Saul Centers(BFS) - 2024 Q4 - Annual Report

Portfolio and Development - As of December 31, 2024, the Company’s portfolio included 50 shopping center properties, eight mixed-use properties, and four non-operating development properties[23]. - The Company has a development pipeline for up to an additional 3,200 apartment units and 870,000 square feet of retail and office space, all located near WMATA red line Metro stations in Montgomery County, Maryland[29][33]. - The Company is developing Twinbrook Quarter Phase I, which includes 452 apartment units and an 80,000 square foot Wegmans supermarket, with a total expected project cost of approximately $331.5 million, of which$ 318.0 million has been invested to date[57]. - The Company is also developing Hampden House, expected to include up to 366 apartment units and 10,100 square feet of retail space, with a total project cost of approximately $246.4 million, of which$ 200.5 million has been invested to date[58]. - The Company plans to selectively add free-standing pad site buildings within its Shopping Center portfolio and has two executed leases with four more under negotiation for a total of six additional pad sites[34]. Financial Management and Debt - The Company intends to maintain a total debt to total asset value ratio of 50% or less, with current debt levels believed to be below this threshold as of December 31, 2024[42]. - The Company intends to finance future acquisitions and developments through various sources, including undistributed operating cash flow and secured or unsecured borrowings[44]. - As of December 31, 2024, the company had approximately $1.55 billion of debt outstanding, with$ 1.37 billion being fixed-rate debt and $187 million being variable-rate debt[98]. - The Company has a$ 145.0 million construction-to-permanent loan for the Twinbrook Quarter project, with an outstanding balance of $127.3 million as of December 31, 2024[57]. - The company has a general policy of limiting borrowings to 50% of asset value, but there is no formal limitation on the amount of indebtedness that may be incurred[99]. Operational Strategy and Management - Management aims to optimize the mix of uses in Shopping Centers to improve foot traffic and intends to renegotiate leases and seek new tenants to increase occupancy and cash flow[30]. - Management believes there are attractive supply/demand characteristics in several sub-markets where the Company operates, positioning it to take advantage of future investment opportunities[35]. - The Company shares certain ancillary functions with the Saul Organization to achieve lower costs and greater economies of scale[25]. - The Company focuses on diversification through development of transit-oriented, residential mixed-use projects and expansion of grocery-anchored shopping centers in the Washington, DC metropolitan area[21][29]. - Management will selectively replace underperforming tenants with those that generate stronger traffic, including grocery store anchors[34]. Market and Economic Risks - The Company faces risks related to tenant bankruptcies, which could adversely affect revenue and occupancy levels[65]. - Over 85% of the Company's property operating income is generated from properties in the metropolitan Washington, DC/Baltimore area, making it susceptible to economic changes in that region[74]. - The company faces significant competition in the retail sector from online merchants and other shopping centers, which could adversely affect leasing and rental rates[75]. - The shift towards telecommuting and flexible work arrangements may reduce demand for office space, impacting occupancy and rental rates[76]. - Financial and economic conditions, including high inflation and unemployment, may adversely impact the company's business and tenants, leading to potential defaults[123]. Employee and Corporate Governance - The Company has approximately 69 full-time equivalent corporate employees and 72 full-time employees at its properties as of December 31, 2024[51]. - The Company is committed to equal employment opportunities and provides competitive employee compensation, including insurance benefits and retirement savings plans[52]. - The Company supports employee education through reimbursement for undergraduate and graduate degrees, as well as costs related to seminars and workshops[53]. - As of December 31, 2024, Mr. B. F. Saul II controlled 45.2% of the company's common stock, which may lead to conflicts of interest[87]. - Consent from limited partners is required for significant actions, such as the sale of substantially all assets, which could limit the company's operational flexibility[97]. Environmental and Regulatory Considerations - The Company is subject to various laws and regulations relating to environmental and pollution controls, but does not expect a materially adverse effect on property operations[54]. - The company faces potential adverse effects from environmental liabilities that could impact property values and operational costs[110]. - Climate change and natural disasters could increase operational costs and negatively impact tenant demand, affecting cash flow and operating results[131]. Financial Performance and Risks - The largest shopping center anchor tenant, Giant Food, accounted for 4.8% of the Company's total revenue for the year ended December 31, 2024[67]. - The company incurred$ 11.4 million in charges related to shared services with the Saul Organization for the year ended December 31, 2024[92]. - The company's rent expense for the year ended December 31, 2024, was $847,600[94]. - The ability to pay dividends at historical rates is not guaranteed and depends on various factors including financial condition and REIT qualification[132]. - The company may face challenges in selling properties quickly due to the illiquid nature of real estate investments, impacting financial flexibility[84].