Saul Centers(BFS) - 2025 Q2 - Quarterly Results

Earnings Release and Operating Results Second Quarter 2025 Financial Highlights For the second quarter of 2025, Saul Centers reported a 5.8% increase in total revenue year-over-year, though net income and Funds from Operations (FFO) declined significantly due to initial operating costs of the new Twinbrook Quarter Phase I project being expensed rather than capitalized, and lower lease termination fees impacting same property results Q2 2025 vs Q2 2024 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $70.8 million | $66.9 million | +5.8% | | Net Income | $14.2 million | $19.5 million | -27.2% | | Net Income per Share (Diluted) | $0.33 | $0.48 | -31.3% | | FFO per Share (Diluted) | $0.73 | $0.83 | -12.0% | - The initial operations of Twinbrook Quarter Phase I adversely impacted Q2 2025 net income by $5.4 million, of which $3.5 million was a reduction in capitalized interest, negatively impacting diluted EPS by $0.12[4] Q2 2025 Same Property Performance vs Q2 2024 | Metric | Q2 2025 vs Q2 2024 | Primary Driver | | :--- | :--- | :--- | | Same Property Revenue | -2.2% (-$1.5 million) | $2.0 million lower lease termination fees | | Same Property NOI | -4.3% (-$2.2 million) | $2.1 million lower lease termination fees | Year-to-Date 2025 Financial Highlights For the six months ended June 30, 2025, total revenue grew compared to the prior year, but net income and FFO decreased due to an $11.6 million adverse impact from Twinbrook Quarter Phase I's initial operations, and same property net operating income declined primarily from lower lease termination fees Six Months 2025 vs 2024 Key Financial Metrics | Metric | Six Months 2025 | Six Months 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $142.7 million | $133.6 million | +6.8% | | Net Income | $27.0 million | $37.8 million | -28.6% | | Net Income per Share (Diluted) | $0.62 | $0.93 | -33.3% | | FFO per Share (Diluted) | $1.44 | $1.63 | -11.7% | - The initial operations of Twinbrook Quarter Phase I adversely impacted net income for the six-month period by $11.6 million, including a $7.1 million reduction in capitalized interest, resulting in a negative impact of $0.26 per diluted share[9] Six Months 2025 Same Property Performance vs 2024 | Metric | Six Months 2025 vs 2024 | Primary Driver | | :--- | :--- | :--- | | Same Property Revenue | +0.2% (+$0.3 million) | N/A | | Same Property NOI | -2.4% (-$2.4 million) | $2.3 million lower lease termination fees | Portfolio and Operations Update The company is actively leasing its new Twinbrook Quarter Phase I development, with anchor tenant Wegmans commencing operations on June 25, 2025, and residential occupancy reaching 86.1% by early August, while overall portfolio lease rates saw a slight year-over-year decline in both commercial and residential segments - At the new Twinbrook Quarter Phase I development, Wegmans began operations on June 25, 2025, and as of August 4, 2025, 389 of the 452 residential units (86.1%) were leased and occupied[3] Portfolio Lease Percentage (as of June 30) | Portfolio | 2025 (%) | 2024 (%) | | :--- | :--- | :--- | | Commercial | 94.0% | 95.8% | | Residential (ex. Twinbrook) | 99.0% | 99.4% | Company Overview Saul Centers, Inc. is a self-managed equity REIT based in Bethesda, Maryland, with a portfolio of 62 properties, primarily community shopping centers and mixed-use assets totaling approximately 10.2 million square feet of leasable area, heavily concentrated in the metropolitan Washington, D.C./Baltimore area, which generates over 85% of its property net operating income - The company operates and manages a real estate portfolio of 62 properties, including 50 community and neighborhood shopping centers and eight mixed-use properties[12] - Over 85% of the company's property net operating income is generated by properties located in the metropolitan Washington, D.C./Baltimore area[12] Financial Statements Consolidated Balance Sheets As of June 30, 2025, total assets increased slightly to $2.14 billion from $2.13 billion at year-end 2024, driven by construction in progress, while total liabilities grew to $1.65 billion from $1.63 billion due to increased borrowings, resulting in a decrease in total equity from $501.1 million to $488.3 million Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total real estate investments, net | $2,047,907 | $2,024,305 | | Total assets | $2,139,684 | $2,126,404 | | Total liabilities | $1,651,410 | $1,625,280 | | Total equity | $488,274 | $501,124 | Consolidated Statements of Operations The statements of operations detail a decline in profitability for both the three and six-month periods ending June 30, 2025, as increased total revenues were more than offset by a significant rise in total expenses, particularly interest expense and depreciation, leading to lower net income compared to prior-year periods Statement of Operations Summary (in thousands) | | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $70,834 | $66,943 | $142,690 | $133,635 | | Total expenses | $56,773 | $47,634 | $115,781 | $96,063 | | Net income | $14,181 | $19,490 | $27,029 | $37,753 | | Net income available to common stockholders | $7,921 | $11,649 | $14,922 | $22,481 | | Basic and diluted EPS | $0.33 | $0.48 | $0.62 | $0.93 | Non-GAAP Reconciliations Reconciliation of Net Income to FFO This section reconciles GAAP Net Income to the non-GAAP measure of Funds from Operations (FFO), showing that after adjusting for real estate depreciation and gains on property disposition, FFO available to common stockholders and noncontrolling interests decreased to $25.4 million ($0.73 per share) in Q2 2025 from $28.5 million ($0.83 per share) in Q2 2024 FFO Reconciliation Summary (in thousands, except per share) | | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $14,181 | $19,490 | $27,029 | $37,753 | | FFO | $28,159 | $31,310 | $55,530 | $61,602 | | FFO available to common stockholders | $25,360 | $28,511 | $49,933 | $56,005 | | Basic and diluted FFO per share | $0.73 | $0.83 | $1.44 | $1.63 | Reconciliation to Same Property Revenue This reconciliation adjusts total revenue to show performance for a consistent set of properties, excluding the impact of recent development, revealing a 2.2% decrease in same property revenue in Q2 2025 driven by the Shopping Centers portfolio, while the six-month period saw a slight 0.2% increase supported by Mixed-Use properties Same Property Revenue by Period (in thousands) | | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total same property revenue | $65,998 | $67,480 | $134,198 | $133,914 | | Shopping Centers | $45,578 | $47,372 | $93,576 | $94,127 | | Mixed-Use properties | $20,420 | $20,108 | $40,622 | $39,787 | Reconciliation to Same Property Net Operating Income (NOI) This section reconciles GAAP Net Income to Same Property Net Operating Income (NOI), a key REIT performance metric, which decreased by 4.3% in Q2 2025 and 2.4% for the six-month period, primarily due to weaker performance in the Shopping Center portfolio not fully offset by modest growth in the Mixed-Use portfolio Same Property NOI by Period (in thousands) | | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total same property NOI | $48,063 | $50,216 | $96,084 | $98,481 | | Shopping Centers | $35,296 | $37,419 | $70,569 | $73,211 | | Mixed-Use properties | $12,767 | $12,797 | $25,515 | $25,270 | Safe Harbor Statement Forward-Looking Statements and Risk Factors The company provides a standard safe harbor statement, cautioning investors that forward-looking statements are subject to various risks and uncertainties, referencing detailed risk factors in its Form 10-K, including tenant ability to pay rent, reliance on anchor tenants, financing and interest rate risks, development activities, and cybersecurity threats - The company claims protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995[14] - Key risks cited include: tenant ability to pay rent, reliance on anchor tenants, financing risks like interest rate increases, development activities, access to capital, and cybersecurity[14]