|
|
9.
|
RELATED PARTY TRANSACTIONS
|
The Chairman and Chief Executive Officer, the President and Chief Operating Officer, the Executive Vice President-Chief Legal and Administrative Officer 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).
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 employee’s cash compensation, subject to certain limits, were
$329,000
,
$400,000
, and
$379,000
, for
2016
,
2015
, and
2014
, respectively. All amounts deferred by employees and contributed by the Company are fully vested.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
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, 2016
,
2015
, and
2014
, the Company contributed
three
times the amount deferred by employees. The Company’s expense, included in general and administrative expense, totaled
$250,800
,
$224,900
, and
$192,800
, for the years ended
December 31, 2016
,
2015
, and
2014
, respectively. All amounts deferred by employees and the Company are fully vested. The cumulative unfunded liability under this plan was
$2.1 million
and
$1.8 million
, at
December 31, 2016
and
2015
, 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 Company’s share of these ancillary costs and expenses for the years ended
December 31, 2016
,
2015
, and
2014
, which included rental expense for the Company’s headquarters lease (see Note 7. Long Term Lease Obligations), totaled
$7.5 million
,
$8.2 million
, and
$7.4 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, 2016
and
2015
, accounts payable, accrued expenses and other liabilities included
$829,000
and
$655,000
, respectively, representing billings due to the Saul Organization for the Company’s share of these ancillary costs and expenses.
The Company has entered into a shared third-party predevelopment cost agreement with the Trust (the “Predevelopment Agreement”). The Predevelopment Agreement, which expired on December 31, 2015 and was extended to December 31, 2016, relates to the sharing of third-party predevelopment costs incurred in connection with the planning of the future redevelopment of certain adjacent real estate assets in the Twinbrook area of Rockville, Maryland. On December 8, 2016, the Company entered into a replacement agreement with the Saul Trust which extended the expiration date to December 31, 2017 and provides for automatic
twelve months
renewals unless either party provides notice of termination. The costs will be shared on a pro rata basis based on the acreage owned by each entity and neither party is obligated to advance funds to the other.
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 Company’s insurance program. Such commissions and fees amounted to approximately
$360,500
,
$443,500
, and
$427,300
, for the years ended
December 31, 2016
,
2015
, and
2014
, respectively.
Effective as of September 4, 2012, the Company entered into a consulting agreement with B. F. Saul III, one of the Company’s former presidents, whereby Mr. Saul III provided certain consulting services to the Company as an independent contractor and was paid at a rate of
$60,000
per month. The consulting agreement included certain noncompete, nonsolicitation and nondisclosure covenants, and expired in September 2014. During 2014, such consulting fees totaled
$495,000
.
In August 2016, the Company entered into an agreement to acquire from the Trust, for an initial purchase price of
$8.8 million
, approximately
14.3
acres of land located at the intersection of Ashburn Village Boulevard and Russell Branch Parkway in Loudoun County, Virginia. In order to allow the Company time to pre-lease and complete project plans and specifications, the parties have agreed to a closing date in early 2018, at which time the Company will exchange limited partnership units for the land. The number of limited partnership units to be exchanged will be based on the initial purchase price and the average share value (as defined in the agreement) of the Company’s common stock at the time of the exchange. The Company intends to construct a shopping center and, upon stabilization, may be obligated to issue additional limited partnership units to the Trust.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
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.
At the annual meeting of the Company’s 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 Company’s stockholders at the 2008 Annual Meeting and further amended at the 2013 Annual Meeting (the “Amended 2004 Plan”). The Amended 2004 Plan, which terminates in 2023, provides for grants of options to purchase up to
2,000,000
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 27, 2007
, the Compensation Committee granted options to purchase
165,000
shares (
27,560
incentive stock options and
137,440
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 Company’s 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
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 Company’s 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 vested immediately, the entire
$254,700
was expensed as of the date of grant.
No
options were granted to the Company’s officers in 2008.
Effective
April 24, 2009
, the Compensation Committee granted options to purchase
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 Company’s 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 Company’s officers in 2009.
Effective
May 7, 2010
, the Compensation Committee granted options to purchase
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 Company’s 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 Company’s officers in 2010.
Effective
May 13, 2011
, the Compensation Committee granted options to purchase
195,000
shares (
65,300
incentive stock options and
129,700
nonqualified stock options) to
fifteen
Company officers and
thirteen
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 Company’s 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
$297,375
were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire
$297,375
was expensed
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
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
277,500
shares (
26,157
incentive stock options and
251,343
nonqualified stock options) to
fifteen
Company officers and
fourteen
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 Company’s 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
$1.4 million
and
$257,250
were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire
$257,250
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 10, 2013
, the Compensation Committee granted options to purchase
237,500
shares (
35,592
incentive stock options and
201,908
nonqualified stock options) to
fifteen
Company officers and
fourteen
Company Directors (the "2013 options"), which expire on
May 9, 2023
. The officers' 2013 Options vest
25%
per year over
four
years and are subject to early expiration upon termination of employment. The directors' 2013 options were immediately exercisable. The exercise price of
$44.42
per share was the closing market price of the Company's common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2013 Options to be
$1.5 million
, of which
$1.2 million
and
$278,250
were assigned to the officer options and director options, respectively. Because the directors' options vested immediately, the entire
$278,250
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 option was vested.
Effective
May 9, 2014
, the Compensation Committee granted options to purchase
200,000
shares (
29,300
incentive stock options and
170,700
nonqualified stock options) to
eighteen
Company officers and
twelve
Company Directors (the “2014 options”), which expire on
May 8, 2024
. The officers’ 2014 Options vest
25%
per year over
four
years and are subject to early expiration upon termination of employment. The directors’ 2014 Options were immediately exercisable. The exercise price of
$47.03
per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2014 Options to be
$1.3 million
, of which
$1.2 million
and
$109,500
were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire
$109,500
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 8, 2015
, the Compensation Committee granted options to purchase
225,000
shares (
33,690
incentive stock options and
191,310
nonqualified stock options) to
19
Company officers and
14
Company Directors (the “2015 options”), which expire on
May 7, 2025
. The officers’ 2015 Options vest
25%
per year over
four
years and are subject to early expiration upon termination of employment. The directors’ 2015 Options were immediately exercisable. The exercise price of
$51.07
per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2015 Options to be
$1.6 million
, of which
$1.4 million
and
$125,300
were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire
$125,300
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 6, 2016
, the Compensation Committee granted options to purchase
226,500
shares (
24,248
incentive stock options and
202,252
nonqualified stock options) to
19
Company officers and
13
Company Directors (the “2016 options”), which expire on
May 5, 2026
. The officers’ 2016 Options vest
25%
per year over
four years
and are subject to early expiration upon termination of employment. The directors’ 2016 Options were immediately exercisable. The exercise price of
$57.74
per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2016 Options to be
$1.2 million
, of which
$1.0 million
and
$151,125
were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire
$151,125
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.
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, 2016
,
2015
and
2014
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
|
Stock options issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors
|
Grant date
|
|
4/27/2007
|
|
4/25/2008
|
|
4/24/2009
|
|
5/7/2010
|
|
5/13/2011
|
|
5/4/2012
|
|
5/10/2013
|
|
5/9/2014
|
|
5/8/2015
|
|
5/6/2016
|
|
Subtotals
|
Total grant
|
|
30,000
|
|
|
30,000
|
|
|
32,500
|
|
|
32,500
|
|
|
32,500
|
|
|
35,000
|
|
|
35,000
|
|
|
30,000
|
|
|
35,000
|
|
|
32,500
|
|
|
325,000
|
|
Vested
|
|
30,000
|
|
|
30,000
|
|
|
32,500
|
|
|
32,500
|
|
|
32,500
|
|
|
35,000
|
|
|
35,000
|
|
|
30,000
|
|
|
35,000
|
|
|
32,500
|
|
|
325,000
|
|
Exercised
|
|
10,000
|
|
|
12,500
|
|
|
25,000
|
|
|
17,500
|
|
|
17,500
|
|
|
17,500
|
|
|
15,000
|
|
|
10,000
|
|
|
5,000
|
|
|
—
|
|
|
130,000
|
|
Forfeited
|
|
7,500
|
|
|
7,500
|
|
|
—
|
|
|
2,500
|
|
|
2,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,000
|
|
Exercisable at December 31, 2016
|
|
12,500
|
|
|
10,000
|
|
|
7,500
|
|
|
12,500
|
|
|
12,500
|
|
|
17,500
|
|
|
20,000
|
|
|
20,000
|
|
|
30,000
|
|
|
32,500
|
|
|
175,000
|
|
Remaining unexercised
|
|
12,500
|
|
|
10,000
|
|
|
7,500
|
|
|
12,500
|
|
|
12,500
|
|
|
17,500
|
|
|
20,000
|
|
|
20,000
|
|
|
30,000
|
|
|
32,500
|
|
|
175,000
|
|
Exercise price
|
|
$
|
54.17
|
|
|
$
|
50.15
|
|
|
$
|
32.68
|
|
|
$
|
38.76
|
|
|
$
|
41.82
|
|
|
$
|
39.29
|
|
|
$
|
44.42
|
|
|
$
|
47.03
|
|
|
$
|
51.07
|
|
|
$
|
57.74
|
|
|
|
Volatility
|
|
0.225
|
|
|
0.237
|
|
|
0.344
|
|
|
0.369
|
|
|
0.358
|
|
|
0.348
|
|
|
0.333
|
|
|
0.173
|
|
|
0.166
|
|
|
0.166
|
|
|
|
Expected life (years)
|
|
8.0
|
|
|
7.0
|
|
|
6.0
|
|
|
5.0
|
|
|
5.0
|
|
|
5.0
|
|
|
5.0
|
|
|
5.0
|
|
|
5.0
|
|
|
5.0
|
|
|
|
Assumed yield
|
|
4.39
|
%
|
|
4.09
|
%
|
|
4.54
|
%
|
|
4.23
|
%
|
|
4.16
|
%
|
|
4.61
|
%
|
|
4.53
|
%
|
|
4.48
|
%
|
|
4.54
|
%
|
|
3.75
|
%
|
|
|
Risk-free rate
|
|
4.65
|
%
|
|
3.49
|
%
|
|
2.19
|
%
|
|
2.17
|
%
|
|
1.86
|
%
|
|
0.78
|
%
|
|
0.82
|
%
|
|
1.63
|
%
|
|
1.50
|
%
|
|
1.23
|
%
|
|
|
Total value at grant date
|
|
$
|
285
|
|
|
$
|
255
|
|
|
$
|
223
|
|
|
$
|
288
|
|
|
$
|
298
|
|
|
$
|
257
|
|
|
$
|
278
|
|
|
$
|
110
|
|
|
$
|
125
|
|
|
$
|
151
|
|
|
$
|
2,270
|
|
Expensed in previous years
|
|
285
|
|
|
255
|
|
|
223
|
|
|
288
|
|
|
298
|
|
|
257
|
|
|
278
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,884
|
|
Expensed in 2014
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|
—
|
|
|
—
|
|
|
110
|
|
Expensed in 2015
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125
|
|
|
—
|
|
|
125
|
|
Expensed in 2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
151
|
|
|
151
|
|
Future expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Officers
|
|
|
|
|
|
|
|
|
|
Grant date
|
|
4/27/2007
|
|
5/13/2011
|
|
5/4/2012
|
|
5/10/2013
|
|
5/9/2014
|
|
5/8/2015
|
|
5/6/2016
|
|
Subtotals
|
|
|
|
|
|
Grand Totals
|
Total grant
|
|
135,000
|
|
|
162,500
|
|
|
242,500
|
|
|
202,500
|
|
|
170,000
|
|
|
190,000
|
|
|
194,000
|
|
|
1,296,500
|
|
|
|
|
|
|
1,621,500
|
|
Vested
|
|
67,500
|
|
|
118,750
|
|
|
107,500
|
|
|
131,875
|
|
|
85,000
|
|
|
47,500
|
|
|
—
|
|
|
558,125
|
|
|
|
|
|
|
883,125
|
|
Exercised
|
|
67,500
|
|
|
92,915
|
|
|
91,205
|
|
|
68,750
|
|
|
31,250
|
|
|
6,250
|
|
|
—
|
|
|
357,870
|
|
|
|
|
|
|
487,870
|
|
Forfeited
|
|
67,500
|
|
|
43,750
|
|
|
135,000
|
|
|
30,625
|
|
|
1,250
|
|
|
1,875
|
|
|
—
|
|
|
280,000
|
|
|
|
|
|
|
300,000
|
|
Exercisable at December 31, 2016
|
|
—
|
|
|
25,835
|
|
|
16,295
|
|
|
63,125
|
|
|
53,750
|
|
|
41,250
|
|
|
—
|
|
|
200,255
|
|
|
|
|
|
|
375,255
|
|
Remaining unexercised
|
|
—
|
|
|
25,835
|
|
|
16,295
|
|
|
103,125
|
|
|
137,500
|
|
|
181,875
|
|
|
194,000
|
|
|
658,630
|
|
|
|
|
|
|
833,630
|
|
Exercise price
|
|
$
|
54.17
|
|
|
$
|
41.82
|
|
|
$
|
39.29
|
|
|
$
|
44.42
|
|
|
$
|
47.03
|
|
|
$
|
51.07
|
|
|
$
|
57.74
|
|
|
|
|
|
|
|
|
|
Volatility
|
|
0.233
|
|
|
0.330
|
|
|
0.315
|
|
|
0.304
|
|
|
0.306
|
|
|
0.298
|
|
|
0.185
|
|
|
|
|
|
|
|
|
|
Expected life (years)
|
|
6.5
|
|
|
8.0
|
|
|
8.0
|
|
|
8.0
|
|
|
7.0
|
|
|
7.0
|
|
|
7.0
|
|
|
|
|
|
|
|
|
|
Assumed yield
|
|
4.13
|
%
|
|
4.81
|
%
|
|
5.28
|
%
|
|
5.12
|
%
|
|
4.89
|
%
|
|
4.94
|
%
|
|
3.80
|
%
|
|
|
|
|
|
|
|
|
Risk-free rate
|
|
4.61
|
%
|
|
2.75
|
%
|
|
1.49
|
%
|
|
1.49
|
%
|
|
2.17
|
%
|
|
1.89
|
%
|
|
1.55
|
%
|
|
|
|
|
|
|
|
|
Gross value at grant date
|
|
$
|
1,339
|
|
|
$
|
1,366
|
|
|
$
|
1,518
|
|
|
$
|
1,401
|
|
|
$
|
1,350
|
|
|
$
|
1,585
|
|
|
$
|
1,137
|
|
|
$
|
9,696
|
|
|
|
|
|
|
$
|
11,966
|
|
Estimated forfeitures
|
|
62
|
|
|
368
|
|
|
845
|
|
|
280
|
|
|
169
|
|
|
142
|
|
|
87
|
|
|
1,953
|
|
|
|
|
|
|
1,953
|
|
Expensed in previous years
|
|
1,277
|
|
|
692
|
|
|
262
|
|
|
209
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,440
|
|
|
|
|
|
|
4,324
|
|
Expensed in 2014
|
|
—
|
|
|
217
|
|
|
157
|
|
|
284
|
|
|
197
|
|
|
—
|
|
|
—
|
|
|
855
|
|
|
|
|
|
|
965
|
|
Expensed in 2015
|
|
—
|
|
|
89
|
|
|
157
|
|
|
269
|
|
|
295
|
|
|
241
|
|
|
—
|
|
|
1,051
|
|
|
|
|
|
|
1,176
|
|
Expensed in 2016
|
|
|
|
—
|
|
|
97
|
|
|
269
|
|
|
295
|
|
|
361
|
|
|
175
|
|
|
1,197
|
|
|
|
|
|
|
1,348
|
|
Future expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|
394
|
|
|
841
|
|
|
875
|
|
|
2,200
|
|
|
|
|
|
|
2,200
|
|
Weighted average term of remaining future expense
|
|
2.5
|
|
|
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
The table below summarizes the option activity for the years
2016
,
2015
, and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
Outstanding at January 1
|
860,274
|
|
|
$
|
46.58
|
|
|
748,208
|
|
|
$
|
44.79
|
|
|
753,625
|
|
|
$
|
42.55
|
|
Granted
|
226,500
|
|
|
57.74
|
|
|
225,000
|
|
|
51.07
|
|
|
200,000
|
|
|
47.03
|
|
Exercised
|
(246,894
|
)
|
|
45.59
|
|
|
(112,934
|
)
|
|
43.67
|
|
|
(167,917
|
)
|
|
37.71
|
|
Expired/Forfeited
|
(6,250
|
)
|
|
45.31
|
|
|
—
|
|
|
—
|
|
|
(37,500
|
)
|
|
43.56
|
|
Outstanding December 31
|
833,630
|
|
|
49.92
|
|
|
860,274
|
|
|
46.58
|
|
|
748,208
|
|
|
44.79
|
|
Exercisable at December 31
|
375,255
|
|
|
46.68
|
|
|
435,899
|
|
|
45.33
|
|
|
380,708
|
|
|
44.85
|
|
The intrinsic value of options exercised in
2016
,
2015
, and
2014
, was
$3.4 million
,
$1.5 million
and
$2.0 million
, respectively. The intrinsic value of options outstanding and exercisable at year end
2016
was
$13.9 million
and
$7.5 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 30, 2016, the final trading day of calendar
2016
, the closing price of
$66.61
per share was used for the calculation of aggregate intrinsic value of options outstanding and exercisable at that date. The weighted average remaining contractual life of the Company’s exercisable and outstanding options at
December 31, 2016
are
6.4
and
7.5
years, respectively.
11. 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 management’s estimate of borrowing rates and loan terms currently available to the Company for fixed rate financing, and assuming long term interest rates of approximately
4.25%
and
3.75%
, would be approximately
$851.3 million
and
$892.9 million
as of
December 31, 2016
and
2015
, respectively, compared to the principal balance of
$844.3 million
and
$832.4 million
at
December 31, 2016
and
2015
, respectively. A change in any of the significant inputs may lead to a change in the Company’s 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 Company’s swap for the indicated periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Increase (decrease) in fair value:
|
|
|
|
|
|
Recognized in earnings
|
$
|
(6
|
)
|
|
$
|
(10
|
)
|
|
$
|
(10
|
)
|
Recognized in other comprehensive income
|
678
|
|
|
124
|
|
|
(675
|
)
|
Total
|
$
|
672
|
|
|
$
|
114
|
|
|
$
|
(685
|
)
|
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
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
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 agreement terminates on
July 1, 2020
. As of
December 31, 2016
, the fair value of the interest-rate swap was approximately
$2.1 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.
12. COMMITMENTS AND CONTINGENCIES
Neither the Company nor the Current Portfolio Properties are subject to any material litigation, nor, to management’s 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.
13. DISTRIBUTIONS
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
$1.84
per share in
2016
and
$1.69
per share during
2015
and
$1.56
per share during
2014
, Series A preferred stock dividends of
$2.41
per depositary share in
2014
and Series C preferred stock dividends of
$1.72
per depositary share during each of
2016
,
2015
, and
2014
. Of the common stock dividends paid,
$1.75
per share,
$1.69
per share, and
$1.56
per share, represented ordinary dividend income in
2016
,
2015
, and
2014
, respectively, and
$0.09
per share represented return of capital to the shareholders in 2016. All of the preferred stock dividends paid were considered ordinary dividend income.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
The following summarizes distributions paid during the years ended
December 31, 2016
,
2015
, and
2014
, 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, except per share amounts)
|
Preferred
Stockholders
|
|
Common
Stockholders
|
|
Limited
Partnership
Unitholders
|
|
Common
Stock Shares
Issued
|
|
Discounted
Share Price
|
|
Limited Partnership Units Issued
|
|
Average Unit Price
|
Distributions during 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31
|
$
|
3,094
|
|
|
$
|
10,168
|
|
|
$
|
3,478
|
|
|
44,176
|
|
|
$
|
57.18
|
|
|
30,891
|
|
|
$
|
57.18
|
|
July 31
|
3,094
|
|
|
10,133
|
|
|
3,465
|
|
|
39,487
|
|
|
65.64
|
|
|
26,897
|
|
|
65.64
|
|
April 30
|
3,094
|
|
|
10,029
|
|
|
3,449
|
|
|
48,854
|
|
|
51.59
|
|
|
34,201
|
|
|
51.59
|
|
January 31
|
3,093
|
|
|
9,142
|
|
|
3,141
|
|
|
54,280
|
|
|
49.24
|
|
|
32,769
|
|
|
49.24
|
|
Total 2016
|
$
|
12,375
|
|
|
$
|
39,472
|
|
|
$
|
13,533
|
|
|
186,797
|
|
|
|
|
124,758
|
|
|
|
Distributions during 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31
|
$
|
3,094
|
|
|
$
|
9,106
|
|
|
$
|
3,129
|
|
|
47,313
|
|
|
$
|
55.73
|
|
|
28,936
|
|
|
$
|
55.73
|
|
July 31
|
3,094
|
|
|
9,081
|
|
|
3,115
|
|
|
56,003
|
|
|
50.30
|
|
|
32,041
|
|
|
50.30
|
|
April 30
|
3,094
|
|
|
9,055
|
|
|
3,104
|
|
|
54,921
|
|
|
50.21
|
|
|
25,264
|
|
|
50.21
|
|
January 31
|
3,093
|
|
|
8,403
|
|
|
2,880
|
|
|
42,975
|
|
|
56.74
|
|
|
20,796
|
|
|
56.74
|
|
Total 2015
|
$
|
12,375
|
|
|
$
|
35,645
|
|
|
$
|
12,228
|
|
|
201,212
|
|
|
|
|
107,037
|
|
|
|
Distributions during 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31
|
$
|
3,856
|
|
|
$
|
8,348
|
|
|
$
|
2,879
|
|
|
40,142
|
|
|
$
|
52.71
|
|
|
|
|
|
July 31
|
3,206
|
|
|
8,314
|
|
|
2,879
|
|
|
57,696
|
|
|
46.79
|
|
|
|
|
|
April 30
|
3,206
|
|
|
8,269
|
|
|
2,838
|
|
|
60,212
|
|
|
44.14
|
|
|
104,831
|
|
|
$
|
44.77
|
|
January 31
|
3,206
|
|
|
7,415
|
|
|
2,521
|
|
|
39,588
|
|
|
45.15
|
|
|
91,352
|
|
|
45.80
|
|
Total 2014
|
$
|
13,474
|
|
|
$
|
32,346
|
|
|
$
|
11,117
|
|
|
197,638
|
|
|
|
|
196,183
|
|
|
|
In December
2016
, the Board of Directors of the Company authorized a distribution of
$0.51
per common share payable in January 2017, to holders of record on
January 17, 2017
. As a result,
$11.0 million
was paid to common shareholders on
January 31, 2017
. Also,
$3.8 million
was paid to limited partnership unitholders on
January 31, 2017
(
$0.51
per Operating Partnership unit). The Board of Directors authorized preferred stock dividends of
$0.4297
per Series C depositary share to holders of record on
January 6, 2017
. As a result,
$3.1 million
was paid to preferred shareholders on
January 13, 2017
. These amounts are reflected as a reduction of stockholders’ equity in the case of common stock and preferred stock dividends and noncontrolling interests deductions in the case of limited partner distributions and are included in dividends and distributions payable in the accompanying consolidated financial statements.
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
|
|
14.
|
INTERIM RESULTS (Unaudited)
|
The following summary presents the results of operations of the Company for the quarterly periods of calendar years
2016
and
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts)
|
2016
|
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
Revenue
|
$
|
56,926
|
|
|
$
|
52,710
|
|
|
$
|
53,233
|
|
|
$
|
54,201
|
|
Operating income before loss on early extinguishment of debt, gain on casualty settlement, and noncontrolling interests
|
16,381
|
|
|
13,250
|
|
|
12,722
|
|
|
13,360
|
|
Gain on sales of properties
|
—
|
|
|
—
|
|
|
—
|
|
|
1,013
|
|
Net income attributable to Saul Centers, Inc.
|
12,948
|
|
|
10,627
|
|
|
10,239
|
|
|
11,465
|
|
Net income available to common stockholders
|
9,854
|
|
|
7,533
|
|
|
7,146
|
|
|
8,371
|
|
Net income available to common stockholders per diluted share
|
0.46
|
|
|
0.35
|
|
|
0.33
|
|
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts)
|
2015
|
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
Revenue
|
$
|
52,088
|
|
|
$
|
51,711
|
|
|
$
|
52,376
|
|
|
$
|
52,902
|
|
Operating income before loss on early extinguishment of debt, gain on casualty settlement, and noncontrolling interests
|
12,687
|
|
|
12,922
|
|
|
13,238
|
|
|
14,083
|
|
Gain on sales of properties
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
Net income attributable to Saul Centers, Inc.
|
10,207
|
|
|
10,396
|
|
|
10,615
|
|
|
11,250
|
|
Net income available to common stockholders
|
7,113
|
|
|
7,302
|
|
|
7,522
|
|
|
8,156
|
|
Net income available to common stockholders per diluted share
|
0.33
|
|
|
0.35
|
|
|
0.36
|
|
|
0.38
|
|
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
2016
presentation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements
|
(In thousands)
|
Shopping
|
|
Mixed-Use
|
|
Corporate
|
|
Consolidated
|
As of or for the year ended December 31, 2016
|
Centers
|
|
Properties
|
|
and Other
|
|
Totals
|
Real estate rental operations:
|
|
|
|
|
|
|
|
Revenue
|
$
|
160,179
|
|
|
$
|
56,840
|
|
|
$
|
51
|
|
|
$
|
217,070
|
|
Expenses
|
(34,931
|
)
|
|
(18,770
|
)
|
|
—
|
|
|
(53,701
|
)
|
Income from real estate
|
125,248
|
|
|
38,070
|
|
|
51
|
|
|
163,369
|
|
Interest expense and amortization of deferred debt costs
|
—
|
|
|
—
|
|
|
(45,683
|
)
|
|
(45,683
|
)
|
General and administrative
|
—
|
|
|
—
|
|
|
(17,496
|
)
|
|
(17,496
|
)
|
Subtotal
|
125,248
|
|
|
38,070
|
|
|
(63,128
|
)
|
|
100,190
|
|
Depreciation and amortization of deferred leasing costs
|
(29,964
|
)
|
|
(14,453
|
)
|
|
—
|
|
|
(44,417
|
)
|
Acquisition related costs
|
(60
|
)
|
|
—
|
|
|
—
|
|
|
(60
|
)
|
Change in fair value of derivatives
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
Gain on sale of property
|
—
|
|
|
1,013
|
|
|
—
|
|
|
1,013
|
|
Net income (loss)
|
$
|
95,224
|
|
|
$
|
24,630
|
|
|
$
|
(63,134
|
)
|
|
$
|
56,720
|
|
Capital investment
|
$
|
64,044
|
|
|
$
|
27,001
|
|
|
$
|
—
|
|
|
$
|
91,045
|
|
Total assets
|
$
|
976,545
|
|
|
$
|
358,419
|
|
|
$
|
8,061
|
|
|
$
|
1,343,025
|
|
|
|
|
|
|
|
|
|
As of or for the year ended December 31, 2015
|
|
|
|
|
|
|
|
Real estate rental operations:
|
|
|
|
|
|
|
|
Revenue
|
$
|
156,110
|
|
|
$
|
52,916
|
|
|
$
|
51
|
|
|
$
|
209,077
|
|
Expenses
|
(33,877
|
)
|
|
(17,266
|
)
|
|
—
|
|
|
(51,143
|
)
|
Income from real estate
|
122,233
|
|
|
35,650
|
|
|
51
|
|
|
157,934
|
|
Interest expense and amortization of deferred debt costs
|
—
|
|
|
—
|
|
|
(45,165
|
)
|
|
(45,165
|
)
|
General and administrative
|
—
|
|
|
—
|
|
|
(16,353
|
)
|
|
(16,353
|
)
|
Subtotal
|
122,233
|
|
|
35,650
|
|
|
(61,467
|
)
|
|
96,416
|
|
Depreciation and amortization of deferred leasing costs
|
(30,171
|
)
|
|
(13,099
|
)
|
|
—
|
|
|
(43,270
|
)
|
Acquisition related costs
|
(84
|
)
|
|
—
|
|
|
—
|
|
|
(84
|
)
|
Predevelopment expenses
|
(57
|
)
|
|
(75
|
)
|
|
—
|
|
|
(132
|
)
|
Change in fair value of derivatives
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
Gain on sale of property
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
Net income (loss)
|
$
|
91,932
|
|
|
$
|
22,476
|
|
|
$
|
(61,477
|
)
|
|
$
|
52,931
|
|
Capital investment
|
$
|
17,159
|
|
|
$
|
52,460
|
|
|
$
|
—
|
|
|
$
|
69,619
|
|
Total assets
|
$
|
931,256
|
|
|
$
|
354,254
|
|
|
$
|
9,898
|
|
|
$
|
1,295,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAUL CENTERS, INC.
Notes to Consolidated Financial Statements (continued)
|
(In thousands)
|
Shopping
|
|
Mixed-Use
|
|
Corporate
|
|
Consolidated
|
As of or for the year ended December 31, 2014
|
Centers
|
|
Properties
|
|
and Other
|
|
Totals
|
Real estate rental operations:
|
|
|
|
|
|
|
|
Revenue
|
$
|
154,385
|
|
|
$
|
52,632
|
|
|
$
|
75
|
|
|
$
|
207,092
|
|
Expenses
|
(33,781
|
)
|
|
(15,732
|
)
|
|
—
|
|
|
(49,513
|
)
|
Income from real estate
|
120,604
|
|
|
36,900
|
|
|
75
|
|
|
157,579
|
|
Interest expense and amortization of deferred debt costs
|
—
|
|
|
—
|
|
|
(46,034
|
)
|
|
(46,034
|
)
|
General and administrative
|
—
|
|
|
—
|
|
|
(16,961
|
)
|
|
(16,961
|
)
|
Subtotal
|
120,604
|
|
|
36,900
|
|
|
(62,920
|
)
|
|
94,584
|
|
Depreciation and amortization of deferred leasing costs
|
(28,082
|
)
|
|
(13,121
|
)
|
|
—
|
|
|
(41,203
|
)
|
Acquisition related costs
|
(949
|
)
|
|
—
|
|
|
—
|
|
|
(949
|
)
|
Predevelopment expenses
|
—
|
|
|
(503
|
)
|
|
—
|
|
|
(503
|
)
|
Change in fair value of derivatives
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
Gain on sale of property
|
6,069
|
|
|
—
|
|
|
—
|
|
|
6,069
|
|
Net income (loss)
|
$
|
97,642
|
|
|
$
|
23,276
|
|
|
$
|
(62,930
|
)
|
|
$
|
57,988
|
|
Capital investment
|
$
|
66,508
|
|
|
$
|
23,760
|
|
|
$
|
—
|
|
|
$
|
90,268
|
|
Total assets
|
$
|
939,267
|
|
|
$
|
305,579
|
|
|
$
|
12,267
|
|
|
$
|
1,257,113
|
|
|
|
|
|
|
|
|
|
The Company has reviewed operating activities for the period subsequent to
December 31, 2016
and prior to the date that financial settlements are issued,
March 7, 2017
, and determined the following subsequent event is required to be disclosed.
In January 2017, the Company purchased for
$76.3 million
, including acquisition costs, Burtonsville Town Square located in Burtonsville, Montgomery County, Maryland.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAUL CENTERS, INC.
Real Estate and Accumulated Depreciation
December 31, 2016
(Dollars in Thousands)
|
|
|
|
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
Capitalized
|
|
Basis at Close of Period
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
Initial
Basis
|
|
Subsequent
to
Acquisition
|
|
Land
|
|
Buildings
and
Improvements
|
|
Leasehold
Interests
|
|
Total
|
|
Accumulated
Depreciation
|
|
Book
Value
|
|
Related
Debt
|
|
Date of
Construction
|
|
Date
Acquired
|
|
Improvements
Depreciable
Lives in Years
|
Shopping Centers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashburn Village, Ashburn, VA
|
$
|
11,431
|
|
|
$
|
20,159
|
|
|
$
|
6,764
|
|
|
$
|
24,826
|
|
|
$
|
—
|
|
|
$
|
31,590
|
|
|
$
|
12,247
|
|
|
$
|
19,343
|
|
|
$
|
28,822
|
|
|
1994 & 2000-6
|
|
3/94
|
|
40
|
Ashland Square Phase I, Dumfries, VA
|
1,178
|
|
|
7,503
|
|
|
1,178
|
|
|
7,503
|
|
|
—
|
|
|
8,681
|
|
|
1,440
|
|
|
7,241
|
|
|
—
|
|
|
2007, 2013
|
|
12/04
|
|
20 & 50
|
Beacon Center, Alexandria, VA
|
24,161
|
|
|
18,402
|
|
|
22,668
|
|
|
19,895
|
|
|
—
|
|
|
42,563
|
|
|
13,721
|
|
|
28,842
|
|
|
41,753
|
|
|
1960 & 1974
|
|
1/72, 11/16
|
|
40 & 50
|
BJ’s Wholesale Club, Alexandria, VA
|
22,623
|
|
|
—
|
|
|
22,623
|
|
|
—
|
|
|
—
|
|
|
22,623
|
|
|
—
|
|
|
22,623
|
|
|
11,129
|
|
|
|
|
3/08
|
|
—
|
Boca Valley Plaza, Boca Raton, FL
|
16,720
|
|
|
1,616
|
|
|
5,735
|
|
|
12,601
|
|
|
—
|
|
|
18,336
|
|
|
4,279
|
|
|
14,057
|
|
|
10,277
|
|
|
|
|
2/04
|
|
40
|
Boulevard, Fairfax, VA
|
4,883
|
|
|
4,461
|
|
|
3,687
|
|
|
5,657
|
|
|
—
|
|
|
9,344
|
|
|
2,594
|
|
|
6,750
|
|
|
17,207
|
|
|
1969, 1999 & 2009
|
|
4/94
|
|
40
|
Briggs Chaney MarketPlace, Silver Spring, MD
|
27,037
|
|
|
3,806
|
|
|
9,789
|
|
|
21,054
|
|
|
—
|
|
|
30,843
|
|
|
7,249
|
|
|
23,594
|
|
|
14,325
|
|
|
|
|
4/04
|
|
40
|
Broadlands Village, Ashburn, VA
|
5,316
|
|
|
27,392
|
|
|
5,300
|
|
|
27,408
|
|
|
—
|
|
|
32,708
|
|
|
9,954
|
|
|
22,754
|
|
|
17,050
|
|
|
2003, 2004 & 2006
|
|
3/02
|
|
40 & 50
|
Countryside Marketplace, Sterling, VA
|
28,912
|
|
|
3,712
|
|
|
7,666
|
|
|
24,958
|
|
|
—
|
|
|
32,624
|
|
|
8,012
|
|
|
24,612
|
|
|
14,335
|
|
|
|
|
2/04
|
|
40
|
Cranberry Square, Westminster, MD
|
31,578
|
|
|
635
|
|
|
6,700
|
|
|
25,513
|
|
|
—
|
|
|
32,213
|
|
|
3,408
|
|
|
28,805
|
|
|
17,630
|
|
|
|
|
9/11
|
|
40
|
Cruse MarketPlace, Cumming, GA
|
12,226
|
|
|
369
|
|
|
3,901
|
|
|
8,694
|
|
|
—
|
|
|
12,595
|
|
|
2,793
|
|
|
9,802
|
|
|
—
|
|
|
|
|
3/04
|
|
40
|
Flagship Center, Rockville, MD
|
160
|
|
|
9
|
|
|
169
|
|
|
—
|
|
|
—
|
|
|
169
|
|
|
—
|
|
|
169
|
|
|
—
|
|
|
1972
|
|
1/72
|
|
—
|
French Market, Oklahoma City, OK
|
5,781
|
|
|
13,790
|
|
|
1,118
|
|
|
18,453
|
|
|
—
|
|
|
19,571
|
|
|
10,629
|
|
|
8,942
|
|
|
—
|
|
|
1972 & 1998
|
|
3/74
|
|
50
|
Germantown, Germantown, MD
|
2,034
|
|
|
567
|
|
|
2,034
|
|
|
567
|
|
|
—
|
|
|
2,601
|
|
|
241
|
|
|
2,360
|
|
|
—
|
|
|
1990
|
|
8/93
|
|
40
|
The Glen, Woodbridge, VA
|
12,918
|
|
|
7,767
|
|
|
5,300
|
|
|
15,385
|
|
|
—
|
|
|
20,685
|
|
|
8,498
|
|
|
12,187
|
|
|
8,172
|
|
|
1993 & 2005
|
|
6/94
|
|
40
|
Great Eastern, District Heights, MD
|
4,993
|
|
|
10,678
|
|
|
3,785
|
|
|
11,886
|
|
|
—
|
|
|
15,671
|
|
|
8,293
|
|
|
7,378
|
|
|
—
|
|
|
1958 & 1960
|
|
1/72
|
|
40
|
Great Falls Center, Great Falls, VA
|
41,750
|
|
|
3,113
|
|
|
14,766
|
|
|
30,097
|
|
|
—
|
|
|
44,863
|
|
|
6,802
|
|
|
38,061
|
|
|
13,401
|
|
|
|
|
3/08
|
|
40
|
Hampshire Langley, Takoma, MD
|
3,159
|
|
|
3,394
|
|
|
1,856
|
|
|
4,697
|
|
|
—
|
|
|
6,553
|
|
|
3,604
|
|
|
2,949
|
|
|
16,352
|
|
|
1960
|
|
1/72
|
|
40
|
Hunt Club Corners, Apopka, FL
|
12,584
|
|
|
3,831
|
|
|
4,822
|
|
|
11,593
|
|
|
—
|
|
|
16,415
|
|
|
3,343
|
|
|
13,072
|
|
|
5,809
|
|
|
|
|
6/06, 12/12
|
|
40
|
Jamestown Place, Altamonte Springs, FL
|
14,055
|
|
|
1,174
|
|
|
4,455
|
|
|
10,774
|
|
|
—
|
|
|
15,229
|
|
|
3,153
|
|
|
12,076
|
|
|
7,685
|
|
|
|
|
11/05
|
|
40
|
Kentlands Square I, Gaithersburg, MD
|
14,379
|
|
|
328
|
|
|
5,006
|
|
|
9,701
|
|
|
—
|
|
|
14,707
|
|
|
3,460
|
|
|
11,247
|
|
|
6,813
|
|
|
2002
|
|
9/02
|
|
40
|
Kentlands Square II, Gaithersburg, MD
|
76,723
|
|
|
1,327
|
|
|
22,800
|
|
|
55,250
|
|
|
—
|
|
|
78,050
|
|
|
7,503
|
|
|
70,547
|
|
|
37,701
|
|
|
|
|
9/11, 9/13
|
|
40
|
Kentlands Place, Gaithersburg, MD
|
1,425
|
|
|
7,220
|
|
|
1,425
|
|
|
7,220
|
|
|
—
|
|
|
8,645
|
|
|
3,446
|
|
|
5,199
|
|
|
—
|
|
|
2005
|
|
1/04
|
|
50
|
Lansdowne Town Center, Leesburg, VA
|
6,545
|
|
|
36,813
|
|
|
6,546
|
|
|
36,812
|
|
|
—
|
|
|
43,358
|
|
|
12,546
|
|
|
30,812
|
|
|
33,571
|
|
|
2006
|
|
11/02
|
|
50
|
Leesburg Pike Plaza, Baileys Crossroads, VA
|
2,418
|
|
|
6,243
|
|
|
1,132
|
|
|
7,529
|
|
|
—
|
|
|
8,661
|
|
|
5,815
|
|
|
2,846
|
|
|
15,917
|
|
|
1965
|
|
2/66
|
|
40
|
Lumberton Plaza, Lumberton, NJ
|
4,400
|
|
|
11,170
|
|
|
950
|
|
|
14,620
|
|
|
—
|
|
|
15,570
|
|
|
12,431
|
|
|
3,139
|
|
|
—
|
|
|
1975
|
|
12/75
|
|
40
|
Metro Pike Center, Rockville, MD
|
33,123
|
|
|
3,760
|
|
|
26,064
|
|
|
10,819
|
|
|
—
|
|
|
36,883
|
|
|
1,172
|
|
|
35,711
|
|
|
14,482
|
|
|
|
|
12/10
|
|
40
|
Shops at Monocacy, Frederick, MD
|
9,541
|
|
|
13,926
|
|
|
9,260
|
|
|
14,207
|
|
|
—
|
|
|
23,467
|
|
|
5,101
|
|
|
18,366
|
|
|
12,725
|
|
|
2004
|
|
11/03
|
|
50
|
Northrock, Warrenton, VA
|
12,686
|
|
|
15,217
|
|
|
12,686
|
|
|
15,217
|
|
|
—
|
|
|
27,903
|
|
|
3,343
|
|
|
24,560
|
|
|
15,357
|
|
|
2009
|
|
01/08
|
|
50
|
Olde Forte Village, Ft. Washington, MD
|
15,933
|
|
|
6,575
|
|
|
5,409
|
|
|
17,099
|
|
|
—
|
|
|
22,508
|
|
|
6,639
|
|
|
15,869
|
|
|
10,372
|
|
|
2004
|
|
07/03
|
|
40
|
Olney, Olney, MD
|
1,884
|
|
|
1,792
|
|
|
—
|
|
|
3,676
|
|
|
—
|
|
|
3,676
|
|
|
3,259
|
|
|
417
|
|
|
11,446
|
|
|
1972
|
|
11/75
|
|
40
|
Orchard Park, Dunwoody, GA
|
19,377
|
|
|
950
|
|
|
7,751
|
|
|
12,576
|
|
|
—
|
|
|
20,327
|
|
|
3,064
|
|
|
17,263
|
|
|
10,253
|
|
|
|
|
7/07
|
|
40
|
Palm Springs Center, Altamonte Springs, FL
|
18,365
|
|
|
1,393
|
|
|
5,739
|
|
|
14,019
|
|
|
—
|
|
|
19,758
|
|
|
4,128
|
|
|
15,630
|
|
|
8,697
|
|
|
|
|
3/05
|
|
40
|
Ravenwood, Baltimore, MD
|
1,245
|
|
|
4,175
|
|
|
703
|
|
|
4,717
|
|
|
—
|
|
|
5,420
|
|
|
2,922
|
|
|
2,498
|
|
|
14,961
|
|
|
1959 & 2006
|
|
1/72
|
|
40
|
11503 Rockville Pike/5541 Nicholson Lane, Rockville, MD
|
26,561
|
|
|
—
|
|
|
22,113
|
|
|
4,448
|
|
|
—
|
|
|
26,561
|
|
|
695
|
|
|
25,866
|
|
|
—
|
|
|
|
|
10/10
12/12
|
|
40
|
1500/1580/1582/1584 Rockville Pike, Rockville, MD
|
51,149
|
|
|
1,093
|
|
|
43,863
|
|
|
8,379
|
|
|
—
|
|
|
52,242
|
|
|
4,605
|
|
|
47,637
|
|
|
—
|
|
|
|
|
12/12, 1/14, 4/14, 12/14
|
|
5, 10, 5, 4
|
Seabreeze Plaza, Palm Harbor, FL
|
24,526
|
|
|
1,539
|
|
|
8,665
|
|
|
17,400
|
|
|
—
|
|
|
26,065
|
|
|
5,079
|
|
|
20,986
|
|
|
16,543
|
|
|
|
|
11/05
|
|
40
|
Market Place at Sea Colony, Bethany Beach, DE
|
2,920
|
|
|
170
|
|
|
1,147
|
|
|
1,943
|
|
|
—
|
|
|
3,090
|
|
|
429
|
|
|
2,661
|
|
|
—
|
|
|
|
|
3/08
|
|
40
|
Seven Corners, Falls Church, VA
|
4,848
|
|
|
44,062
|
|
|
4,913
|
|
|
43,997
|
|
|
—
|
|
|
48,910
|
|
|
27,710
|
|
|
21,200
|
|
|
66,210
|
|
|
1956 & 1997
|
|
7/73
|
|
40
|
Severna Park Marketplace, Severna Park, MD
|
63,254
|
|
|
92
|
|
|
12,700
|
|
|
50,646
|
|
|
—
|
|
|
63,346
|
|
|
6,651
|
|
|
56,695
|
|
|
33,097
|
|
|
|
|
9/11
|
|
40
|
Shops at Fairfax, Fairfax, VA
|
2,708
|
|
|
9,923
|
|
|
992
|
|
|
11,639
|
|
|
—
|
|
|
12,631
|
|
|
7,627
|
|
|
5,004
|
|
|
11,472
|
|
|
1975 & 1999
|
|
6/75
|
|
50
|
Smallwood Village Center, Waldorf, MD
|
17,819
|
|
|
7,662
|
|
|
6,402
|
|
|
19,079
|
|
|
—
|
|
|
25,481
|
|
|
6,492
|
|
|
18,989
|
|
|
—
|
|
|
|
|
1/06
|
|
40
|
Southdale, Glen Burnie, MD
|
18,895
|
|
|
22,684
|
|
|
15,245
|
|
|
26,334
|
|
|
—
|
|
|
41,579
|
|
|
20,763
|
|
|
20,816
|
|
|
—
|
|
|
1962 & 1986
|
|
1/72
|
|
40
|
Southside Plaza, Richmond, VA
|
6,728
|
|
|
10,647
|
|
|
1,878
|
|
|
15,497
|
|
|
—
|
|
|
17,375
|
|
|
11,910
|
|
|
5,465
|
|
|
—
|
|
|
1958
|
|
1/72
|
|
40
|
South Dekalb Plaza, Atlanta, GA
|
2,474
|
|
|
4,186
|
|
|
703
|
|
|
5,957
|
|
|
—
|
|
|
6,660
|
|
|
4,658
|
|
|
2,002
|
|
|
—
|
|
|
1970
|
|
2/76
|
|
40
|
Thruway, Winston-Salem, NC
|
7,848
|
|
|
23,925
|
|
|
7,692
|
|
|
24,081
|
|
|
—
|
|
|
31,773
|
|
|
15,673
|
|
|
16,100
|
|
|
39,213
|
|
|
1955 & 1965
|
|
5/72
|
|
40
|
Village Center, Centreville, VA
|
16,502
|
|
|
2,354
|
|
|
7,851
|
|
|
11,005
|
|
|
—
|
|
|
18,856
|
|
|
6,346
|
|
|
12,510
|
|
|
13,832
|
|
|
1990
|
|
8/93
|
|
40
|
Westview Village, Frederick, MD
|
6,047
|
|
|
24,230
|
|
|
6,047
|
|
|
24,230
|
|
|
—
|
|
|
30,277
|
|
|
6,422
|
|
|
23,855
|
|
|
—
|
|
|
2009
|
|
11/07, 02/15
|
|
50
|
White Oak, Silver Spring, MD
|
6,277
|
|
|
5,357
|
|
|
4,649
|
|
|
6,985
|
|
|
—
|
|
|
11,634
|
|
|
5,906
|
|
|
5,728
|
|
|
24,504
|
|
|
1958 & 1967
|
|
1/72
|
|
40
|
Other Buildings / Improvements
|
|
|
211
|
|
|
|
|
211
|
|
|
|
|
211
|
|
|
103
|
|
|
108
|
|
|
—
|
|
|
|
|
|
|
|
Total Shopping Centers
|
760,099
|
|
|
401,402
|
|
|
384,647
|
|
|
776,854
|
|
|
—
|
|
|
1,161,501
|
|
|
316,158
|
|
|
845,343
|
|
|
621,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mixed-Use Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Avenel Business Park, Gaithersburg, MD
|
21,459
|
|
|
30,504
|
|
|
3,756
|
|
|
48,207
|
|
|
—
|
|
|
51,963
|
|
|
35,261
|
|
|
16,702
|
|
|
28,945
|
|
|
1981-2000
|
|
12/84
|
|
35 & 40
|
Clarendon Center, Arlington, VA (1)
|
12,753
|
|
|
185,436
|
|
|
16,287
|
|
|
181,902
|
|
|
—
|
|
|
198,189
|
|
|
32,314
|
|
|
165,875
|
|
|
109,144
|
|
|
2010
|
|
7/73, 1/96 & 4/02
|
|
50
|
Park Van Ness, Washington, DC
|
2,242
|
|
286
|
|
90,676
|
|
|
2,242
|
|
|
90,676
|
|
|
—
|
|
|
92,918
|
|
|
1,831
|
|
|
91,087
|
|
|
70,144
|
|
|
2016
|
|
7/73 & 2/11
|
|
50
|
601 Pennsylvania Ave., Washington, DC
|
5,479
|
|
|
66,158
|
|
|
5,667
|
|
|
65,970
|
|
|
—
|
|
|
71,637
|
|
|
49,856
|
|
|
21,781
|
|
|
—
|
|
|
1986
|
|
7/73
|
|
35
|
Washington Square, Alexandria, VA
|
2,034
|
|
|
54,945
|
|
|
544
|
|
|
56,435
|
|
|
—
|
|
|
56,979
|
|
|
22,859
|
|
|
34,120
|
|
|
29,428
|
|
|
2000
|
|
7/73
|
|
50
|
Total Mixed-Use Properties
|
43,967
|
|
|
427,719
|
|
|
28,496
|
|
|
443,190
|
|
|
—
|
|
|
471,686
|
|
|
142,121
|
|
|
329,565
|
|
|
237,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashland Square Phase II, Manassas, VA
|
5,292
|
|
|
1,813
|
|
|
7,029
|
|
|
76
|
|
|
—
|
|
|
7,105
|
|
|
—
|
|
|
7,105
|
|
|
—
|
|
|
|
|
12/04
|
|
|
New Market, New Market, MD
|
2,088
|
|
|
286
|
|
|
2,374
|
|
|
—
|
|
|
—
|
|
|
2,374
|
|
|
—
|
|
|
2,374
|
|
|
—
|
|
|
|
|
9/05
|
|
|
North Glebe Road, Arlington, VA
|
52,067
|
|
|
6,080
|
|
|
—
|
|
|
58,147
|
|
|
—
|
|
|
58,147
|
|
|
—
|
|
|
58,147
|
|
|
—
|
|
|
—
|
|
8/14-8/16
|
|
|
Total Development Land
|
59,447
|
|
|
8,179
|
|
|
9,403
|
|
|
58,223
|
|
|
—
|
|
|
67,626
|
|
|
—
|
|
|
67,626
|
|
|
—
|
|
|
|
|
|
|
|
Total
|
$
|
863,513
|
|
|
$
|
837,300
|
|
|
$
|
422,546
|
|
|
$
|
1,278,267
|
|
|
$
|
—
|
|
|
$
|
1,700,813
|
|
|
$
|
458,279
|
|
|
$
|
1,242,534
|
|
|
$
|
858,774
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes the North and South Blocks and Residential
|
Schedule III
SAUL CENTERS, INC.
Real Estate and Accumulated Depreciation
December 31, 2015
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
$1.3 billion
at
December 31, 2016
. 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, 2016
are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
2016
|
|
2015
|
|
2014
|
Total real estate investments:
|
|
|
|
|
|
Balance, beginning of year
|
$
|
1,622,710
|
|
|
$
|
1,560,159
|
|
|
$
|
1,459,439
|
|
Acquisitions
|
48,123
|
|
|
4,894
|
|
|
70,921
|
|
Improvements
|
35,826
|
|
|
70,067
|
|
|
34,417
|
|
Retirements
|
(5,846
|
)
|
|
(1,981
|
)
|
|
(4,618
|
)
|
Transfers to assets held for sale
|
—
|
|
|
(10,429
|
)
|
|
—
|
|
Balance, end of year
|
$
|
1,700,813
|
|
|
$
|
1,622,710
|
|
|
$
|
1,560,159
|
|
Total accumulated depreciation:
|
|
|
|
|
|
Balance, beginning of year
|
$
|
425,370
|
|
|
$
|
396,617
|
|
|
$
|
364,663
|
|
Depreciation expense
|
38,755
|
|
|
37,698
|
|
|
35,933
|
|
Retirements
|
(5,846
|
)
|
|
(1,911
|
)
|
|
(3,979
|
)
|
Transfers to assets held for sale
|
—
|
|
|
$
|
(7,034
|
)
|
|
—
|
|
Balance, end of year
|
$
|
458,279
|
|
|
$
|
425,370
|
|
|
$
|
396,617
|
|